Retirement Funds - advice and ideas welcome

PyggyMalony66

Hi guys, long time lurker here, looking for suggestions on how best to play my money in retirement. There's not much to play with to be honest but I am going to retire this year that's a definite.

I'm 66 in July, full state pension due November 30th, currently working three days a week (I just dropped down from 4 days a week). I used to love my job but now I hate it hence needing to retire probably a year or two earlier than planned - and I don't want to get another job (I have a collection to sell on Ebay which will be a 'job' for around 6 months to a year).

So, here are the numbers:

HSBC Flexisave 801.00

HSBC Cash ISA 3.00

HSBC Online Bonus Saver 5022.00

HSBC Regular Saver 1750.00 (halfway through the term)

YBS Rainy Day Account 5557.00

Shawbrook Bank Cash Isa 21396.00 fixed till May 2026

Shawbrook Bank Cash Isa 23957.00 fixed till July 2026

Scottish Widows (old private pension) 41421.00

Aviva (current workplace pension) 17358.00

Family owe me 12000.00

So current total just under £130,000.00

I have an eight year old car that's just done 40,000 miles

I own my house worth about £300,000

I have inexpensive hobbies

I've travelled and have no real desire to travel now

Thank you for reading this far! I'm thinking of finishing work end of June so I can enjoy the summer months. Using some savings to get me through to November and state pension payment. Then drawing down a top up each year, for twenty years, from £100,000 leaving £25,000 and whatever I make on ebay for home repairs and emergencies.

I know it's not ideal but it is what it is. When I'm 86 I can downsize the house (this might happen before 86) or the house will fund care if needed.

Happy to hear your thoughts on this plan, and what should I do to tidy up all the accounts I currently hold to get best use for the planned drawdown? And in what order should I drawdown from them?

Thanks in advance

Pyggy

QrizB

Welcome to the forum!

As you're still working, you might want to consider pumping as much of your cashback cash savings into your pension as you can. The tax relief will work on your favour.

Albermarle

You have about half the funds in cash, and half invested in DC pensions.

In simple terms cash savings are good for emergencies and to fund items over the next few years. However at best they keep up with inflation, and often they do not . On the other hand investments in stocks and shares are better for the long term as normally you would expect them to grow more than inflation, albeit with a few bumps in the road . Hence the need to think long term with investments ( >10 years).

Where some clarification is needed is to how the two DC pensions are invested. If they are invested in higher risk/higher potential growth funds, then having 50% in cash is less of an issue. However if they are invested in low risk/low growth/cash like funds, then along with having 50% in cash savings, you are not taking enough risk, and your funds will struggle to last out for the next couple of decades or so.

As the saying goes- taking no risks is actually quite risky !

PyggyMalony66

QrizB and Albermarle, thank you for your observations. Much appreciated.

QrizB- what do you mean by my 'cashback savings'?

Albermarle, I think you're right when you say taking no risks is actually quite risky, and I think this is what's underlying my 'tidying up' question. I think I need to do more with what I've got.

I will look at where the pensions are invested (I've been quite passive in this area I'm ashamed to say) and get back to you later.

Pyggy

QrizB

Sorry,"cashback" was my phone Autocarrot trying to be helpful. I meant "cash". Have edited it now.

PyggyMalony66

Thanks QrizB. I think this is something I should consider.

Albermarle - Scottish Widows 'pension unitised with profit'. And 'This benefit guarantees a minimum growth rate of 4% for any investments made before 1 July 1994. This only applies if the benefit is taken at your selected retirement age'. Almost all the money was invested before 1994 with a handful of payments in 1995. None since.

Aviva - Av MFFocGrowth S6 and Av MFFocCons Pre 2024 S6

Hope that makes sense to you.

Pyggy

DRS1

The Scottish Widows unitised with profits fund probably does not qualify as "high risk/higher potential growth". That is not a criticism - half my Scottish Widows pension was in a with profits fund which wasn't even unitised and certainly did not grow at 4% pa. Does yours come with a terminal bonus?

Given the age of the SW pension you have probably already had letters saying you are approaching (or have passed) your selected retirement age and what your options are. It would be as well to check those options to see if one route may be better than others. For example is buying an annuity at a guaranteed rate an option (referred to as GAR)? Another thing to check if you want to do drawdown instead of the annuity is can you actually do that under this pension or do you need to move the pension to a more modern one in order to do drawdown (or your preferred version of drawdown)? If you need to move it best to find out now rather than when you actually want some money.

PyggyMalony66

DRS1 - thank you for you comments and questions.

My original retirement age (like a lot of women) was 60, and as I approached that age and started receiving letters I had a conversation with SW as I clearly was not going to retire then. The notes I took of that conversation on 5/3/20 were:

Transfer value £24,851.00

Bid value (money paid in) 13,348.52

Plus terminal bonus £11,484

Minus - there are no minuses.

I must take the pension before age 75 or they will buy an annuity with it.

…..

So, there is a terminal bonus - what does that mean?

My retirement age is now 75 on the paperwork as it was deferred due to that conversation but my understanding is I'm not being held to that date - am I?

I would need to ask if I can drawdown. Thank you as I've been presuming.

Pyggy

DRS1

You quoted a figure for the SW pension of 41421. I was wondering (if there was a terminal bonus) whether that was included in the 41421 figure or whether there was a nice surprise waiting for you. From your later post the terminal bonus (then) is included in the transfer value and if the 41421 figure is the transfer value then the terminal bonus is already in there. Sorry no nice surprise.

When I used to monitor the value of my SW pension I would leave out the terminal bonus (on the basis the figure wasn't guaranteed) but then I can be a fool at times.

The pre-retirement booklet SW sent me didn't say if I would need to move to a new plan to do drawdown but did have a note saying that the charges might be higher or lower in the new plan if I did need to move. So yes best to ask them specifically.

On the minus (no minuses) point you may want to check that as well. With a with profits fund you can have something called a market value reduction. It doesn't apply if you take the benefits at your selected retirement date but it can apply at other times (eg if you take a transfer payment to another pension plan). Even at other times though there may be no market value reduction - as the name suggests it depends what the market is doing.

DRS1

Sorry I missed the age 75 question - the answer is no you can take the benefits at any time before age 75. Like you my paperwork said that at age 75 they would buy an annuity with the pension pot. Personally I did not give them the chance to do that and I am not sure it is required for a modern pension. It used to be a requirement back in the day. When you ask about doing drawdown you might also want to get them to confirm that if you are still doing drawdown when you get to age 75 they won't suddenly turn around and buy an annuity for you. I am pretty sure they will say No (but I don't work for SW).

Albermarle

A with profits fund is a rather old fashioned one, but not necessarily bad. They are rather opaque on how they work, but the idea is that when markets are doing well, they keep some of the profits back . They then use these to try and keep a positive return when markets are not so good. The idea being that your fund increases by a % every year, even when markets are down, so it smooths out the market fluctuations, although it can struggle when the market downturn is deep and long.

For the Aviva funds, can you have a look at the fact sheets, and see how they are described.