I am finally there. My Plan.... Please comment

sgx2000

Hi Everyone

Sorry for the long post….

After years of trawling this forum (Many thanks to everyone who has helped along the way)

I am finally at the point where I will properly start my retirement.

I retired 18 months ago (was made voluntarily redundant) and have lived happily on my redundancy and small DB since.

 

I am 65 (66 April 2026).

I have a DC pension pot of £151,500 with Aviva, currently invested in Aviva Pensions My Future Focus Consolidation (Pre-2024) S6.

I will receive a full state pension from April 2026 of £12547.60

I have a DB pension of £8341 (CPI linked) gross.

I have £33,900 in a cash isa. (Trading212)

I have £18,000 in Bitcoin. 

I have £4000 in Premium Bonds.

 

I require a £27,000 Annual Gross Income from the age of 66 for a comfortable retirement. (Inflation Linked)

 

Given that I think it is not unreasonable to expect stock market crash within the next 2 years and that I am as such, relatively risk averse….

My plan is…

1.      Leave my Aviva Pension where it is.  Or, more likely, transfer internally within Aviva to a SIPP invested mainly in My Future Focus Drawdown S6 (a slightly newer version of the workplace pension I am currently still in), (Apparently considered Aviva’s default drawdown fund). OR possibly Aviva My Future Focus Consolidation S6 (a slightly higher risk level)

2.      To take the full PCLS.  (£37,500)   £20,000 would be added to my Cash ISA in April. £7200 would be taken for the first year of retirement shortfall, and the remaining £10,300 would be placed in a savings account until April 2027 tax year and then added to the Cash ISA

3.      I would then take £7200 annually (increasing by inflation annually) from the Cash ISA and savings until this is depleted to £20,000 (the cash safety net)

4.      After that I would start drawdown for the shortfall annually (increasing by inflation annually)

 

My Recent Questions to Chat GPT and Gemini where…

1.      Is this a logical way to achieve a comfortable retirement income?

2.      Would it be better to move my Aviva Pension to Aviva SIPP before I take the PCLS? Or should I take the PCLS from my Aviva Pension, then move the crystalized pot to an Aviva SIPP

3.      Given my assets as a starting point.  Is there a better way to take my pension?

4.      Could I, without taking excessive risks, achieve a higher net income?

Both returned comments that this was basically a sound conservative plan…

 

I would be very grateful for any comments or input from the forum…

Is this sane?

MK62

Seems reasonable imho.......there are many ways to skin this particular cat though, but nobody knows the best way until after the fact.

Given your "relatively" risk averse view though, have you not considered an annuity? A single life RPI index linked annuity, using the 75% of your pension left after your PCLS is taken would currently give c.£6000pa for life. Added to your SP and DB, you'd be practically at your target income without touching the rest.

Lowtrawler

As you are risk averse, why mess about trying to manage your retirement income? The DC pension pot with Aviva should be enough to provide an RPI linked annuity bridging the current shortfall to £27k annual gross income. It will leave you with your PCLS, cash isa, bitcoin and premium bonds.

Vitor

This all looks broadly sane and conservative. You already have a strong inflation-linked income floor from DB plus State Pension of about £20.9k gross, which materially reduces risk. I would question the £27k gross target though. For a (presumed) single person with (again presumed) no housing costs, that is comfortably above median pensioner income and implies £6k+ of discretionary spend rather than core needs. Stress-testing a lower baseline, say £23–24k, would significantly ease pressure on the DC pot. Using PCLS and cash to manage sequence risk is sensible. One mismatch is holding £18k in Bitcoin while describing yourself as risk-averse.

dunstonh

2.      To take the full PCLS.  (£37,500)   £20,000 would be added to my Cash ISA in April. £7200 would be taken for the first year of retirement shortfall, and the remaining £10,300 would be placed in a savings account until April 2027 tax year and then added to the Cash ISA

Another option is not to take the PCLS until you need to.

2.      Would it be better to move my Aviva Pension to Aviva SIPP before I take the PCLS? Or should I take the PCLS from my Aviva Pension, then move the crystalized pot to an Aviva SIPP

It would depend on the terms you are getting on the Aviva SIPP compared to the terms on the existing plan.    Aviva often give improved terms when moving from from Aviva L&P to Aviva platform.

4.      Could I, without taking excessive risks, achieve a higher net income?

You are looking at investing in a bog-standard basic fund.  These will, by design, be simple and middle-of-the-road.  So, neither the best or the worst.     However, an RPI annuity is likely to provide the best option for a risk-averse individual.  Current RPI annuity rates are higher than the UK safe withdrawal rate.   So, if you are taking a drawdown that is higher than an RPI annuity, then you are increasing your risk.   That risk may be small if your draw is low but could be high if your draw is high.

Both returned comments that this was basically a sound conservative plan…

It doesn't sound conservative.  The fund may have a conservative classification in terms of investment risk, but it's barely 25% equities. It cannot sustain the drawdown rate you are looking at once you have used your cash up.    So, you are looking at capital erosion meaning your pension money will run out at some point.

With modelling, that could be calculated but its not often that someone who refers to themselves as "relatively risk averse" would take that level of risk.  Then again, they wouldn't invest in Bitcoin either.

sgx2000

Vitor said:

This all looks broadly sane and conservative. You already have a strong inflation-linked income floor from DB plus State Pension of about £20.9k gross, which materially reduces risk. I would question the £27k gross target though. For a (presumed) single person with (again presumed) no housing costs, that is comfortably above median pensioner income and implies £6k+ of discretionary spend rather than core needs. Stress-testing a lower baseline, say £23–24k, would significantly ease pressure on the DC pot. Using PCLS and cash to manage sequence risk is sensible. One mismatch is holding £18k in Bitcoin while describing yourself as risk-averse.

Thanks for the reply.
I am not single.   
Married, but wife is a lot younger and working.
No Housing Costs... House bought quite a few years back...

My £27k includes, my half of all household expenditure, my individual expenses, and Approx. £6k towards holidays (yes, discretionary spend). 

The bitcoin was a really good learning curve. 
First few grand in about 2018...
I made every novice mistake you can think off....lol
Over the years I have put in approx. £7500
But as it currently stands currently,  I took £3k out this year 
So at the moment I have about £4.5K of 'skin in the game' and  £18K in Bitcoin...
And given that Bitcoin is currently down approx. 25% on its high, the 3K may go back in..

My intention with Bitcoin is withdraw £3k eack year that bitcoin is up...to use my Capitol Gains Allowance (no tax)
and either 'fritter it away' or put it back into ISA's

I am also thinking that once stocks have 'corrected' I may then move 50% of whats remaining of my cash isa into a Stocks & shares ISA (probably into a Vanguard FTSE All-World ETF)

sgx2000

dunstonh said:

2.      Would it be better to move my Aviva Pension to Aviva SIPP before I take the PCLS? Or should I take the PCLS from my Aviva Pension, then move the crystalized pot to an Aviva SIPP

It would depend on the terms you are getting on the Aviva SIPP compared to the terms on the existing plan.    Aviva often give improved terms when moving from from Aviva L&P to Aviva platform.
Many Thanks for the reply, and thanks for all your comments over the years..
Can you please explain what 'improved terms' may be.. And would they only apply to 'advisors'?

Both returned comments that this was basically a sound conservative plan…

It doesn't sound conservative.  The fund may have a conservative classification in terms of investment risk, but it's barely 25% equities. It cannot sustain the drawdown rate you are looking at once you have used your cash up.    So, you are looking at capital erosion meaning your pension money will run out at some point.

Lol ...  Us novices look at lower stocks as more conservation
Obviously you pros would say that 25% nowhere near enough....lol

With modelling, that could be calculated but its not often that someone who refers to themselves as "relatively risk averse" would take that level of risk.  Then again, they wouldn't invest in Bitcoin either.

LOL.  I think my 'risk aversion' is more to do with my belief that a market 'correction' must be well overdue. 

And Bitcoin, was in the bigger picture, a tiny amount when you add in the value of the DB pension with the other assets.  (without all the mistakes I made it probably would have been almost twice the gain) But agreed - Risky

@dunstonh.....

dunstonh

Can you please explain what 'improved terms' may be

They reduce the platform charge from their default.   

Lol ...  Us novices look at lower stocks as more conservation
Obviously you pros would say that 25% nowhere near enough....lol

In investment risk terms, it is lower risk (though it doesn't mean it's immune to a 20% loss, as seen during the Nov 21 to Oct 23 period).
The problem is that it has very little chance of making enough money to sustain the future draw rate in real terms..

Risks need to be considered not just as investment risk but also as inflation risk and shortfall risk. (others can be behavioural risk).
So, investment risk is low, but shortfall risk and inflation risk are higher.

you are looking to draw £7200 from the cash and when that is gone, you will draw it from the pension.   With just 25% equities, you would be looking at the ballpark of real term value consistency and not real terms growth.
So, the pension of £151,500 would be £113,625 after TFC taken.
This means £7200 / £113,625 equates to a 6.34% draw rate.
The UK safe withdrawal rate in mid 60s is about 3.5% assuming 60%+ equities. 


Just a quick and dirty whilst I have a cuppa, the client I am working on at the moment is 60% equities and their success rate (of not running out of money) is 91%. If I change their investment mix to 20% equities, the success rate drops to 43%.   Their figures are obviously different to yours, but it shows the impact of going too low on investment risk.   Often, being too low on investment risk increases the other risks.

Pat38493

Just to clarify on the PCLS - you mean the PCLS tax free portion from the Aviva pension or do you mean you are taking a PCLS from the DB pension?  If the latter, what is the reduction?  Based on your point 2 I guess you mean the Aviva tax free cash but just checking.

As a general comment your numbers look ok so it seems that you have enough assets in terms of pure value and wrappers.

If the Aviva is currently invested in a fund that is only 20-30% equities, I would be looking to increase that significantly especially if you are not going to draw on it for 5 years or more.  I tend to concur with Dunstonh that if you want to withdraw £5K plus annually from a £151K fund, having that in a 20% equity fund is actually high risk as you are at risk to get killed by inflation unless you get lucky.  I see it more of a u shaped risk curve with 60% equities as the low risk and going up either side.

Also - in my opinion you should ignore the value of the Bitcoin investments in your calculations - I would treat that as a hobby / side project rather than a reliable long term investment at this point.  Bitcoin is a crypto currency and currency trading is not pension investing - nothing against it but personally I would not then count that money in my retirement plan.

As regards the impending financial crash, the problem there is that you are surely right that there is a big financial correction coming "soon".  However, a lot of clever fund manager experts were saying that in 1997/98 and the market continued going up for more than 2 years before it finally crashed - and when it crashed it initially crashed back to the 98 level - meantime those folks ended up closing down their funds as nobody would put money in their funds as they had moved them out of equities!  Nearly half of the last 100 years were part of a run of 4 or more years of double digit positive returns.

(also if you are worried about mag 7 exposure there are other ways to mitigate this without going down to very low overall equity exposure).

To put it another way, to some extent it can help to keep dancing while the music is playing  

If your money was already enough in all circumstances, that would be fine but it feels like you could run into problems if there is a big inflation shock down the line.

On the other hand - you mentioned in later post that you are married with a younger wife, so this could change the answers one way or another - does your wife have good pension provisions for the future etc?

Also - if you are prepared to reduce your real spending if there is big inflation, this could also help.

One other thing - I'm not sure it makes sense to hold a small amount of money in premium bonds - see the Martin Lewis articles explaining that premium bonds are only rational to hold if you hold the full amount and you would otherwise be paying savings interest.  If you are interested in the possibility of winning big prizes you would be better off buying a lottery ticket each week.

sgx2000

dunstonh said:

Can you please explain what 'improved terms' may be

They reduce the platform charge from their default.   

Lol ...  Us novices look at lower stocks as more conservation
Obviously you pros would say that 25% nowhere near enough....lol

In investment risk terms, it is lower risk (though it doesn't mean it's immune to a 20% loss, as seen during the Nov 21 to Oct 23 period).
The problem is that it has very little chance of making enough money to sustain the future draw rate in real terms..

Risks need to be considered not just as investment risk but also as inflation risk and shortfall risk. (others can be behavioural risk).
So, investment risk is low, but shortfall risk and inflation risk are higher.

you are looking to draw £7200 from the cash and when that is gone, you will draw it from the pension.   With just 25% equities, you would be looking at the ballpark of real term value consistency and not real terms growth.
So, the pension of £151,500 would be £113,625 after TFC taken.
This means £7200 / £113,625 equates to a 6.34% draw rate.
The UK safe withdrawal rate in mid 60s is about 3.5% assuming 60%+ equities. 


Just a quick and dirty whilst I have a cuppa, the client I am working on at the moment is 60% equities and their success rate (of not running out of money) is 91%. If I change their investment mix to 20% equities, the success rate drops to 43%.   Their figures are obviously different to yours, but it shows the impact of going too low on investment risk.   Often, being too low on investment risk increases the other risks.

Again many thanks for your reply...

My immediate 'seat of yer pants'  thought is that I currently have £33,900 in a cash ISA.
If I set asside £20k for a cash reserve this will leave £13,900
Then add the TFC to this = £51,775 Cash to initially draw from

£51,775 / £7200 = 7.19 years (that is without any interest but also without inflation factored)

So the remaining £113,625 will be held  within my pension for at least 7 years before I will need to start a drawdown....
Even with a modest 2.5% above inflation & fees increase over the 7 years the pot would be approx.  £135,000 before I would need to withdraw from it.  I will then be 73.

In 7 years allowing for 3.5% inflation, the withdrawl rate would need approx £9100 per year 
£135,000 / 9100 = 14 years (without allowing for fund depreciation or inflation or interest)

That the put me at 87 (lol unlikely I will still be here... But at 87 I could live happily on the state pension and DB pension..

You are however a very good professional advisor, and are VERY CORRECT in that I should be looking for more growth potential   i.e. a better SIPP ETF Fund / funds.

I will try a few ways.... at the moment I am thinking perhaps The Aviva 'bog standad' basic fund  at say 60% and perhaps 40% Vanguard FTSE All-World to give a bit more growth...

Again... Many Many Thanks for all your comments

sgx2000

Pat38493 said:

Just to clarify on the PCLS - you mean the PCLS tax free portion from the Aviva pension or do you mean you are taking a PCLS from the DB pension?  If the latter, what is the reduction?  Based on your point 2 I guess you mean the Aviva tax free cash but just checking.

Thanks for the reply...
YES The PCLS is from my DC Aviva Pension

Also - in my opinion you should ignore the value of the Bitcoin investments in your calculations - I would treat that as a hobby / side project rather than a reliable long term investment at this point.  Bitcoin is a crypto currency and currency trading is not pension investing - nothing against it but personally I would not then count that money in my retirement plan.

In regard to Bitcoin I Agree.   I Have only ever treated it as ' A biit of fun' (all be it a really good gain)

To put it another way, to some extent it can help to keep dancing while the music is playing  

Excellent

If your money was already enough in all circumstances, that would be fine but it feels like you could run into problems if there is a big inflation shock down the line.

Hopefully Not, with most of my real world core expenses covered by state pension and CPI linked DB Pension

On the other hand - you mentioned in later post that you are married with a younger wife, so this could change the answers one way or another - does your wife have good pension provisions for the future etc?

My wife is 17 years younger.  Well on her way to a decent pension. But highly unlikely to be able to retire for at least 10 years

Also - if you are prepared to reduce your real spending if there is big inflation, this could also help.

Yes.  The required £27K is inclusive of £6k on holidays.  So my real world expenditure is pretty much covered

One other thing - I'm not sure it makes sense to hold a small amount of money in premium bonds - see the Martin Lewis articles explaining that premium bonds are only rational to hold if you hold the full amount and you would otherwise be paying savings interest.  If you are interested in the possibility of winning big prizes you would be better off buying a lottery ticket each week.

The bonds where left over from my redundancy money. I could only pay £20k into my isa. And my savings where looking at going into being taxable.  The will be gone by summer.


Again many thanks for the reply...

@ Pat38493 .......