Looking to retire soon……best options?

gm0

Old closed employer pensions in run off. Either as trusts. Or wound up via life companies.  Will have largely, or entirely liability matched assets. To generate the cashflow of the actuarial death pool of people in payment. 

Which diminishes over time towards zero.  It's never exact. But the capital and yield of the assets spits out the indexed income.  And the residue is planned to be fairly minimal. Assets get spent down. A lot of index linked gilt equivalents are held because this is regulated to avoid spivs speculating wildly, going bust, and dumping the scheme into the PPF.  Index linked gilt type of assets matches the desired indexed income promises. Without upside for more. But also with minimal risk for the scheme and the government backed PPF.  Without regulation spivvery betting other people's money would rule.  And we would rue the day.

So performance - is anyway irrelevant to what you get.  You get what you are entitled to.  Even some of the limited "investing" by schemes alongside matching that is allowed.  Contributed to one of the problems in the brief Truss era and bond market reaction to her tactics. Things are stable. Until they aren't.

With long term retirement in view.  Index linked income beyond SP across a household is a really good thing to have.  

Partial inflation hedging is still better than none.  

We don't have enough of it.  So partner's DB pension we left the tax free cash alone. And took all the indexed income on offer without reduction.  For my DC.  We took some out as there was no indexed income to be had. anyway. And we have a use for it.

The way I think about it is this.  

When I am 75-80 returning to work is unattractive or impossible (potentially health) and/or market access. So I need enough fairly guaranteed income for essential spending - regardless of what happens to stock markets and inflation.  Ongoing boom.  70% correction and ten year slump.   All of the above.

So inflation linked coverage of essential income. Later.  From SP and other things.

After essential outgoings are fairly secure any excess can be invested - even aggressively to taste.
Same logic as the scheme not going bust but in a pool of one. 

You want to "know" your retirement won't become unsustainable for 5-10 years when you are too old to work.  It must not fail.   

Fixed (unindexed) pensions and annuities are vulnerable to an inflation spike.   And leave nothing beyond any spouse benefit %.

Indexed annuities are safer but leave nothing at the end - regardless of early or late death. And indexation may be below long term average inflation (1970s like conditions) but still *better* than not indexed.

Drawdown or lump sum in S&S ISA may also not handle an inflation spike and can be subject to long correction and recovery cycles.    A low drawdown on an "pot" (S&S ISA or in a DC pension - that can "not fail" across all conditions. Is very low.  The discussion is around the 3.0-3.5% income of initial pot size with indexation (CPI/3%). In sterling, global investing. UK.  It does of course provide a tax sheltered and inheritable pot.  So while there is risk there is potential reward.

Veloflyer

gm0 said:

Old closed employer pensions in run off. Either as trusts. Or wound up via life companies.  Will have largely, or entirely liability matched assets. To generate the cashflow of the actuarial death pool of people in payment. 

Which diminishes over time towards zero.  It's never exact. But the capital and yield of the assets spits out the indexed income.  And the residue is planned to be fairly minimal. Assets get spent down. A lot of index linked gilt equivalents are held because this is regulated to avoid spivs speculating wildly, going bust, and dumping the scheme into the PPF.  Index linked gilt type of assets matches the desired indexed income promises. Without upside for more. But also with minimal risk for the scheme and the government backed PPF.  Without regulation spivvery betting other people's money would rule.  And we would rue the day.

So performance - is anyway irrelevant to what you get.  You get what you are entitled to.  Even some of the limited "investing" by schemes alongside matching that is allowed.  Contributed to one of the problems in the brief Truss era and bond market reaction to her tactics. Things are stable. Until they aren't.

With long term retirement in view.  Index linked income beyond SP across a household is a really good thing to have.  

Partial inflation hedging is still better than none.  

We don't have enough of it.  So partner's DB pension we left the tax free cash alone. And took all the indexed income on offer without reduction.  For my DC.  We took some out as there was no indexed income to be had. anyway. And we have a use for it.

The way I think about it is this.  

When I am 75-80 returning to work is unattractive or impossible (potentially health) and/or market access. So I need enough fairly guaranteed income for essential spending - regardless of what happens to stock markets and inflation.  Ongoing boom.  70% correction and ten year slump.   All of the above.

So inflation linked coverage of essential income. Later.  From SP and other things.

After essential outgoings are fairly secure any excess can be invested - even aggressively to taste.
Same logic as the scheme not going bust but in a pool of one. 

You want to "know" your retirement won't become unsustainable for 5-10 years when you are too old to work.  It must not fail.   

Fixed (unindexed) pensions and annuities are vulnerable to an inflation spike.   And leave nothing beyond any spouse benefit %.

Indexed annuities are safer but leave nothing at the end - regardless of early or late death. And indexation may be below long term average inflation (1970s like conditions) but still *better* than not indexed.

Drawdown or lump sum in S&S ISA may also not handle an inflation spike and can be subject to long correction and recovery cycles.    A low drawdown on an "pot" (S&S ISA or in a DC pension - that can "not fail" across all conditions. Is very low.  The discussion is around the 3.0-3.5% income of initial pot size with indexation (CPI/3%). In sterling, global investing. UK.  It does of course provide a tax sheltered and inheritable pot.  So while there is risk there is potential reward.

I think I am in broad agreement ref the index-linking. I too am close to retiring, so my basic philosophy is to transfer whatever amount in my (uncrystallized) pot into ILGs which covers the essentials - more specifically perhaps an ILG ladder held until each ILG matures. This with a view to preservation and isolation from market forces. This many morph into an IL annuity later on.

Whatever remains in the pot is beer money. I intend to leave it in equities - low cost global trackers - and also have a cash buffer in case I wish to draw more monies during a market crash.