Pension

czj

Well-Known Member
Messages
139
Type of diabetes
Type 1
Treatment type
Insulin
Congratulations on facing up to it all.

Without wanting to get into any politics, I've heard Steve Webb the (Lib Dem) pensions minister speak a couple of times in the last few years. He came over as someone who really cared about Pensions and knew his stuff. Having spent 20 years working for large pension companies I was over the moon when it was announced the government were ending the need to buy an annuity.

Are you planning on blowing it all on a Lamborghini?
 

AndBreathe

Master
Retired Moderator
Messages
11,320
Type of diabetes
I reversed my Type 2
Treatment type
Diet only
Congratulations on facing up to it all.

Without wanting to get into any politics, I've heard Steve Webb the (Lib Dem) pensions minister speak a couple of times in the last few years. He came over as someone who really cared about Pensions and knew his stuff. Having spent 20 years working for large pension companies I was over the moon when it was announced the government were ending the need to buy an annuity.

Are you planning on blowing it all on a Lamborghini?


You have to unwind pots totalling c£320k to do that,....................






...............unless trading in
 
C

chris lowe

Guest
Crikey Douglas99 you've got kids and can still afford a pension? Or are you planning on being a SKI-er (spending kids inheritance) :)
 

Snowy12

Well-Known Member
Messages
935
Type of diabetes
Type 2
Treatment type
Tablets (oral)
Dislikes
Tuna,People spitting on the floor and ironing.
What about spending some funds on premium bonds,that is if you haven't already done so.
 

AndBreathe

Master
Retired Moderator
Messages
11,320
Type of diabetes
I reversed my Type 2
Treatment type
Diet only
The saga continues.
Too many funds to decide to invest in.....

Douglas, unless you are an experienced investor, and by that I mean, making your own stock or fund choices, not investing x amount every so often, then you are potentially playing with fire. The right, for you, fund choice could result in stellar performance, the wrong, for you, funds could equally result in a total loss of your hard earned savings. If you are dealing on an execution only basis, you are completely absolving the investment managers and pension managers from any accountability. That's a big, big decision, and not one to take lightly, first time around.

The final years, when credibly, you should be considering a sliding scale of investment to cash (or cash equivalents), in readiness for disinvestment (I'm thinking you will be taking regular cash withdrawals to maximise on return and tax implications?). If you are finding this tricky, you need professional advice, you will have to pay for. If you are unable or unwilling to pay for professional advice, I wish you good luck in your Russian Roulette.

Really, this isn't a time to give it a whirl.

Just for completeness, I am not a financial advisor, or pitching for your business. My comment is purely from an experienced investor, who has worked closely with fund managers, actuaries and the like over the years, and who understands the wider regulation fairly well.
 

LittleGreyCat

Well-Known Member
Messages
4,233
Type of diabetes
Type 2
Treatment type
Tablets (oral)
Dislikes
Diet drinks - the artificial sweeteners taste vile.
Having to forswear foods I have loved all my life.
Trying to find low carb meals when eating out.
If I understand you correctly you are looking to invest over a 3 year period and then start your draw down.

Presumably you will take 25% of the fund tax free at the start and then take a regular (or irregular) income from the rest, depending on how much your expenditure outstrips your income from other sources.

I am not a financial expert of any sort, but as far as I know three years is too short a period to safely invest in stocks and shares or any derivatives based on stocks and shares.
You are at far too much risk from a temporary down turn in the market.
I think such investments are supposed to be for a minimum 10 year period and not for those who will be forced to cash them in at a specific point.

Traditionally, for a pension you started out aggressively in your 20s and 30s putting your money into growth stocks because over a long time line the stock market has (usually?) always out performed other types of investment.
However when you got to within 10 years of cashing in you moved to low risk stocks, and then mainly into bonds and cash because you wanted to preserve your pension pot and not risk needing to cash in your investments when the stock market was in a temporary crash (such as over the last 10 years or so). By retirement age everything should be in cash and government bonds. No more potential for massive gains, but you have locked in your gains to date.

Look at http://www.tradingeconomics.com/united-kingdom/stock-market for example and look at the graph from 2000 to 2012.
The stock market is still not back up to the levels of 2000 and if you had needed to cash in your stocks during 2003 or 2009 you would have seen your investment value halved.

The years 2000 to 2003 are a fine example - as I say, invest in 2000 and see your investment halved by 2003.
The market is coming back up towards the all time highs but is still relatively unstable - witness the crash and then partial recovery this week.
In three years time it could be back down to 2003 levels.

One complicating factor is this "quantitative easing" going on at the moment coupled with artificially low interest rates.

For the traditional cash portion of a mature pension portfolio this means that you get virtually no interest and the value of your pension pot slowly erodes.

Government buying of bonds (quantitative easing) is artificially forcing the bond price up.
For fixed interest bonds this forces yield (the interest you get on your initial investment) right down.
There is also the "elephant in the room" - at some point the governments are going to stop printing money and artificially inflating the bond market.
At this point the cash value of the bonds should drop sharply, and the yields come back up to normal.
This would be the point to invest in bonds, but not to be holding bonds bought at a higher price.
So the traditional bond portion of a mature pension portfolio isn't looking good at the moment either.

TL;DR quantitative easing has screwed the traditional pension fund strategy.
Only once this has stopped is it relatively safe to go back to the traditional methods.

I am in this dilemma at the moment.
I have a small SIPP holding cash.
The market is near its peak and volatile, which is not the situation to invest for short term growth.
The bond market is waiting for normal service to be resumed, so now is not the time to buy bonds
Cash is generating minuscule income but seems to be the least bad option - at least for the next couple of years.

So, in summary, I would be wary about investing in the stock market if you intend to cash in your investments in the next 3 years to start paying out.
If you think that, say, 50% of your pension will remain untouched for 10 years or more and that you can manage without it if the market crashes, then you could consider long term investment of around that portion.
If you are thinking that your health may prevent the enjoyment of your money after 10 years or less then I would be strongly tempted to keep it in cash for the moment.

Please note again - I am not in any way qualified to give financial advice and this is purely a personal opinion.
I am trying to explain my personal view about risks of loss against chance of profit in the short term.

Footnote:
Our kids have gone through University and it wasn't the same as when we went through University.
We had grants; they have loans.
One has paid the loan off.
The other is still in debt aged early '30s and is unlikely to clear this debt any year soon.
I left University debt free in an employment market where a degree was a rare thing (about 5% I think) instead of being as common as muck (around 50%).
So again, different times.

Cheers

LGC
 

AndBreathe

Master
Retired Moderator
Messages
11,320
Type of diabetes
I reversed my Type 2
Treatment type
Diet only
If I understand you correctly you are looking to invest over a 3 year period and then start your draw down.

Presumably you will take 25% of the fund tax free at the start and then take a regular (or irregular) income from the rest, depending on how much your expenditure outstrips your income from other sources.

I am not a financial expert of any sort, but as far as I know three years is too short a period to safely invest in stocks and shares or any derivatives based on stocks and shares.
You are at far too much risk from a temporary down turn in the market.
I think such investments are supposed to be for a minimum 10 year period and not for those who will be forced to cash them in at a specific point.

Traditionally, for a pension you started out aggressively in your 20s and 30s putting your money into growth stocks because over a long time line the stock market has (usually?) always out performed other types of investment.
However when you got to within 10 years of cashing in you moved to low risk stocks, and then mainly into bonds and cash because you wanted to preserve your pension pot and not risk needing to cash in your investments when the stock market was in a temporary crash (such as over the last 10 years or so). By retirement age everything should be in cash and government bonds. No more potential for massive gains, but you have locked in your gains to date.

Look at http://www.tradingeconomics.com/united-kingdom/stock-market for example and look at the graph from 2000 to 2012.
The stock market is still not back up to the levels of 2000 and if you had needed to cash in your stocks during 2003 or 2009 you would have seen your investment value halved.

The years 2000 to 2003 are a fine example - as I say, invest in 2000 and see your investment halved by 2003.
The market is coming back up towards the all time highs but is still relatively unstable - witness the crash and then partial recovery this week.
In three years time it could be back down to 2003 levels.

One complicating factor is this "quantitative easing" going on at the moment coupled with artificially low interest rates.

For the traditional cash portion of a mature pension portfolio this means that you get virtually no interest and the value of your pension pot slowly erodes.

Government buying of bonds (quantitative easing) is artificially forcing the bond price up.
For fixed interest bonds this forces yield (the interest you get on your initial investment) right down.
There is also the "elephant in the room" - at some point the governments are going to stop printing money and artificially inflating the bond market.
At this point the cash value of the bonds should drop sharply, and the yields come back up to normal.
This would be the point to invest in bonds, but not to be holding bonds bought at a higher price.
So the traditional bond portion of a mature pension portfolio isn't looking good at the moment either.

TL;DR quantitative easing has screwed the traditional pension fund strategy.
Only once this has stopped is it relatively safe to go back to the traditional methods.

I am in this dilemma at the moment.
I have a small SIPP holding cash.
The market is near its peak and volatile, which is not the situation to invest for short term growth.
The bond market is waiting for normal service to be resumed, so now is not the time to buy bonds
Cash is generating minuscule income but seems to be the least bad option - at least for the next couple of years.

So, in summary, I would be wary about investing in the stock market if you intend to cash in your investments in the next 3 years to start paying out.
If you think that, say, 50% of your pension will remain untouched for 10 years or more and that you can manage without it if the market crashes, then you could consider long term investment of around that portion.
If you are thinking that your health may prevent the enjoyment of your money after 10 years or less then I would be strongly tempted to keep it in cash for the moment.

Please note again - I am not in any way qualified to give financial advice and this is purely a personal opinion.
I am trying to explain my personal view about risks of loss against chance of profit in the short term.

Footnote:
Our kids have gone through University and it wasn't the same as when we went through University.
We had grants; they have loans.
One has paid the loan off.
The other is still in debt aged early '30s and is unlikely to clear this debt any year soon.
I left University debt free in an employment market where a degree was a rare thing (about 5% I think) instead of being as common as muck (around 50%).
So again, different times.

Cheers

LGC

As I understand it, @douglas99 has fairly recently transferred accumulated funds in other pension instruments into a SIPP, so the funds were invested, but will probably have been transferred into the SIPP as cash, and therefore investment decisions are required. Obviously to remain in cash could be a valid investment choice, but I'm not qualified or placed to make that assessment.
 

LittleGreyCat

Well-Known Member
Messages
4,233
Type of diabetes
Type 2
Treatment type
Tablets (oral)
Dislikes
Diet drinks - the artificial sweeteners taste vile.
Having to forswear foods I have loved all my life.
Trying to find low carb meals when eating out.
As I understand it, @douglas99 has fairly recently transferred accumulated funds in other pension instruments into a SIPP, so the funds were invested, but will probably have been transferred into the SIPP as cash, and therefore investment decisions are required. Obviously to remain in cash could be a valid investment choice, but I'm not qualified or placed to make that assessment.

That is also the assumption that I was starting from - and reflects the difficult position that I am in at the moment.

@douglas99 said "Now, I need to decide what funds to invest in for maximum benefit from a drawdown to start in 3 years."

My main point was a warning that 3 years is probably too short a term to invest in anything stock market related given the turbulent times of the last 10 years.

With a SIPP you make your own decisions - I was just sharing my position at the moment.

Cheers

LGC
 

dawnmc

Well-Known Member
Messages
2,431
Type of diabetes
Type 2
Treatment type
Non-insulin injectable medication (incretin mimetics)
Blimey, your so lucky to have a pension. I don't, I'll be off to live in a box somewhere. 22 yrs of marriage up the swanee, and he gets the pension. I get to bring up 4 kids alone.
Enjoy playing with your money.
 
  • Like
Reactions: 3 people

Bluetit1802

Legend
Messages
25,216
Type of diabetes
Type 2 (in remission!)
Treatment type
Diet only
Blimey, your so lucky to have a pension. I don't, I'll be off to live in a box somewhere. 22 yrs of marriage up the swanee, and he gets the pension. I get to bring up 4 kids alone.
Enjoy playing with your money.

I am almost certain the rules changed and you can claim part of an ex-husband's pension. Perhaps you should make some enquiries.
 

LittleGreyCat

Well-Known Member
Messages
4,233
Type of diabetes
Type 2
Treatment type
Tablets (oral)
Dislikes
Diet drinks - the artificial sweeteners taste vile.
Having to forswear foods I have loved all my life.
Trying to find low carb meals when eating out.
When you agreed your settlement did you get something extra (such as his half of the house) to compensate for not getting half the pension?
As Bluetit1802 says you are normally entitled to half the ex-spouse's pension unless you agree some alternative arrangement.

If in doubt, check with the CAB to make sure that you haven't missed out.

Cheers

LGC
 
  • Like
Reactions: 2 people

AndBreathe

Master
Retired Moderator
Messages
11,320
Type of diabetes
I reversed my Type 2
Treatment type
Diet only
I don't really want to get into a deep debate as some of these details are just too individually specific, but in reality, unless Douglas intends to take all of his pension pot, as cash, in one go, although he may start taking benefits from his pension in three years, he may have money in his pension "pot" for many years to come.

Personally, I will time some withdrawals from one of my pots, but I am hoping I will have money invested for many, many years to come, with strategic investing/dis-investing.

I agree 3 years, in isolation is a short term investment, which isn't necessarily matched with equity based investments, and this, coupled with the potential for a the need for capital growth for tens of years could influence the matter.

If Douglas does indeed consider he will withdraw all of his fund in one hot, then the advice he should be seeking is different; a decent tax accountant would be worth a couple of hundred pounds.
 
  • Like
Reactions: 2 people