Which pension pot to drawdown first?

DRS1

OP @Kryten_the_Titan makes a very important point about the age 55/57 change. which looks like it will affect you. You should ask the two pension providers if you have a protected minimum pension age under your pensions and if you would lose it if you transferred to a new pension. Assuming you don't have one or would lose it then what they suggest about crystallising enough pension to cover the years from 55 to 57 is the logical approach (even if you were otherwise thinking of drawing down using a different method). You would then be able to draw from the crystallised pot during the 55 - 57 period.

QrizB

You should ask the two pension providers if you have a protected minimum pension age

Vanguard definitely don't, so you don't need to ask them.

Do you take from long held assets which have risen substantially over the years or recently bought ones that are closer to the original purchase amount?

That's the wrong question.

Imagine your two pensions were both invested in the same fund, "Fund A". The older one bought units in Fund A when they were £10 each; the new pension bought units when they were £20 each; units are now worth £30.

Which do you sell, the ones you bought for £10 or the ones you bought for £20? It should be obvious that it doesn't matter.

Happy_Minion

https://forums.moneysavingexpert.com/discussion/comment/82042159#Comment_82042159

That explanation makes it a lot clearer. I wasn't thinking about it like that.

ThreeScoreAndOn

I think "old investments vs newer investments" is a red herring like has already been mentioned by others. Inside a pension there's no capital gains tax, so it makes no difference whether a holding has doubled or is near what you paid for it. You can sell either without a tax consequence inside the wrapper. So that specific question doesn't really have a meaningful answer; the useful questions are different ones which I think people have also mentioned. So if I was you I would look into:

• Which plan actually supports flexible drawdown/Tax Free Lump Sum? Older group personal pensions (your Aegon one) sometimes don't, and you'd have to transfer to access drawdown the way you want. Worth checking before you build a plan around it.
• Charges and investments. If one is cheaper, or lets you hold what you want, that's a stronger reason to consolidate there than which pot is "older." Your Vanguard 2040 fund is still mostly equities and only de-risks as 2040 approaches — fine for long-term money, less ideal for the cash you'll spend in the next couple of years.
• Sequence-of-returns risk. The thing to avoid is selling equities in a downturn to fund income. So rather than "which pot first," the common approach is: hold roughly 2–3 years of planned withdrawals in cash / money-market, draw that first, and let the equity portion ride — then top the cash bucket back up in good years. You already have a lot in the ISA in cash by the sounds of it too.

Put together, most people in your position would consolidate into one low-cost flexible plan (Moonwolf's point about replicating the funds cheaper is sound), invest it as a glidepath (cash buffer → shorter bonds → equities), and then "which pot" stops mattering because it's one pot doing one job with the ISA to help minimise tax paid on drawdown. You should be able to pay next to no tax with and 18k draw requirement if you use your ISA's and 25% tax free wisely.

Two things to watch out for, you turn 55 next year, but the normal minimum pension age rises to 57 on 06/04/2028 for anyone born after 06/04/1971 — so check your window at 55 or you may end up paying for 55→57 from your £160k ISA/cash. Don't forget you can still pay £2,880 a year into a pension as a non-earner and get it grossed up to £3,600, even while drawing down. Don't forget to factor in inflation if you plan to hold cash over a longer period take account that it errodes in buying power because of inflation at approx 2.5-2.8% every year or worse ...

Most of all model it because really that is the key factor in deciding.

Good luck and I hope it all goes well for you.