Cash out? Enough is enough

bjorn_toby_wilde

Mistermeaner said:

Thanks all for thoughts and input. I put in a sell order today for 300k to be reinvested in a money market fund, at least for now while I look properly at the funds available in my pension (it’s a work scheme not a sipp so limited fund range). That will give me a 70% equity portfolio which seems reasonable given I’ll hopefully be accessing it in 10-11 years 

with our other investments we still have over 1mil invested in equities so maintaining a decent level of exposure there but think I’ll be much more comfortable with that 300k being ‘safe’ - inflation risk aside that’s the mortgage paid off (if we still have it in 10yesrs) and a good few years of retirement covered 

we are investing more in isas outside of the pension due to the LSA and to cover early retirement - it’s hard though as I still want to Sal sac to below 100k to avoid the punitive marginal tax and also theres 

I wonder if rach in accounts will do something revolutionary around pension freedoms to release all that lovely cash into the economy 

That seems a sensible ratio given your age and objectives.

Have you considered increasing contributions to your wife’s pension? My salary was always higher than my wife’s and something we never really considered was the effect of that imbalance in retirement. I will have relatively little headroom, once I reach SPA, to withdraw from my SIPP before I hit the higher rate tax threshold. If we had put more into my wife’s pension it could have been more tax efficient.

Cus

artyboy said:

RogerPensionGuy said:

The current narrative is to keep investing, don't try timming the markets, just keep investing and spending a long time in the markets. 

If markets go down, it's on sale and buy more in any dip or troff. 

Reciency bias shows us most dips only last a football season or two, that is easy peasy, no hassle. 

The S&P500 has just 12 companies holding about 44% of the 500 market cap, that's a very strong concentration. 

So much index passive investing holding up tippy markets. 

I can hear the music nicely in my ears now. 

What could possibly go wrong? 

Because of course, everyone will have pots of extra spare cash to invest, once their investments have taken a 40-50% bath...

Obviously I realise you're being tongue in cheek, but that's exactly why I'm sitting on a very substantial amount of CSH2. Worst case** is that right now it keeps pace with inflation and I take the opportunity cost of rising equities. But I'm willing to wager that there will be an opportunity to reinvest at a more attractive price point in the not too distant future.

Realistically I'll be paying at least 40% tax on any future pension growth because of the marginal tax rate I'll get hit with on withdrawal. Probably more after the next budget. So my motivation to chase the bigger returns (as opposed to go for relative safety) has lessened my risk appetite as the bubble gets ever bigger.


** Best case of course is that I drop dead before 6/4/27, and then my kids can get the lot free of income tax and IHT. You have to laugh sometimes...

This is interesting to me, as it seems I'm in a similar position, where in reality one could just stop the game and secure inflation based increases however.. my gut is to take some out, wait, go back in at lower levels etc but what I can't process is that in reality what am I really basing this method is just instinct, and I know that I know nothing really, except it feels right..

Torn..

Bostonerimus1

Inflation linked gilts and bonds are the classic way to retain your buying power if you plan to purchase a lifetime annuity. OP have a general read around the subject of asset allocation and then decide. You don't need many funds to make up a diversified portfolio, but 30% in money markets is a pretty high allocation and will be eaten away by inflation if left there.

ukdw

I've tended to find you can get fee free, higher returns and sometimes guaranteed rates for cash in normal taxable and/or ISA accounts, rather than money market funds within sipps.

So personally for long term cash holding I would balance more towards high interest cash accounts (which have to be juggled around to get the best rates) rather than holding a potentially fee paying money market fund within a sipp for 10+ years.

NormalNorman

RogerPensionGuy said:

The current narrative is to keep investing, don't try timming the markets, just keep investing and spending a long time in the markets. 

If markets go down, it's on sale and buy more in any dip or troff. 

Reciency bias shows us most dips only last a football season or two, that is easy peasy, no hassle. 

The S&P500 has just 12 companies holding about 44% of the 500 market cap, that's a very strong concentration. 

So much index passive investing holding up tippy markets. 

I can hear the music nicely in my ears now. 

What could possibly go wrong? 

Here's a real life example...

Workplace pension is with Royal London. Usually employer contributions are credited a month in arrears.

However, April was it [?] when the markets had a huge dip and at the same time the employer contributions were not invested for two months so missed the boat. Seems to have righted itself but not the first time the possibility of a decent gain has passed me by. Annoying when the total contributions per month is in the four figures.

What I find myself doing is every so often transferring a chuck from the employer scheme to the SIPP. Even that can be fraught with delays from the RL end according to the SIPP provider.

Why don't I change RL to more suited investments? Have you seen their portal? If anyone understands this crock from the dark ages be sure to let me know, cheers!

NormalNorman

artyboy said:

RogerPensionGuy said:

The current narrative is to keep investing, don't try timming the markets, just keep investing and spending a long time in the markets. 

If markets go down, it's on sale and buy more in any dip or troff. 

Reciency bias shows us most dips only last a football season or two, that is easy peasy, no hassle. 

The S&P500 has just 12 companies holding about 44% of the 500 market cap, that's a very strong concentration. 

So much index passive investing holding up tippy markets. 

I can hear the music nicely in my ears now. 

What could possibly go wrong? 

Because of course, everyone will have pots of extra spare cash to invest, once their investments have taken a 40-50% bath...

Obviously I realise you're being tongue in cheek, but that's exactly why I'm sitting on a very substantial amount of CSH2. Worst case** is that right now it keeps pace with inflation and I take the opportunity cost of rising equities. But I'm willing to wager that there will be an opportunity to reinvest at a more attractive price point in the not too distant future.

Realistically I'll be paying at least 40% tax on any future pension growth because of the marginal tax rate I'll get hit with on withdrawal. Probably more after the next budget. So my motivation to chase the bigger returns (as opposed to go for relative safety) has lessened my risk appetite as the bubble gets ever bigger.


** Best case of course is that I drop dead before 6/4/27, and then my kids can get the lot free of income tax and IHT. You have to laugh sometimes...

Also building up CSH2 as a cash buffer with the SIPP wrapper. Why... the rest of the pension is fairly high risk for maximum growth but need to have some money set aside for drawdown/lump sum [whatever] in three years. As you say it also provides the opportunity to jump back into the market if there is a large drop. Cheers

LHW99

ukdw said:

I've tended to find you can get fee free, higher returns and sometimes guaranteed rates for cash in normal taxable and/or ISA accounts, rather than money market funds within sipps.

So personally for long term cash holding I would balance more towards high interest cash accounts (which have to be juggled around to get the best rates) rather than holding a potentially fee paying money market fund within a sipp for 10+ years.

But an MMF within a SIPP may well earn a higher interest rate than cash within the SIPP, while waiting to e.g. build up dividends to a reasonable lump for investment, or pending a UFPLS withdrawal.

NormalNorman

ukdw said:

I've tended to find you can get fee free, higher returns and sometimes guaranteed rates for cash in normal taxable and/or ISA accounts, rather than money market funds within sipps.

So personally for long term cash holding I would balance more towards high interest cash accounts (which have to be juggled around to get the best rates) rather than holding a potentially fee paying money market fund within a sipp for 10+ years.

Adding in the CSH2 ETF, for example, does not increase the platform fees as already at the max pa they charge for ETFs only. If I went for OEICs then yes, I'd pay more in fees with this platform provider. 

artyboy

I moved another £200k from HMWO to CSH2 first thing this morning. Time will tell if it was the right move, but at the most micro level (i.e. today) I'm happy enough...

barnstar2077

Mistermeaner said:

Hi all , musing and would appreciate thoughts 

im 46 and have ‘enough’ saved in my dc pension ; as of today £1.02mil, I’ve saved well and growth has been excellent 

my partner 41 has 200k in her dc pension and she’s now got a few years local government pension and will likely stay in it 

additionally we have 80k between us in Lisa’s 

outside of retirement vehicles we have 14k in cash isa and 60k in S&s isa

Our only debt is 170k mortgage on our house worth 500k+

we don’t live lavishly and our outgoings kids mortgage bills etc are met from income with plenty left to save 

it feels like we have more than enough saved for retirement and we will continue to save into pensions etc because of the tax benefits 

what im musing on is whether to convert a good chunk of my DC into something ‘safe’ like money market funds - fully accepting I won’t get the potential growth but in my mind im thinking why risk it? Earlier this year my pension dropped from 930k to 750k over night, obviously it recovered snd then some but being as I don’t need more would it be sensible to turn say 25% or more of that 1mil into money market and preserve it ? 

What would you do ? 

Thanks 

If you are married then you may want to consider reducing your own pension contributions to whatever is the most matched by your company, and then you both live off of your money while greatly increasing the amount going into your wife's pension.  Which would reduce the overall tax you will pay as a couple when you retire.

Then I would consider putting any spare cash into ISAs.

This would give you two well funded pensions that you could start drawing down from 57/58'ish, and you could use the ISAs to retire even earlier, go part time etc if you want.

As for what to invest in, I would go pretty aggressive.  Some might say with your pension pot already being so impressive means that you don't need to take the risk, but I would say having so much so young already means that you can afford to have a higher volatility portfolio as you have time to weather any storms (and as you are so young, and will hopefully be living into your eighties, it makes sense to have a large portion of your investments in 100% equity, globally diverse, funds anyway.)