Income Drawdown

[bad company]

I retired earlier this year at the age of 57. Apparently I can draw 5.52% of my fund annually as I do not require a lump sum. That figure seems unsustainable to me, I don't want to end up old & poor.

Does anybody have an opinion of a sensible drawdown %?

[bad company]

anonymous said:

[redacted]

My mum is 83 and just returned from her 6th Round World Cruise. She is away for 4 months on one of those and takes other holidays. She couldn't do any of that if she was poor.

[jeff m2]

4% is considered the norm

Basically 300K gives you 1k/month, which should increase just ahead of inflation.

[PurpleMoonlight]

bad company said:

Apparently I can draw 5.52% of my fund annually as I do not require a lump sum.

Are you saying you are electing not to receive the tax free pension commencement lump sum?

If so, are you mad?

[bad company]

PurpleMoonlight said:

Are you saying you are electing not to receive the tax free pension commencement lump sum?

If so, are you mad?

No, not mad. I am taking the tax free element monthly rather than in one go.

[bad company]

jeff m2 said:

4% is considered the norm

Basically 300K gives you 1k/month, which should increase just ahead of inflation.

I thought 4% prudent. The max 5.52% is attractive tho.

[otherman]

bad company said:

I retired earlier this year at the age of 57. Apparently I can draw 5.52% of my fund annually as I do not require a lump sum. That figure seems unsustainable to me, I don't want to end up old & poor.

Does anybody have an opinion of a sensible drawdown %?

You're only allowed to use drawdown when you have other pensions (including the state one) of at least £20k. That's to make sure that you don't end up left with nothing at 75. So if the state pension is £7k you'd need to annuitise enough to give you £13k then you can use drawdown on the rest.

[bad company]

otherman said:

You're only allowed to use drawdown when you have other pensions (including the state one) of at least £20k. That's to make sure that you don't end up left with nothing at 75. So if the state pension is £7k you'd need to annuitise enough to give you £13k then you can use drawdown on the rest.

I thought that only applied to flexible rather than capped drawdown?

[PurpleMoonlight]

bad company said:

I thought that only applied to flexible rather than capped drawdown?

It does.

[98elise]

otherman said:

bad company said:

I retired earlier this year at the age of 57. Apparently I can draw 5.52% of my fund annually as I do not require a lump sum. That figure seems unsustainable to me, I don't want to end up old & poor.

Does anybody have an opinion of a sensible drawdown %?

You're only allowed to use drawdown when you have other pensions (including the state one) of at least £20k. That's to make sure that you don't end up left with nothing at 75. So if the state pension is £7k you'd need to annuitise enough to give you £13k then you can use drawdown on the rest.

Is that pensions, or can it be other forms of income such as property investments or ISA's? I suspect it will only be pensions

[jeff m2]

bad company said:

jeff m2 said:

4% is considered the norm

Basically 300K gives you 1k/month, which should increase just ahead of inflation.

I thought 4% prudent. The max 5.52% is attractive tho.

4% is the figure used by those that self manage their funds, ie money over and above that in a pension or has to be put in one of those God awful annuities.
I did read an article last year that discussed the possibility of using 5%, it said it was....sorta ok if the first two years were not poor growth in the market as that might put you behind the eight ball.

In your case the Trustees of the Funds have done their sums and projected 5 plus as sustainable, you should be fine.

(The 4% would maintain capital, the 5+% figures you're gonna die sometime thus end the trustees commitment. )

Edited by jeff m2 on Tuesday 9th July 22:01

[PurpleMoonlight]

98elise said:

Is that pensions, or can it be other forms of income such as property investments or ISA's? I suspect it will only be pensions

For Flexible Drawdown only state pensions, annuities and large defined benefit occupational pension scheme pensions count towards the £20,000 pa.

[PurpleMoonlight]

jeff m2 said:

In your case the Trustees of the Funds have done their sums and projected 5 plus as sustainable, you should be fine.

(The 4% would maintain capital, the 5+% figures you're gonna die sometime thus end the trustees commitment. )

Edited by jeff m2 on Tuesday 9th July 22:01

Capped Drawdown has nothing whatsoever to do with what the trustees may feel is sustainable. It's simply a legislative defined calculation based on the value of the members assets and the approrpiate GAD rate on a give day. This is then reviewed no later than every third year, or earlier than a year on request, until age 75 whereupon it is reviewed annually.

[jeff m2]

PurpleMoonlight said:

jeff m2 said:

In your case the Trustees of the Funds have done their sums and projected 5 plus as sustainable, you should be fine.

(The 4% would maintain capital, the 5+% figures you're gonna die sometime thus end the trustees commitment. )

Edited by jeff m2 on Tuesday 9th July 22:01

Capped Drawdown has nothing whatsoever to do with what the trustees may feel is sustainable. It's simply a legislative defined calculation based on the value of the members assets and the approrpiate GAD rate on a give day. This is then reviewed no later than every third year, or earlier than a year on request, until age 75 whereupon it is reviewed annually.

In his original post he said drawdown on funds, he did not specify "pension", I assumed it was his money. Assuming 8% growth in Capital, anything above 4 would(could) jeopardise preservation of capital if monthly payout is to be kept ahead of inflation.
If he had used the word pension, I would not have posted. (I was concerned he was being badly advised)