Advice on Drawdown (currently Vanguard) please

Tony_J

Hello
I took VR last summer, so am now retired.

In the new tax year I intend to start drawing on my main DC fund with Vanguard. I don't want to take the 25% tax free lump sum yet (though may do so for all, or most of my DC pots at some point)

Looking at the vanguard website the option for regular payment is "Flexible income (drawdown)", though it seems to assume first taking the 25% tax free and then crystalize the rest. Drawing funds without having crystalized i.e. "Individual lump sums (UFPLS)" doesn't mention an option to set up regular monthly payments, which is what I would prefer. Is my reading correct?.

Futhermore (and I hope this is okay to ask) My current investments are LifeStrategy 60% Equity Fund, Japan Stock Index Fund & S&P 500 UCITS ETF. I'm content with the current value, so feel perhaps I should move to lower risk funds with the goal of matching inflation. Any tips on how to select funds (or one fund for everything). At the rate I intend to take, there would be enough to last around 25 years

I appreciate this may be more appropriate to put to an IFA, but I had a bad experience with one, so am cynical of approaching another

dunstonh

Looking at the vanguard website the option for regular payment is "Flexible income (drawdown)", though it seems to assume first taking the 25% tax free and then crystalize the rest. Drawing funds without having crystalized i.e. "Individual lump sums (UFPLS)" doesn't mention an option to set up regular monthly payments, which is what I would prefer. Is my reading correct?.

Vanguard does not support regular UFPLS.

Futhermore (and I hope this is okay to ask) My current investments are LifeStrategy 60% Equity Fund, Japan Stock Index Fund & S&P 500 UCITS ETF. I'm content with the current value, so feel perhaps I should move to lower risk funds with the goal of matching inflation. Any tips on how to select funds (or one fund for everything). At the rate I intend to take, there would be enough to last around 25 years

Your fund selection is a bit random but you probably got away with it until the end of 2024 (US has been off the boil since then but still positive).

VLS is a one and done fund.

Tony_J

Thanks

I'll take a look at the VLS.

If I were to opt UFPLS with vanguard and request funds say quarterly, would that be a lot of hassle (I guess the tax element may be a bit of a pain)

squirrelpie

If I were to opt UFPLS with vanguard and request funds say quarterly, would that be a lot of hassle (I guess the tax element may be a bit of a pain)

Only you can decide whether its too much hassle. See what hoops they make you jump through and decide if it's acceptable to you. The tax may or may not involve some hassle, depending on your personal circumstances, but generally it will all work itself out over time if you're prepared to wait.

Albermarle

Looking at the vanguard website the option for regular payment is "Flexible income (drawdown)", though it seems to assume first taking the 25% tax free and then crystalize the rest

Although some pensions say you have to take all the tax free cash, before withdrawing taxable income, most modern plans, including Vanguards, do not..

So as far as I know, you should be able to take a portion of the tax free cash and take a regular income. So lets say the pension fund is £200K.

You could take say £15K tax free cash and this would move £45K into a crystallised drawdown account. You could than ask for a monthly income from this . When the £45K was running out, just repeat the exercise by taking more tax free cash.

If you want to stick to UFPLS, you could take one payment a year and stick it in easy access savings account and take money from that when needed.

My current investments are LifeStrategy 60% Equity Fund, Japan Stock Index Fund & S&P 500 UCITS ETF. I'm content with the current value, so feel perhaps I should move to lower risk funds with the goal of matching inflation.

If you want the pot to last a long time, then you ideally need some growth above inflation. However I would say ( personal opinion only) that your current portfolio is a bit aggressive for a drawdown, as it could drop a lot in a stock market rout. Also it is rather concentrated on the US and Japan.

ian16527

As Albermarle as said above, you cant get away without using your TFLS.

When you want to drawdown you have to ask Vanguard to move some funds from Pre Retirement and it will create a new Drawdown account for you. They will move funds pro rata which is something I have complained about before. You have to select which funds you want to store your money in the drawdown account.

When you ask for this they will produce a Benefit illustration which you must read. Then you have to book a call where they will go through this with you. Then you can press the go button to move the funds.

I have only used Flexible drawdown, not UFPLS so I specify a monthly amount in the process. I move funds once a year as this gets you the most tax free amount due to the increases in the pre retirement account which is still un crystalised.

If you move all your fund into drawdown they would give you the full TFLS straight away. But not sure if you could only use flexi drawdown as there would be no tax free cash left for an UFPLS ( I assume you always get 75/25 % split with UFPLS but happy to be corrected) - you would need to ask them

Tony_J

Great suggestions thanks.

I think the idea of moving funds once a year will achieve want I want. I will also invest £2,880 back into vanguard each year.

Albermarle

f you move all your fund into drawdown they would give you the full TFLS straight away. But not sure if you could only use flexi drawdown as there would be no tax free cash left for an UFPLS ( I assume you always get 75/25 % split with UFPLS but happy to be corrected) - you would need to ask them

Regardless of the provider, if there is no tax free cash left, you can not use UFPLS anymore.