Killik Explains: How pension drawdown works

[@richardpiper4828]

Great video. Very well presented and helpful.

[@chrisf1600]

Thanks, that was a good intro. Very useful :)

[@wernesgruder1]

Pensions....what a great idea.....for the investment companies. 40 to 50 years of payments and probably 70 to 80 year’s of commission payments. How many companies can get a more or less stable income stream from their customers for such a period?

[@lemaia6206]

let's not pretend that this stable income stream does not come with it's own risk shall we? rainy days come for everyone and many get taken by the rushing water.

[@insertnamehere5146]

Final salary pensions are a bit of a scam in my opinion. You Pay in for example 35 years. You retire and get your lump sum and start taking your pension (normally half your working wage) You die within the year. Immediately the pension is worth (evaporates) to Half. Then your wife lives maybe another 5 years on your half pension and she dies. The Pension dies with her! 35 years of invested money gone!!! The reason they were popular in the past was because most men were dead by 65ish so the fund was always well funded. Now more men (but not all all) live longer the pension funds are whining and employers have mostly closed them all. They worked on the assumption you paid in all your working life but died within a few years of retiring hence keeping the pension pot full of your money for the odd person who lived to 95.

[@wernesgruder1]

insert name here . Ah, the penny’s dropped. If pensions made such little profit for investment firms why do you think there are so many in the market? 40 to 50 years of commission on your money and they hold your capital to invest how THEY like. The Great Annuity scandal has at least been avoided by being able to drawdown at 55

[@asam2013]

Spot on- everyone needs to learn to manage their own money, no one else is going to do it for you. Best to invest in a SIPP or Vanguard tracker fund. Minimise fees, take control

[@fredatlas4396]

@@wernesgruder1 actually an annuity could be a good option if you can get 6% guaranteed income every year payed out monthly. I think annuities have gone up recently due to rising interest rates and yields on bonds. I'm certain legal & General were offering 6% for people 65yrs and over. I don't think you will be able to sustainably draw that much income from a pension drawdown, they are talking about maximum 4% as a sustainable amount if you don't want to run out of money. And you could start out with drawdown and if you get lucky and your pension pot grows well, you could still buy an annuity at say 70 yrs old if they are offering good rates. Or use part of your pension to buy some annuity income to cover essentials, like the bills, energy, council tax etc. Anyway I think the decision to buy an annuity or drawdown are the least of our worries for most people as we don't have enough money in our pension pots and its getting a lot worse thanks to our tory government since 2010.

[@neilcole3406]

Get your own back .......live to be120yo!

[@davidbrooks8038]

You can see why some people dont both with a pension with all this bullshit.

[@fredatlas4396]

Can you take up to 25% tax free in drawdown each tax year or is it just a one off tax free withdrawal

[@156dave]

I would be interested on your thoughts on borrowing money to pay into a company pension scheme example get secured loan of 120k against house then invest 40k/year into pension scheme get 25% tax free plus 40% tax relief + 8% investment return then payback loan with 25% tax free cash

[@richierich.1982]

In the last 3 years? I don't think you will get 40% tax relief as not part of your income, 25% top up from HMRC plus growth yeah, don't know how common this is mind. I know what you are saying though.

[@googleuser795]

Think the money you put into pension has to be earned, a loan would not be allowed I guess

[@RayTheBrassPlayer]

No mention of how fees charged to manage funds further erode the growth of a fund.

[@timhancock6626]

There are funds available with low management charges these days that you could only dream about 30 years ago. I don't mind paying someone to do the job so I can go walking, sailing and so forth instead of having my head stuck in a computer screen all day just to save 0.98%....which is what I currently pay on most of my drawdown fund. Paradoxically my other fund charges 1.5% and is doing OK considered the Covid induced volatility. To all those moaning about pensions, what else do you suggest ? As well as tax relief many people will get an employer contribution on defined contribution schemes that pretty well covers charges. It ain't perfect but it's a lot better than it was for most of my working career. Can anyone remember when early leavers pensions in final salary schemes were not indexed at all ? I can and they truly were worthless after a few years Inflation at +15% in the mid 1970s.

[@fredatlas4396]

Best use low cost index funds or etfs that track indexes, then you will keep your charges lower and keep more of the profits

[@boyasaka]

Say you have 200k in your pension pot You retire at 60 And you take 25 percent tax free ( which is 50k) leaving 150k in your pot Then 3 months later your die What happens to the 150k in your pot if you are single ??

[@Jeffybonbon]

I am a 40% tax payer and I would be interested to see a presentation on only taking the Tax Free cash and leavening the rest as a hedge against IHT

[@brutallyhonest9140]

Why take the TFLS Lump Sum when the Pension pot is written under a Pension trust so IHT free? As long as fund is within Lifetime allowance naturally.

[@mrelano65]

The cash that feeds the pension over many years is taxed after you earn it then taxed again when you draw it.

[@FHIPrincePeter]

4% Rule.

[@wernesgruder1]

Prince Peter 4% rule invented by investment industry to keep your money invested with them. They make money from your money, more invested= more commission. The real problem is why are you getting 4% on your money?

[@thisisbob1001]

Strategy = eat lentils

[@dudeatx]

You're not really explaining or discussing pension drawdown here at all.