Pension fund comments

MDMD

Hi all, looking for some pointers. I’m 42 and have been assessing my retirement fund following the recent sudden death of my father (aged 72) which has made me look at my own plans. I’m now considering taking an annuity at about age 60 with part of the pension and drawing down on the rest in an attempt to use it all up before I go (whenever that is)

Unfortunately my pension seems unnecessarily messy and so looking to simplify things as it’s just gone over £750k and so at the current rate of contributions it will probably outlast me if I just draw down.

I’ve got two pots split into a Fidelity SIPP with protected age 55 access (the SMT and VEVE holding) and (currently) age 57 workplace pension (also with Fidelity but on their terrible Planviewer platform holding everything else). The WPP is a bit messy as for some reason they split out amounts transferred in and new amounts and make it tricky to switch funds. There are very limited funds (about 30) available.

Fidelity ACS UK Equity Tracker Index Fund Class 5	38,404.83
Fidelity ACS World ex UK Equity Tracker Fund Class 5	181,331.19
Fidelity Aquila Connect Emerging Markets Fund Class 5	45,355.32
Fidelity iShares Corporate Bond Index Fund All Stocks - Class 5	28,975.53
Fidelity iShares Over 5 Years Index Linked Gilt Fund - Class 5	29,632.58
Fidelity Sterling Aggregate Bond Fund C8	52,321.81
SCOTTISH MORTGAGE INV TRUST,ORD GBP0.05(SMT)	27,690.3
VANGUARD FUNDS PLC,VANGUARD FTSE DEV WORLD UCT ETF USD DIS(VEVE)	349,254.46
Cash	203.88
	753,169.9

Also got a deferred Civil Service DB pension (Premium scheme) of about £3k currently from age 60 and projected full state pension in 12 years and about 100k in an emergency fund in cash (mix of regular savers, Cash ISAs, Premium Bonds). Small amounts in cash and S&S ISAs and a LISA but nothing material.

Basically looking for any suggestions or observations on the holdings, some of the bond funds should probably go, just not sure which ones!

Marcon

Maybe time for some professional advice given you have three quarters of a million already? Could be an excellent investment.

ali_bear

You have 13-18 years until retirement and already have saved enough into your pension. But investments can go down as well as up - consider the possibility of a stock market correction followed by an extended period of high inflation and low growth.

Depending on your earnings you probably still want to be paying in to it.

Even though this sounds a bit harsh, perhaps reflect on past decisions and consider getting some proper financial advice?

webmasterpolo

I'd also say you need professional financial advice.

You may or may not have "enough" in the pot, as this all depends on how much your retirement lifestyle will cost.

I would worry less about whether you will buy annuity with some or not or whatever structure in the future, the market conditions and tax rules are very likely to be completely different in 13 years or so when you can actually do it. Just focus on maximising the pot to improve your options when you get there. I would also consider an ISA portfolio alongside to further increase your options and retirement tax planning opportunities.

We don't know your income levels but typically best to max the highest tax rate into the pension (40 or 45%) upto 60k then funds ISA. So if you earn 150k, 60k into pension rest you can save into ISA, if you earn 60k, 10k into pension, rest into ISA. This is because the tax break on the way in needs to be big to justify the tax rate on way out. Especially if your retirement lifestyle cost is 50k+.

HTH

-Web

Bostonerimus1

You look to be in very good shape. I've seen far messier portfolios. I might get rid of the Emerging Markets and SMT.

You should think about taxes and flexibility now and the level of any ISA contributions. Your bonds, pensions and cash give you some good insulation against and equity crash and I would be looking at paying down debt like mortgages and car loans while you are still working.

phlebas192

With £750k already in your pensions and 13/15+ years until you can access them, I don't see that there is going to be much tax benefit in adding more to them. Things might change but right now you will likely be able to take the maximum tax free lump sum and be paying 40% marginal tax once you reach SPA. That said, do add anything that will be matched by your employer or that will avoid excessive marginal tax rates but otherwise I would concentrate on building up a S&S ISA with whatever mix of funds you wish.

You don't mention a spouse, but if you have one then gifting them cash to add to their pension would make sense - unless of course they are also in a similarly good position!

Probably worth trying to decide how much income you really neeed / want in retirement. If less than £50k then you can hopefully look forward to retiring in your early 50s if you so wish.

As for the funds, your WPP seems to weirdly ignore UK equities. Is there any reason for that?

If you are planning on purchasing an annuity then it would make sense to gradually switch from equities into gilts with the intention of having enough in those approaching retirement to purchase an annuity with the level of income you desire.

Can't really comment on the other funds except to query SMT. It was flavour of the month some time back but Allianz Technology Trust (ATT) has either matched it with generally lower volatility or outperformed it over almost any meaningful period for the past 20 years. But at less than 4% of the total it's not exactly going to make much difference overall anyway.

MDMD

thanks all for the comments, I’ve been thinking about getting some proper advice, so might look into that at some point. I’m in the process of building up my ISA again to diversify away from pensions a bit after it got used up for a house deposit.

To address some other points

Salary is currently around £116k plus around £20k bonus each year. I sal sac down to £99999 (and have been for the past 5 years or so) to get 62% relief. Employer pays in 10%.

My current role will end in the next 12 months and unsure how quickly I’ll find a new one so need some cash to fund missing the gap and why I’m not pay down the mortgage until I know where the future lies.

The SMT holding I have been thinking of dumping, just unsure if the SpaceX IPO will give an uptick in value which isn’t yet priced in.

There is a UK component to the WPP, it’s the first line but the new text editor messed up the formatting

Sam_666

I would loose SMT, bonds and gilts. Put proceeds in Vanguard fund.

I dont understand your logic on your work pension contributions.
If you earn £136k per year and have cash buffer of £100K, why arent you contributing full £60k (incl employer)?
Paying off morgage before retirement is usualy very bad idea.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/81985208#Comment_81985208

I have to disagree about paying off the mortgage. I feel you should go into retirement with as few liabilities as possible. Not having to service a mortgage, car loan etc takes a lot of pressure off your need to generate income. Risk and market down turns are a lot more visceral when you are generating income from capital rather than your labour so it's nice not to have to worry about keeping up with your mortgage.

MDMD

https://forums.moneysavingexpert.com/discussion/comment/81985208#Comment_81985208

There’s no point in paying in the full £60k as once pay goes under £100k I would get 42% relief on the way in but pay tax at 40% on the way out (assuming my TFC hits the limit and I’m a HR taxpayer when withdrawing). For the 2pp difference I’d rather keep control and access to the funds by sticking it in an ISA.

ali_bear

There's still the possibility of the TFC limit being lifted or abolished altogether by some future govt. Worth a punt on?