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Drawdown pensions experience


elgreco
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Hi, I’m in the fortunate position of being the holder of a considerable pension pot after 37 years of hard work. I may be in a position of retiring in about 14 months at 55. Now I know my best bet is to see a pensions financial adviser and heed his advice but was just interested if anyone has experience of a drawdown pension and how it has performed? 

Thanks

Tom

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I have been in a slightly similar position, but chose a different path.

I have a fairly good pension 'pot' saved up which I can draw down/buy annuity when I like - and I have two (very old) defined benefits pensions (start giving a defined annual payment at age 65) - and a state pension, starts at 66.  I also have (built up over many years) a (non pension) savings pot in ISA (and PEP), and a few non ISA stocks and shares.

I retired shortly before my 60th birthday with a redundancy package - and I'm now 60.

The plan, working OK so far was and remains as follows;

Leave pension 'pot' intact for now, but cease contributing - and just allow it to grow/accumulate

Leave defined benefits and state pension to happen as scheduled (there are penalties for altering these)

Live until I'm 65 on income from ISA by moving ISA funds into income generating funds (all within ISA shelter) to get maximum tax free income.  Maximise income from stocks and shares, which will be below personal allowance anyway.  This gives me a total annual income before I get to 65 that is adequate, (but not generous) and I have a lump sum from my redundancy as a reserve.  Need to be a bit sensible about new cars, holidays, new guns(!) etc. until extra income cuts in at 65, but that is one of the trade offs one makes for early retirement.

When I get to 65 (just over 4 years now), I get a significant 'boost' to my income from the two defined benefit pensions, and a year later at 66, a further 'boost' when the state pension cuts in.

KEY to this working is having money in ISA to give tax free income.  You can (currently, it used to be a lot less) only put £20K a year into ISA, but once there there is no limit on how much the total can be - and it is free of both income tax and CGT, so my strategy has taken time to build up.

You need to find a good advisor and work out a strategy because there can be nasty tax pitfalls with drawing down too much in any given tax year, and how you do this and how you invest/manage it will depend very much on personal circumstances.  I had long planned to be capable of retiring at 60, should I want/need to.

I hope this helps.

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