Reply to: Pensions/drawdown etc

[Fred Bloggs]

Fully depends on how it’s invested but conventional wisdom these days suggests 4% as the sensible figure to maintain a sustainable pot and maintain some protection against inflation.

understanding and acceptance of risk is a key factor both risk in your invested assets and some risk that future long term market conditions may dent the sustainability.

The age at which you start is neither here nor there if it’s truly sustainable.

The investments should be tiered and structured with 2-3 years worth in cash/near cash to mitigate the risk of having to sell assets in a market dip. The rest should be typically targeted at diverse assets with a reasonable chunk at the back in higher risk classes.

There’s a Meaningful Money pod cast series on retirement and pension structuring that is definitely worth a listen. If you are not sure on the way forward then there are companies / ifa out there who will help for a fee.

It's possible you are right and 4 is the magic number.

However, that number has for a number of years been discredited as being too generous in today's economic climate. The number 4 originated in the USA, it may or may never have been totally appropriate elsewhere.

Indeed, it is all down to personal risk appetite at the end of the day.

But I encourage everyone to fully educate themselves so they stand a chance of understanding the very real risks associated long term with defined contribution pension plans. It has never been easier. All the information is out there.

I absolutely recommend avoiding any advisors in this space as they are conflicted in what they say and do. And then there's the issue of the appalling charges they levy, but that's another thread. The key here, as in so much else is self education.

With many pension pots in the high 6 or even 7 figures, an individual literally cannot afford to go without serious self education in personal finance matters.

[Wonky]

Today, I would suggest 5% drawdown is far too high to be sure you won't run out of money. Especially going into drawdown at 55 if you pull out money to live on. There is no magic number that's guaranteed to work. But it's going to be far less than 5% drawdown if you don't want to run out of money.

Fully depends on how it’s invested but conventional wisdom these days suggests 4% as the sensible figure to maintain a sustainable pot and maintain some protection against inflation.

understanding and acceptance of risk is a key factor both risk in your invested assets and some risk that future long term market conditions may dent the sustainability.

The age at which you start is neither here nor there if it’s truly sustainable.

The investments should be tiered and structured with 2-3 years worth in cash/near cash to mitigate the risk of having to sell assets in a market dip. The rest should be typically targeted at diverse assets with a reasonable chunk at the back in higher risk classes.

There’s a Meaningful Money pod cast series on retirement and pension structuring that is definitely worth a listen. If you are not sure on the way forward then there are companies / ifa out there who will help for a fee.

[Fred Bloggs]

Is that 25K income or 25K pot? If that latter, that doesn't sound like much of a retirement income. IIRC, the rule of thumb guidance used to be £100K of pot for £5K of annual income, so you're looking at around £10K a year there - probably better than most of the population, but not exactly easy street money.

I suppose a better question that 'how much have you got' is how big a pot you need in order to be able to retire at 55.

Vaguely thinking about chucking it all in next year - currently (counts fingers) 53, so just over a year till I can access my pot.

But am absolutely clueless about how it all works, whether I can afford to not work, whether I'm allowed to take a part time job while drawing pension etc, etc.

No mortgage, but I don't want to be counting pennies if I want a weekend away, or an occasional holiday etc.

No idea how long I'm gonna live for, that kinda info would be handy...

Today, I would suggest 5% drawdown is far too high to be sure you won't run out of money. Especially going into drawdown at 55 if you pull out money to live on. There is no magic number that's guaranteed to work. But it's going to be far less than 5% drawdown if you don't want to run out of money.

[Fred Bloggs]

And MPAA when triggered applies to ALL you're pensions not just the one you took it out of?

Refer to your other post in the other thread where you posted the same question.

[mudskipper]

HL SIPP - £125K
EX-employer pension - £25K
Current Umbrella pension - £42K
NEST - £2

Not brilliant....

Is that 25K income or 25K pot? If that latter, that doesn't sound like much of a retirement income. IIRC, the rule of thumb guidance used to be £100K of pot for £5K of annual income, so you're looking at around £10K a year there - probably better than most of the population, but not exactly easy street money.

I suppose a better question that 'how much have you got' is how big a pot you need in order to be able to retire at 55.

Vaguely thinking about chucking it all in next year - currently (counts fingers) 53, so just over a year till I can access my pot.

But am absolutely clueless about how it all works, whether I can afford to not work, whether I'm allowed to take a part time job while drawing pension etc, etc.

No mortgage, but I don't want to be counting pennies if I want a weekend away, or an occasional holiday etc.

No idea how long I'm gonna live for, that kinda info would be handy...

[psychocandy]

Take out £250K spend £50K per year on fun stuff, if you make it till sixty you are nearly deed anyhoo, so no need for a lot of cash after that

Long time deed


Sent from my iPhone using Contractor UK Forum

Throw yourself at the mercy of the state and claim benefits ;-)

[psychocandy]

Drawing the 25 per cent tax free does not trigger MPAA. Spend it on cocaine, hookers or daffodils. No difference.

Draw down even 1p in income after taking the 25 per cent and you trigger the MPAA.

And MPAA when triggered applies to ALL you're pensions not just the one you took it out of?

[northernladuk]

Actually, if I'm going to boast, you should see the size of my..... ok I'll stop there.

Would have been better if you'd stopped around post number 4

[psychocandy]

***.

Actually, if I'm going to boast, you should see the size of my..... ok I'll stop there.

[psychocandy]

****.

Why? Its hardly like I've got a massive amount that I'm boasting about.....

[sludgesurfer]

One of the best explanations I've read:

The annual allowance for pensions

[northernladuk]

HL SIPP - £125K
EX-employer pension - £25K
Current Umbrella pension - £42K
NEST - £2

Not brilliant....

Thanks PC.

[GhostofTarbera]

HL SIPP - £125K
EX-employer pension - £25K
Current Umbrella pension - £42K
NEST - £2

Not brilliant....

Plus 10k a year from gov


Sent from my iPhone using Contractor UK Forum

[Fred Bloggs]

Can you spend it more shares in a SIPP and get more free money from the government?

Assuming the MPAA is not triggered the answer is a qualified yes. The qualification bring that there are recycling rules that prevent a double dose of tax top up. It's complicated so you need to research this now you know what you look for.

[psychocandy]

Fair enough. Why don't you go first.

HL SIPP - £125K
EX-employer pension - £25K
Current Umbrella pension - £42K
NEST - £2

Not brilliant....