Great advise. Sequencing risk is my biggest headache with 5 years left until I plan to retire aged 61 (hopefully). I am currently building a cash reserve in ISA"s and high interest accounts. Hope to get to somewhere between 2 and 3 years of cash and then leave my SIPP invested in a couple of global funds. That way you still receive interest from the ISA’s etc rather than having it in the cash account of the SIPP and can live off these until the market recovers when I will sell from the funds to replenish Seems the best strategy to me
Firstly, top channel! Excellent source of information. 👌🏻 Why not produce a course , not all of us wish to pay for an advisor but would be willing to buy a course …. What I find most annoying about advisors (sorry) is that most won’t be clear about costs up front . I once paid an advisor to review my pensions. Charged me a small fortune . Then , only after hours of my time, offered to move them to “better” funds and platforms for a fee…. Would have cost more than 10k…. Instead I educated myself , took control and moved them myself . I’ve been learning, reviewing and managing them since. All good. Glad you mentioned bonds are , at least at the moment , terrible . I wrongly understood bonds were safe , not the case when in funds !
Hi Nick. I do plan on creating a course - I’m designing it currently. It is a problem that advisers aren’t clear about costs. I always hold a discovery call first at my expense to explain my service and the costs. Then I follow that up with an engagement letter, which re-confirms everything I explained. Advice usually costs less than doing it yourself. The problem is that many advisers aren’t very skilled at articulating why. There are major costs of using direct platforms that are hidden and you wouldn’t be aware of. I’m doing a video soon to explain some of these.
Second comment 😂 the cash account is some what similar to the 3 bucket method. The elephant in the room is when is a “good” time to move money into the cash pot …. When the market goes up 1%, 5%, 20%?…. Tricky right …. What would an advisor do? 😊
It depends how you’re using the cash. There are no hard and fast rules here. It’s like paying for insurance - you choose the level of cover you want. Sometimes that cover costs you more but the feeling of having a safety net is important. Nobody regrets taking insurance when it pays out.
Hi Chris. Thanks for the reply and largely agree. Although I’m not a tax expert so I don’t really get the last but. Pension only I think?re selling my stocks I’m not advocating wild capital volatility (100% equity) but good income portfolios have fallen less than say a vanguard 20%, 40% and 60% equity this year and outpaced them last so the risk appears similar but I get my income of 5%. Selling at depressed levels applies to both income and capital portfolios but, for example, if I needed 7% temporarily I’m better selling 2% and getting 5% than selling 7%. Being in vanguard this year and needing 5% would have been terrible. Milk the cow don’t kill the cow I say
Of the two options you describe at the start of the video, I have to admit that the higher-risk portfolio sounds a lot more attractive ! I recently retired in my early 50s, and I'm still keen to maximize my returns even though I could probably afford to slow down and de-risk. That's probably not very rational but I find it really difficult to shake the competitive urge. Right now I'm trying to follow a version of what you describe as the cash management strategy (i've sometimes heard of it as "time bucketing" too); I keep around 5 years in premium bonds and very low-risk funds, with the rest in equities. Two years feels a little low to me, but that's just my preference. Anyway, just wanted to say that I enjoyed the thought-provoking video and really appreciate the effort you put in, Chris. Your content is top notch.
There’s nothing wrong with that Chris. Much comes down to your own personal attitude to risk but above that, your capacity to be able to take it 👍🏼 As long as you have a robust cash position it’s perfectly viable to take more risk if you’re comfortable with what that entails.
Hi Chris Most advisors mention these drawdown options. What about people like myself who have a sipp that produces income from dividend payments that are paid in cash and sits in your cash account and is taken rather than being re invested. Then there really isn't any drawdown, just dividends, providing your income. There are a lot of good quality blue chips paying 8% upwards at present.
Hi there. You can hold dividend paying companies in your portfolio and utilise the yield they generate to pay your income. They are still susceptible to price falls, dividend reductions and other risks though. If you need to take more than the amount of cash you’ve generated at any point, and that coincides with a fall in capital values, then you’ll have to send more shares to generate the required capital. That means that even when the price recovers, you’ve got less shares to be able to generate your dividends. Unfortunately, there is no perfect strategy.
Hi there. There are different trusts that can assist with inheritance tax planning. There are also potentially life time tax charges and restrictions to be aware of depending on the type of trust, so professional advice is always required.
Hi Chris, I'm enjoying your explanations on pensions only because it's near that time for me. Regarding Flexi Drawdown, I have three works pensions of these one in particular I would like to flexi drawdown this pension it's a deferred benefit type, I left this company many years ago but left the pension with them. My IFA has said that Flexi drawdown is difficult to set up as there appears to be barriers to it and that not too many are accepted into a Flexi drawdown, resulting in we cannot do it. Do you know why it is so difficult to set up a Flexi drawdown pension. I'm wanting to drawdown quickly to pay of a mortgage before I'm 75, I'm broadly drawing down twice as much as it would normally pay out.
Hi Russ. The rules around defined benefit transfers are very strict now, mainly as a result of poor advice given in the past. Few advisers will advise in this space anymore because it is very expensive for them to remain active. Most professional indemnity insurers won’t provide cover to advisers in this area anymore, so it’s too high risk.
Hi there. Yes and no. You have to crystallise benefits somehow to take money out of a pension, but drawdown is only one of the options. You can take what is called ‘uncrystallised funds pension lump sum’, where you crystallise a small amount of your pension in order to take a taxable payment alongside a some tax free lump sum. I.e. if you had a pot of £100k, you could crystallise £2k in order to receive a £1.5k taxable payment plus a £500 tax free lump sum payment.
Hey Chris, Another great vid. Cheers. You’re dead right. SoR risk is the biggest concern in my mind Personally I”m 6.5yrs yrs away, so gradually trading off accumulation with.de-risking for a while. My plan is a combo of the two methods. 1-2yrs away, will have moved the portfolio to: 1yr of cash 1yr of ST bonds 3yrs of ‘natural yield’ : IT/LT/Junk bonds, Hi Div Stocks & Property Balance: global stock market (max growth), with just a smattering of Au (which I hold increase everything else goes pear-shaped!!) If things go bearish, I’ve got a 5ish yr cushion to ride out a drawdown. If it doesn’t you avoided the SoR risk - go buy a new Tesla ;-) I saw a vid (US ‘guru’) saying SoR risk only needs to be avoided in the 1st 5-7 yrs after which you could in theory dial back up a little more risk because you are in fact invested on a ~40yr horizon. Your thoughts?
Hi there. Good to see you’ve got a comprehensive strategy in place which takes account of different risks in retirement. I’d have to watch that video to understand their view point on that. Have you got a link?
Hi there. There isn't a catch all answer to this I'm afraid because it will depend on how you're looking to use the platform and what you're looking to buy. Some will be better for lower amounts of capital, some will be better for larger amounts, some will be better for regular contributions, some offer wider investment choice, some are better for holding direct shares.
Vanguard has a cash account option in my pension account effectively paying 3.75% so guaranteed growth? Appreciate interest rates are favourable compared to recent years and not guaranteed but not a zero growth performance drag today?
My problem with advisors is they win either way , if your investment Tanks they,ll have the excuses and you still pay there fees,in my eg Total platform fees equate to approx 22% of “Growth” on the entire Pension Pot ,summary advisors operate a win/win reward scheme for themselves …
The problem is that you’re placing the adviser’s value in the performance of the markets, which the adviser doesn’t control. I’m not saying that’s your fault, it may be that the adviser hasn’t really done enough to explain what their actual value is and what they’re there to do.
It’s quite strange that I ask a question to myself about pensions/investments and then, as if by magic, one of your great videos pops up Chris answering my question 👌 I’ve been watching for a while now and learned so much, thank you. You never know, my pension pot may grow enough with your advice that I’d be able to secure your services on how to deploy it in retirement 😉
I'm planning to keep invested and just take dividends and bond income out if needed. I'm not looking to sell anything and leave the capital to charity when I go belly up. This way I never have to worry about having to sell in a major down market. Have a look at bond yields now at the end of 2022, bet you never thought you'd see these again.
But the worth of your investments could still go down a lot, and then your capital & income will go down plus sometimes companies stop paying dividends altogether
Hi Chris, what’s the best way to start a career as Financial Advisor/Planner? Would it be best to get into a big org who train you up, or to do some qualifications myself before applying for roles? Appreciate your advice and videos!
Hi there! I would say that having a passion for financial planning means you're more than half way there. Many advisers fell into the industry and it's not their real passion. I think you can tell when someone really enjoys what they do, and their advice will always be better. Qualifications are the starting point to be able to actually advise but to be honest, being able to convey complex messages in a simple format is the most important thing. Knowledge is only good if you can make it easy to understand. That said, sitting the necessary exams with a body like the CII or the CISI will be essential. You need to be at Diploma level to be able to obtain CF30 (competent adviser status). Learning the advice process is equally as important, so you need to find somewhere where this training is given. Being able to fact find effectively and conduct client interviews is key. There aren't many firms who have the resources to take on a newly qualified adviser with no clients, so I would suggest looking at something like the St James's Place Academy. As well as getting you through the qualifications, they give great training and will assist in finding a Partner practice for you to work in once you graduate. Hope that helps!
Hi Chris ….enjoy your videos especially as there is a good mix of info for those in at the start of their investing journey as well as those of us who are about to retire and wondering what to do with the pensions we have built up. I’ve been trying to work out the pros and cons of state pension deferral and thought a bit more info on this would be good. For example if you have a sizeable pension portfolio would it be worth defeating the state pension and spend more money from a drawdown. If your investments do well you might have a big LTA charge at 75 Anyway keep the info coming …excellent work !
Hi Phil many thanks for your comment! Have you seen my recent video on whether to take or defer state pension? It may help answer some of these questions for you.
@@chrisbourne-retirementplanner Hi Chris ….yes I watched the video thx As is usually the case with these things there is no simple answer and you just have to run the numbers and scenarios 🙈…..in my particular case it turns out if returns are higher (4.7%+) it’s better to defer. LTA @ 75 years can be quite nasty in high return environment when you take 100% tax free lump sum @ 55 and plan to leave the rest till state pension age or later …. Keep the videos coming and hopefully we can all use your tax efficient strategies to create better retirement plans for ourselves 😁
do you invest tax free draw down , or use it to clear the remainder of your mortgage ? Leaving you needing less cash on a monthly basis and so letting you retire easier and earlier by a few years ?
Hi Tom. Many people use their tax free lump sum to pay off the remainder of their mortgage. Money saved is the same as money earned, so this is perfectly sensible planning for many people. Some would argue that you could gain more growth by leaving the money invested in today’s low interest environment, but the difference is that paying the mortgage off is a GUARANTEED saving, whereas any additional growth from remaining invested is a POTENTIAL increase. The most important thing is simply planning your income and finances in a way that provides the most comfort and security to enjoy retirement.
@@chrisbourne-retirementplanner absolutely outstanding answer .. that's how I thought it would be as the interest I'm paying on the mortgage is more than I would earn by looking at it sitting in a pension pot .. plus I gain peace of mind by owing less . Many thanks for your swift reply and for sharing your knowledge . T
Why withdraw every month. Why not just make a withdrawal once a year instead, take out enough money for the whole year ahead. Or you could just put enough money into cash to last for say 6yrs or so, and maybe put some more into cash when & if the money you have invested is up quite a lot before the end of the 6 yrs
Hi Chris, as a newbie to investing I’m enjoying catching up on all your videos, thinking I’d left it to late at 47 your advice has been great. I have a works pension that I am now finally starting to take serious, also opened a free trade account and a vanguard ISA blended lifestyle 100, I was thinking once I’ve built up some money in my freetrade account say 5k should I sell my shares and move the money into my work pension?
Thanks Tony glad they've been useful to you! There's nothing wrong with doing that as you will benefit from the tax relief uplift. The difference in risk profile needs to be considered though... if your Freetrade account has a higher risk profile it probably provides greater long term growth potential, which could outweigh the tax relief. Compare the relative risk and think about the timescale you're looking at.
Please do not be too married to tax efficiency. I've found a draw-down & cash mix which does save "more tax" - but at the end of the portfolio life, I have taken less then in a slightly less tax efficient version. So. Check around other strategies near your ideal - perhaps one results in more £ in hand.
I totally agree with you Guy that tax efficiency in itself isn't good enough - the net result and how much is left in your pocket is what's important... that's what I always focus on.
The problem with a cash account is that inflation eats it away especially over more than a one year period and even more so in times of high inflation - something we are in now and it is likely to increase further in the next 6months to a year. This makes holding two much cash a great way to erode your buying power and real pension pot value. However there is no golden answer to running a retirement portfolio I guess.
Yes that’s right Geoff, it creates performance drag as mentioned in the vid. Central banks still don’t seem to be viewing inflation as a persistent long term threat though in their forward guidance, which suggests that they think it will wash out once year on year headline figures have passed. Some economists disagree, so it will be interesting to see who is right. If inflation does stick around however you will find that returns on cash will increase.
Hi Chris, great video. We retired 2 years ago and despite being a FA I the 90,s and 00,s we used an IFA to invest our hard earned savings. We are on Drawdown with 2 years income and a 20 30 50 income strategy or low medium and high. Just one question please, is there any disvantage of Crystallising now that the LTA has been scrapped for the moment ? Many thanks Shaun
Really good video but unfortunately some big errors in the natural income section. You comments around price falls (ex dividend) and income targets aren’t entirely accurate. Income generated is separate to capital which is why I think you only talk of yield. Not PPS. Yes capital falls temporarily next day (EXD) but so what? This leads onto your errors around volatility. Not only have these comments clearly not aged well you fail to distinguish between capital volatility and the income volatility. I care less about how volatile my capital is if my income remains consistent. Bravo mr portfolio manager if markets are volatile but my income stays true as this is what I spend so care about more. Good points on sequence risk and the other bits tho 👏
Hi Bob. Many thanks for your comment! Glad to hear you enjoyed the video. Although I’d have to say that unless you’ve misinterpreted the information, I’m afraid you’re not quite correct. The information I’ve provided on natural yield strategies is based on many years experience of working with distribution funds. I do illustrate that an element of a fund’s return comes from capital appreciation, but from a dividend payment perspective a disbursement of company capital literally reduces the value of that company. What you have to understand however is that this impacts different companies to different extents. Mature companies that have paid steady dividends for many years out of their large reserves (like the BPs and Shells of this world) are impacted less than younger companies with less reserve capital. Distribution funds seek to limit income volatility, but in order to do that they have taken increasingly more risk over the past decade, particularly on the fixed income side of the funds (although this situation may now begin to change again). This has led to some questionable results which, as mentioned above, I’ve been able to observe from being close to these strategies on a daily basis.
@@chrisbourne-retirementplanner Hi Chris, possibly but the only misunderstanding would come from your use of the word fallacy and it’s implications. As mentioned I thought the video was really good up until that point & I acknowledge what you said spout capital appreciation. Perhaps fallacy was a slip of the tongue but if not I fear you have confused & conflated two separate issues. Whilst your comments around ex Div are tautologically true the use of the word fallacy implies that you don’t truly understand that this makes ZERO difference to the availability of income. Think about it logically. The way you positioned it made it sound like a capital withdrawal. If so what happens at the next QD, etc, etc. As discussed this might have just been a misunderstanding/ slip of the tongue because you and I know this is down to corporate accounting and that the retained profits will build up again and the share price move accordingly. Unfortunately your comments around company size and maturity (also two separate issues) are irrelevant as again this makes zero difference to the availability of income. Sadly this suggests that your conflating income and capital and too focused on capital volatility and not income volatility. A good income portfolio (not stock or fund) is like a buy to let and has x2 accounts. Income and capital. Like a B2L they operate independently and, as the customer, I buy the portfolio for the income, focus on that and ignore the capital.
Hi Bob. The problem is that just focusing on income stability and ignoring capital fluctuation altogether wouldn’t really work in most client retirement portfolios for a number of reasons… One is that income needs may significantly alter and if natural income doesn’t meet the additional requirement alone, the excess will have to come from capital. If capital values are depressed, more shares will have to be sold, which would impact future pps income. Another is tax planning. The use of a regular UFPLS strategy may necessitate the sale of invested units, particularly if distributions that have built up within wrapper cash aren’t sufficient. The personal allowance usually expands over time so the need for capital increases if someone is looking to maximise PCLS to taxable income ratio maintaining a 0% tax rate. Price stability is therefore important. Which distribution funds can you name that have delivered this as well as total return focussed funds over the past few years? I can’t think of many. For that reason, the notion that natural yield alone can provide a stable retirement income that is also flexible enough to cater for tax planning opportunities and significant income changes, is a fallacy.
brilliant video as usual. Let's get you up to 10,000 subs by sharing this video. I hope all the things I have invested will yield at least 4 -5% so effectively I can go part time in about 4 yrs (when I am 55 and injuries allowing) and top up my income from a small private pension and also i have my isas that I could get an income from if needed (without actually touching capital) until my state pension hits. Then draw state pension, small private pension and top up with tax free isa income-that is the plan but will have to see if it works (may need tinkering along the way if things change)
I'm 54 yrs old, in good health and plan on working until I'm 67 (my retirement age) my basic salary is £40 per year, I'm married, wife has worked in government for 30 yrs so will get a very generous pension, here's my issue, I have a small ish pension pot of £70K that I want to get my hands on as quickly as possible after I'm 55, and pay al little tax as possible, what are my best options? a quick calculation in my head tells me if I take 25% tax free and the rest of in instantly I'll get hit for 40% income tax as I'll go over the £50 tax band.
Hi Shaun. You won’t be able to avoid paying tax altogether, particularly if you take the pot out while still working. It is possible to withdraw it over a couple (or more) tax years though to control the liability and ensure you don’t push yourself into a higher band.
very interesting vid and we are all so different I am 63 and i start draw down at 65 lets say my fund is 100k and I will take only the Tax free money so my draw down is 5K per year tax free and the rest stays invested I will still invest in my SIPP for a futher 5 years my company paying money into my sipp as its doing now at age 70 I have another fund of money lets say 100k of new money I take 25k tax free and i will take 5k a year I repeat the same from 70 to 75 years of age again I have another tax free 25k which will give me 5k again for five years of course i cant fund my pension futher due age but at 80 Iwill have a lot of money in my pension fund and it will have given me tax free cash from the age of 65 to 80 If I pass away between 65 and 80 my pension goes to my son 100% IHT free I think I am the extream case my Pension in genaral is not for me its for my Son and his Children so I will stay totaly invested because I have time hopefully to live into my 80s Pension Planning can be used in such fanatstic ways in 2022
Yes that’s good forward planning. You’re absolutely right - the ability to plan with pensions is so much more flexible today than it ever was. There’s not much we can applaud the government for but I think George Osborne definitely made a big positive difference with pension freedoms.
Great advise. Sequencing risk is my biggest headache with 5 years left until I plan to retire aged 61 (hopefully).
I am currently building a cash reserve in ISA"s and high interest accounts. Hope to get to somewhere between 2 and 3 years of cash and then leave my SIPP invested in a couple of global funds. That way you still receive interest from the ISA’s etc rather than having it in the cash account of the SIPP and can live off these until the market recovers when I will sell from the funds to replenish
Seems the best strategy to me
What great videos! Really helpful and enjoyable. Many thanks Chris.
Thank you Duncan! You’re very welcome 👍🏼
With your knowledge, content, and excellent delivery, I am very surprised you are not on 100K+ subscribers.
That’s very good of you to say. I’ll keep trying to make useful content for people.
Firstly, top channel! Excellent source of information. 👌🏻
Why not produce a course , not all of us wish to pay for an advisor but would be willing to buy a course ….
What I find most annoying about advisors (sorry) is that most won’t be clear about costs up front . I once paid an advisor to review my pensions. Charged me a small fortune . Then , only after hours of my time, offered to move them to “better” funds and platforms for a fee…. Would have cost more than 10k…. Instead I educated myself , took control and moved them myself . I’ve been learning, reviewing and managing them since. All good.
Glad you mentioned bonds are , at least at the moment , terrible . I wrongly understood bonds were safe , not the case when in funds !
Hi Nick. I do plan on creating a course - I’m designing it currently.
It is a problem that advisers aren’t clear about costs. I always hold a discovery call first at my expense to explain my service and the costs. Then I follow that up with an engagement letter, which re-confirms everything I explained.
Advice usually costs less than doing it yourself. The problem is that many advisers aren’t very skilled at articulating why. There are major costs of using direct platforms that are hidden and you wouldn’t be aware of. I’m doing a video soon to explain some of these.
@@chrisbourne-retirementplanner look forward to hearing all about it .
Great content 👍🏻👌🏻
Well, that's given me a few things to think about. Very useful, thank you!
It will be great knowing things are just about in place ,,but just keep working
Second comment 😂 the cash account is some what similar to the 3 bucket method. The elephant in the room is when is a “good” time to move money into the cash pot …. When the market goes up 1%, 5%, 20%?…. Tricky right …. What would an advisor do? 😊
It depends how you’re using the cash. There are no hard and fast rules here. It’s like paying for insurance - you choose the level of cover you want. Sometimes that cover costs you more but the feeling of having a safety net is important. Nobody regrets taking insurance when it pays out.
Top content as always............love you man!
Arr you're too kind mate... thank you!
Hi Chris. Thanks for the reply and largely agree. Although I’m not a tax expert so I don’t really get the last but. Pension only I think?re selling my stocks I’m not advocating wild capital volatility (100% equity) but good income portfolios have fallen less than say a vanguard 20%, 40% and 60% equity this year and outpaced them last so the risk appears similar but I get my income of 5%. Selling at depressed levels applies to both income and capital portfolios but, for example, if I needed 7% temporarily I’m better selling 2% and getting 5% than selling 7%. Being in vanguard this year and needing 5% would have been terrible. Milk the cow don’t kill the cow I say
Great videos Chris. Thanks very much.
Thanks Anthony! I’m glad you’ve found them useful.
Really interesting , and some great stratagies to consider .
Glad you enjoyed it Andy.
Of the two options you describe at the start of the video, I have to admit that the higher-risk portfolio sounds a lot more attractive ! I recently retired in my early 50s, and I'm still keen to maximize my returns even though I could probably afford to slow down and de-risk. That's probably not very rational but I find it really difficult to shake the competitive urge. Right now I'm trying to follow a version of what you describe as the cash management strategy (i've sometimes heard of it as "time bucketing" too); I keep around 5 years in premium bonds and very low-risk funds, with the rest in equities. Two years feels a little low to me, but that's just my preference. Anyway, just wanted to say that I enjoyed the thought-provoking video and really appreciate the effort you put in, Chris. Your content is top notch.
There’s nothing wrong with that Chris. Much comes down to your own personal attitude to risk but above that, your capacity to be able to take it 👍🏼 As long as you have a robust cash position it’s perfectly viable to take more risk if you’re comfortable with what that entails.
Excellent information video chris
I always learn something every time I watch
Thankyou
@@ianphillips6871 Thanks Ian it's really good to hear that!
Thank you. I found this video so helpful 😊👌👌
Good video. Answers some questions I had.
I'm pleased to hear that Andrew. Thanks for watching 👍
Hi Chris
Most advisors mention these drawdown options. What about people like myself who have a sipp that produces income from dividend payments that are paid in cash and sits in your cash account and is taken rather than being re invested. Then there really isn't any drawdown, just dividends, providing your income. There are a lot of good quality blue chips paying 8% upwards at present.
Hi there. You can hold dividend paying companies in your portfolio and utilise the yield they generate to pay your income. They are still susceptible to price falls, dividend reductions and other risks though. If you need to take more than the amount of cash you’ve generated at any point, and that coincides with a fall in capital values, then you’ll have to send more shares to generate the required capital. That means that even when the price recovers, you’ve got less shares to be able to generate your dividends. Unfortunately, there is no perfect strategy.
@chrisbourne-taxfreeinvesti9688 Many thanks, Chris 👍
Amazing video..plz make more video like this .
Thanks very much! Yes I am making a series on this theme of drawing income in retirement, so stay tuned 👍🏼
Nice vid Chris, good to see those subs. creeping up....
Thanks Willie… they’re moving in the right direction!
thanks Chris
No worries Rob hope it was helpful 👍🏼
Can I open a Trust to avoid tax. Is there any disadvantages?
Hi there. There are different trusts that can assist with inheritance tax planning. There are also potentially life time tax charges and restrictions to be aware of depending on the type of trust, so professional advice is always required.
@@chrisbourne-retirementplanner Thanks Chris
WoW, what a great video. Keep them coming
Thank you! I will certainly try :)
Excellent, thanks for the information 😊
You’re welcome Stephen glad it’s helpful 👍🏼
Hi Chris, I'm enjoying your explanations on pensions only because it's near that time for me. Regarding Flexi Drawdown, I have three works pensions of these one in particular I would like to flexi drawdown this pension it's a deferred benefit type, I left this company many years ago but left the pension with them. My IFA has said that Flexi drawdown is difficult to set up as there appears to be barriers to it and that not too many are accepted into a Flexi drawdown, resulting in we cannot do it. Do you know why it is so difficult to set up a Flexi drawdown pension. I'm wanting to drawdown quickly to pay of a mortgage before I'm 75, I'm broadly drawing down twice as much as it would normally pay out.
Hi Russ. The rules around defined benefit transfers are very strict now, mainly as a result of poor advice given in the past. Few advisers will advise in this space anymore because it is very expensive for them to remain active. Most professional indemnity insurers won’t provide cover to advisers in this area anymore, so it’s too high risk.
Does the income fund need to be in drawdown mode for one to take the income/dividends in retirement
Hi there. Yes and no. You have to crystallise benefits somehow to take money out of a pension, but drawdown is only one of the options. You can take what is called ‘uncrystallised funds pension lump sum’, where you crystallise a small amount of your pension in order to take a taxable payment alongside a some tax free lump sum. I.e. if you had a pot of £100k, you could crystallise £2k in order to receive a £1.5k taxable payment plus a £500 tax free lump sum payment.
You don’t receive dividends from pensions though - all taxable withdrawals are taxed as income.
Hey Chris, Another great vid. Cheers.
You’re dead right. SoR risk is the biggest concern in my mind
Personally I”m 6.5yrs yrs away, so gradually trading off accumulation with.de-risking for a while.
My plan is a combo of the two methods.
1-2yrs away, will have moved the portfolio to:
1yr of cash
1yr of ST bonds
3yrs of ‘natural yield’ : IT/LT/Junk bonds, Hi Div Stocks & Property
Balance: global stock market (max growth), with just a smattering of Au (which I hold increase everything else goes pear-shaped!!)
If things go bearish, I’ve got a 5ish yr cushion to ride out a drawdown. If it doesn’t you avoided the SoR risk - go buy a new Tesla ;-)
I saw a vid (US ‘guru’) saying SoR risk only needs to be avoided in the 1st 5-7 yrs after which you could in theory dial back up a little more risk because you are in fact invested on a ~40yr horizon.
Your thoughts?
Hi there. Good to see you’ve got a comprehensive strategy in place which takes account of different risks in retirement. I’d have to watch that video to understand their view point on that. Have you got a link?
Direct to consumer platform??? Pls reply and recommend Chris. Thank you
Hi there. There isn't a catch all answer to this I'm afraid because it will depend on how you're looking to use the platform and what you're looking to buy. Some will be better for lower amounts of capital, some will be better for larger amounts, some will be better for regular contributions, some offer wider investment choice, some are better for holding direct shares.
@@chrisbourne-retirementplanner thanks Chris. Any direct contact to you for queries pls. Thanks
He never replies !
Vanguard has a cash account option in my pension account effectively paying 3.75% so guaranteed growth? Appreciate interest rates are favourable compared to recent years and not guaranteed but not a zero growth performance drag today?
Yes cash returns have certainly improved in recent times.
My problem with advisors is they win either way , if your investment Tanks they,ll have the excuses and you still pay there fees,in my eg Total platform fees equate to approx 22% of “Growth” on the entire Pension Pot ,summary advisors operate a win/win reward scheme for themselves …
The problem is that you’re placing the adviser’s value in the performance of the markets, which the adviser doesn’t control. I’m not saying that’s your fault, it may be that the adviser hasn’t really done enough to explain what their actual value is and what they’re there to do.
It’s quite strange that I ask a question to myself about pensions/investments and then, as if by magic, one of your great videos pops up Chris answering my question 👌 I’ve been watching for a while now and learned so much, thank you. You never know, my pension pot may grow enough with your advice that I’d be able to secure your services on how to deploy it in retirement 😉
Haha glad to be of service Gary! Thanks for watching 👍🏼
I'm planning to keep invested and just take dividends and bond income out if needed. I'm not looking to sell anything and leave the capital to charity when I go belly up. This way I never have to worry about having to sell in a major down market. Have a look at bond yields now at the end of 2022, bet you never thought you'd see these again.
But the worth of your investments could still go down a lot, and then your capital & income will go down plus sometimes companies stop paying dividends altogether
Hi Chris, what’s the best way to start a career as Financial Advisor/Planner? Would it be best to get into a big org who train you up, or to do some qualifications myself before applying for roles? Appreciate your advice and videos!
Hi there! I would say that having a passion for financial planning means you're more than half way there. Many advisers fell into the industry and it's not their real passion. I think you can tell when someone really enjoys what they do, and their advice will always be better.
Qualifications are the starting point to be able to actually advise but to be honest, being able to convey complex messages in a simple format is the most important thing. Knowledge is only good if you can make it easy to understand.
That said, sitting the necessary exams with a body like the CII or the CISI will be essential. You need to be at Diploma level to be able to obtain CF30 (competent adviser status).
Learning the advice process is equally as important, so you need to find somewhere where this training is given. Being able to fact find effectively and conduct client interviews is key.
There aren't many firms who have the resources to take on a newly qualified adviser with no clients, so I would suggest looking at something like the St James's Place Academy. As well as getting you through the qualifications, they give great training and will assist in finding a Partner practice for you to work in once you graduate.
Hope that helps!
Only because most people already know ISA as an abbreviation, but fewer would know what a GIA is.
Very helpful advice Chris. Your channel is one of the best financial feeds I've found. Cheers
Just trying to put good quality info out there for people Bill and it’s always good to hear that it’s helping. Thanks for your support 👍🏼
Hi Chris ….enjoy your videos especially as there is a good mix of info for those in at the start of their investing journey as well as those of us who are about to retire and wondering what to do with the pensions we have built up.
I’ve been trying to work out the pros and cons of state pension deferral and thought a bit more info on this would be good. For example if you have a sizeable pension portfolio would it be worth defeating the state pension and spend more money from a drawdown. If your investments do well you might have a big LTA charge at 75
Anyway keep the info coming …excellent work !
Hi Phil many thanks for your comment! Have you seen my recent video on whether to take or defer state pension? It may help answer some of these questions for you.
@@chrisbourne-retirementplanner
Hi Chris ….yes I watched the video thx
As is usually the case with these things there is no simple answer and you just have to run the numbers and scenarios 🙈…..in my particular case it turns out if returns are higher (4.7%+) it’s better to defer. LTA @ 75 years can be quite nasty in high return environment when you take 100% tax free lump sum @ 55 and plan to leave the rest till state pension age or later ….
Keep the videos coming and hopefully we can all use your tax efficient strategies to create better retirement plans for ourselves 😁
Excuse me but do u use lightshot to screenshot?
Hi Chris, what are your thoughts on a risk parity style portfolio for decumulation, e.g. the golden butterfly portfolio?
Hi there. I think Golden Butterfly has merits and has produced good returns without much volatility.
brilliant!
Thank you much appreciated!
do you invest tax free draw down , or use it to clear the remainder of your mortgage ? Leaving you needing less cash on a monthly basis and so letting you retire easier and earlier by a few years ?
Hi Tom. Many people use their tax free lump sum to pay off the remainder of their mortgage. Money saved is the same as money earned, so this is perfectly sensible planning for many people. Some would argue that you could gain more growth by leaving the money invested in today’s low interest environment, but the difference is that paying the mortgage off is a GUARANTEED saving, whereas any additional growth from remaining invested is a POTENTIAL increase. The most important thing is simply planning your income and finances in a way that provides the most comfort and security to enjoy retirement.
@@chrisbourne-retirementplanner absolutely outstanding answer .. that's how I thought it would be as the interest I'm paying on the mortgage is more than I would earn by looking at it sitting in a pension pot .. plus I gain peace of mind by owing less . Many thanks for your swift reply and for sharing your knowledge . T
NEVER retire until you have cleared your mortgage.
@@tancreddehauteville764 things have changed so much in the last three or four months , , how on earth does anything add up these days , crazy times.
Why withdraw every month. Why not just make a withdrawal once a year instead, take out enough money for the whole year ahead. Or you could just put enough money into cash to last for say 6yrs or so, and maybe put some more into cash when & if the money you have invested is up quite a lot before the end of the 6 yrs
Hi Chris, as a newbie to investing I’m enjoying catching up on all your videos, thinking I’d left it to late at 47 your advice has been great.
I have a works pension that I am now finally starting to take serious, also opened a free trade account and a vanguard ISA blended lifestyle 100, I was thinking once I’ve built up some money in my freetrade account say 5k should I sell my shares and move the money into my work pension?
Thanks Tony glad they've been useful to you! There's nothing wrong with doing that as you will benefit from the tax relief uplift. The difference in risk profile needs to be considered though... if your Freetrade account has a higher risk profile it probably provides greater long term growth potential, which could outweigh the tax relief. Compare the relative risk and think about the timescale you're looking at.
Please do not be too married to tax efficiency. I've found a draw-down & cash mix which does save "more tax" - but at the end of the portfolio life, I have taken less then in a slightly less tax efficient version. So. Check around other strategies near your ideal - perhaps one results in more £ in hand.
I totally agree with you Guy that tax efficiency in itself isn't good enough - the net result and how much is left in your pocket is what's important... that's what I always focus on.
The problem with a cash account is that inflation eats it away especially over more than a one year period and even more so in times of high inflation - something we are in now and it is likely to increase further in the next 6months to a year. This makes holding two much cash a great way to erode your buying power and real pension pot value. However there is no golden answer to running a retirement portfolio I guess.
Yes that’s right Geoff, it creates performance drag as mentioned in the vid. Central banks still don’t seem to be viewing inflation as a persistent long term threat though in their forward guidance, which suggests that they think it will wash out once year on year headline figures have passed. Some economists disagree, so it will be interesting to see who is right. If inflation does stick around however you will find that returns on cash will increase.
Hi Chris, great video. We retired 2 years ago and despite being a FA I the 90,s and 00,s we used an IFA to invest our hard earned savings. We are on Drawdown with 2 years income and a 20 30 50 income strategy or low medium and high.
Just one question please, is there any disvantage of Crystallising now that the LTA has been scrapped for the moment ?
Many thanks
Shaun
Really good video but unfortunately some big errors in the natural income section. You comments around price falls (ex dividend) and income targets aren’t entirely accurate. Income generated is separate to capital which is why I think you only talk of yield. Not PPS. Yes capital falls temporarily next day (EXD) but so what? This leads onto your errors around volatility. Not only have these comments clearly not aged well you fail to distinguish between capital volatility and the income volatility. I care less about how volatile my capital is if my income remains consistent. Bravo mr portfolio manager if markets are volatile but my income stays true as this is what I spend so care about more. Good points on sequence risk and the other bits tho 👏
Hi Bob. Many thanks for your comment! Glad to hear you enjoyed the video. Although I’d have to say that unless you’ve misinterpreted the information, I’m afraid you’re not quite correct. The information I’ve provided on natural yield strategies is based on many years experience of working with distribution funds. I do illustrate that an element of a fund’s return comes from capital appreciation, but from a dividend payment perspective a disbursement of company capital literally reduces the value of that company. What you have to understand however is that this impacts different companies to different extents. Mature companies that have paid steady dividends for many years out of their large reserves (like the BPs and Shells of this world) are impacted less than younger companies with less reserve capital. Distribution funds seek to limit income volatility, but in order to do that they have taken increasingly more risk over the past decade, particularly on the fixed income side of the funds (although this situation may now begin to change again). This has led to some questionable results which, as mentioned above, I’ve been able to observe from being close to these strategies on a daily basis.
@@chrisbourne-retirementplanner Hi Chris, possibly but the only misunderstanding would come from your use of the word fallacy and it’s implications. As mentioned I thought the video was really good up until that point & I acknowledge what you said spout capital appreciation. Perhaps fallacy was a slip of the tongue but if not I fear you have confused & conflated two separate issues. Whilst your comments around ex Div are tautologically true the use of the word fallacy implies that you don’t truly understand that this makes ZERO difference to the availability of income. Think about it logically. The way you positioned it made it sound like a capital withdrawal. If so what happens at the next QD, etc, etc. As discussed this might have just been a misunderstanding/ slip of the tongue because you and I know this is down to corporate accounting and that the retained profits will build up again and the share price move accordingly. Unfortunately your comments around company size and maturity (also two separate issues) are irrelevant as again this makes zero difference to the availability of income. Sadly this suggests that your conflating income and capital and too focused on capital volatility and not income volatility. A good income portfolio (not stock or fund) is like a buy to let and has x2 accounts. Income and capital. Like a B2L they operate independently and, as the customer, I buy the portfolio for the income, focus on that and ignore the capital.
Hi Bob. The problem is that just focusing on income stability and ignoring capital fluctuation altogether wouldn’t really work in most client retirement portfolios for a number of reasons…
One is that income needs may significantly alter and if natural income doesn’t meet the additional requirement alone, the excess will have to come from capital. If capital values are depressed, more shares will have to be sold, which would impact future pps income.
Another is tax planning. The use of a regular UFPLS strategy may necessitate the sale of invested units, particularly if distributions that have built up within wrapper cash aren’t sufficient. The personal allowance usually expands over time so the need for capital increases if someone is looking to maximise PCLS to taxable income ratio maintaining a 0% tax rate. Price stability is therefore important.
Which distribution funds can you name that have delivered this as well as total return focussed funds over the past few years? I can’t think of many.
For that reason, the notion that natural yield alone can provide a stable retirement income that is also flexible enough to cater for tax planning opportunities and significant income changes, is a fallacy.
brilliant video as usual. Let's get you up to 10,000 subs by sharing this video.
I hope all the things I have invested will yield at least 4 -5% so effectively I can go part time in about 4 yrs (when I am 55 and injuries allowing) and top up my income from a small private pension and also i have my isas that I could get an income from if needed (without actually touching capital) until my state pension hits.
Then draw state pension, small private pension and top up with tax free isa income-that is the plan but will have to see if it works (may need tinkering along the way if things change)
Getting closer to that 10k Anita! You are doing well to have a clear strategy in mind for part-retirement... something that most people do not have!
You basically don't Blink Chris.... Its not all I took away don't worry, but sadly that was the main point 🙄
You’ve found me out Callum… I’m actually a cyborg 🤖
The video needs updating. It cites low interest rates, which is not currently the case.
I'm 54 yrs old, in good health and plan on working until I'm 67 (my retirement age) my basic salary is £40 per year, I'm married, wife has worked in government for 30 yrs so will get a very generous pension, here's my issue, I have a small ish pension pot of £70K that I want to get my hands on as quickly as possible after I'm 55, and pay al little tax as possible, what are my best options? a quick calculation in my head tells me if I take 25% tax free and the rest of in instantly I'll get hit for 40% income tax as I'll go over the £50 tax band.
Hi Shaun. You won’t be able to avoid paying tax altogether, particularly if you take the pot out while still working. It is possible to withdraw it over a couple (or more) tax years though to control the liability and ensure you don’t push yourself into a higher band.
very interesting vid and we are all so different I am 63 and i start draw down at 65 lets say my fund is 100k and I will take only the Tax free money so my draw down is 5K per year tax free and the rest stays invested I will still invest in my SIPP for a futher 5 years my company paying money into my sipp as its doing now at age 70 I have another fund of money lets say 100k of new money I take 25k tax free and i will take 5k a year I repeat the same from 70 to 75 years of age again I have another tax free 25k which will give me 5k again for five years of course i cant fund my pension futher due age but at 80 Iwill have a lot of money in my pension fund and it will have given me tax free cash from the age of 65 to 80 If I pass away between 65 and 80 my pension goes to my son 100% IHT free I think I am the extream case my Pension in genaral is not for me its for my Son and his Children so I will stay totaly invested because I have time hopefully to live into my 80s Pension Planning can be used in such fanatstic ways in 2022
Yes that’s good forward planning. You’re absolutely right - the ability to plan with pensions is so much more flexible today than it ever was. There’s not much we can applaud the government for but I think George Osborne definitely made a big positive difference with pension freedoms.