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  1. #1

    Ideas needed for safe drawdown of pension

    I am retired and have an as yet untouched DC pension with L&G, current value is approx 180k.
    I am currently living off a small separate DB pension and savings but would like to now start taking some income from the L&G pension.
    I am thinking I would take the 25% tax free lump and put it into savings and put the rest into a drawdown arrangement taking approx 3k per year out of it - this will keep me below the income tax personal allowance.
    I have been going round in circles trying to pick a provider/plan that:
    - is low cost
    - is fairly low risk - it would be great if there was some growth but I am more concerned about protection from a large drop in the stock market - should I consider a cash fund?
    - provides flexibility in terms of changing the amount I draw and/or move to a different provider in the future
    - allows me to continue paying in 2800 or so for the additional 720 tax relief

    Any suggestions as to provider/investment funds that meet the above criteria would be gratefully received.

  2. #2
    There are two separate issues - where is the pension to be held (the "platform") and what funds are you going to use.

    Platform - the most flexible is a SIPP which should allow you to do everything you want. A SIPP will provide online access to thousands of funds. There are several SIPP providers each of which will have different charges and facilities. For example H-L, Interactive Investors, Bestinvest, AJ Bell and quite a few others.

    Funds - Firstly cash is a seriously bad idea. It is almost certain that that your pension will lose real value each year from inflation. There are three other options you could take:
    a) Buy a set of funds that together achieve your objectives. I assume that you dont have the experience to do this.
    b) Pay an IFA to put together the set of funds. This could cost you perhaps 1K with possible ongoing management costs.
    c) buy a very broad single fund that holds a wide range of more focussed funds that are managed with the objective of controlling the overall risk. Such a fund is called "multi-asset" and is typically classified according to degree of risk. There are a number of multi-asset funds available. You could look on under the "mixed investment" sectors. The higher the % equity (shares) the higher the severity of major falls but the higher the average returns. Major providers include L&G, HSBC, Blackrock, Vanguard

  3. #3
    Thanks Linton, I can see a SIPP is the right way to go and that a cash fund going to lose out to inflation.
    As a benchmark, how much % charge should I expect to pay and what % return would be a reasonable expectation on a low risk multi asset fund?
    I may end up going to an IFA but do balk at the costs they charge.
    I just want something simple to manage, preferably by myself.

    L&G do offer a fixed term drawdown product that according to their calculator would (with 135k put into it) allow me to take 3k per year for 3 years and a guaranteed residual pot of approx 131k. Not a huge return but it is guaranteed. Do you have any views on this?

  4. #4
    That is probably not a good idea. Generally rule of thumb is that you dont take the lump sum unless you have a reason for doing so. Sticking it in a savings account is not a reason. It is likely that phased flexi-access drawdown would be better for you.


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