Pension planning

[Re-sign Carl Dale]

Nice one....hopefully. "value of the investment can go up and down."
Best thing I did was to get into cash after Brexit. Yes, stockmarket went up more afterwards, but now...still not back where it was.

I have just picked up this thread so my ha’porth of advice comes a bit late and there has already been a lot of useful contributions. Just before I retired the boss of the small consultancy company where I worked brought in an IFA to have a chat with the staff about pension planning. It was fortuitous timing for me as it turned out. To cut a long story short I went for an income drawdown pension plan as annuities had become very poor value for money.

The positives are that this scheme is very flexible. You can take as little as you need in the way of pension (you can still work at the same time if you want), the whole pension fund is transferable to your spouse in the event of your death and it can even be bequeathed to your children (subject to usual taxation rules). The downside is that the pension pot is invested in the stock markets which can be very volatile e.g. in the immediate aftermath of the COVID pandemic almost £40K was wiped off the value of my portfolio. (It has partially recovered now, only (!) £15K down). These are exceptional times though and it must be remembered that these are long-term investments. I have been retired for about 15 years and the investments have grown by more than the amounts I withdraw every year so I am happy.

Great that you got the opportunity for advice via work. I run retirement courses for staff at a few Universities and they are always really well received. It’s the sign of a caring employer.

Income Drawdown is the route where probably 90% of my clients go down - suitable if they have the capacity to tolerate investment fluctuations, both financially and emotionally!

The last 10 or so years for investments have been generally really good ... the next couple of years could be more interesting, although the trajectory is always up if you can leave it long enough.

A key approach is to have a strategy of not being forced to sell during a period temporary decline - I always recommend that a cash / very cautious buffer within a pension fund is held. This is exclusively there to pay income and cover charges for a couple of years. This means that you don’t need to worry about the short term fluctuations we’ve seen over the last few months as the only part that is exposed to these, won’t be needing to be touched for a while.