1 year to retirement/recession/pension

DonnieCorko

Hi there

My dad is due to retire next year. I was thinking that it may be worth it to cash out his pension now as there are risks of recession due to the coronavirus but also due to the fact we are overdue a recession (cyclical nature etc). He spoke to his financial advisor about this who said not to worry hes on a low risk plan but if he wanted to he could cash out.

His plan was to plow his earnings from his business and our side business into it for this year to reduce his tax liability and retire next year. However, I am wondering if it makes sense to cash out his pension now (lump sum + monthly sum). Downside is he will be in the higher tax bracket for this year at least but the upside is that his pension wont take a hit if there is a global recession (or at least thats my uneducated pension).

Any advice? Can you fully trust financial advisors?

Thanks

Browney7

DonnieCorko wrote: »

Hi there

My dad is due to retire next year. I was thinking that it may be worth it to cash out his pension now as there are risks of recession due to the coronavirus but also due to the fact we are overdue a recession (cyclical nature etc). He spoke to his financial advisor about this who said not to worry hes on a low risk plan but if he wanted to he could cash out.

His plan was to plow his earnings from his business and our side business into it for this year to reduce his tax liability and retire next year. However, I am wondering if it makes sense to cash out his pension now (lump sum + monthly sum). Downside is he will be in the higher tax bracket for this year at least but the upside is that his pension wont take a hit if there is a global recession (or at least thats my uneducated pension).

Any advice? Can you fully trust financial advisors?

Thanks

He's probably in a Lifestyle fund? - does he know how he plans to draw down the remaining balance after deduction of lump sum? Will he opt for ARF or annuity? If an ARF, he'll have a portion of his fund invested in equities for the rest of his life more than likely.

Highly likely his current fund has 20 to 25% in cash or deposits, another chunk in long term bonds and a small portion of equities. He can always switch 100% to cash investments in his policy if he wants - he'll lose about 0.5% to 1% in fees over the year if he does this

DonnieCorko

Browney7 wrote: »

He's probably in a Lifestyle fund? - does he know how he plans to draw down the remaining balance after deduction of lump sum? Will he opt for ARF or annuity? If an ARF, he'll have a portion of his fund invested in equities for the rest of his life more than likely.

Highly likely his current fund has 20 to 25% in cash or deposits, another chunk in long term bonds and a small portion of equities. He can always switch 100% to cash investments in his policy if he wants - he'll lose about 0.5% to 1% in fees over the year if he does this

Just asked him and he said by law he has to do both (he thinks). Im not sure if he fully understand it tbh either.

By the sounds of it so, seeing as only a small amount is likely in deposits, that he should leave as is and go with the advisors advice?

Thanks for the reply

Browney7

DonnieCorko wrote: »

Just asked him and he said by law he has to do both (he thinks). Im not sure if he fully understand it tbh either.

By the sounds of it so, seeing as only a small amount is likely in deposits, that he should leave as is and go with the advisors advice?

Thanks for the reply

He should have a statement from the company he has the pension with outlining which fund he's in and you should be able to find out the asset split from their website. That, or ask the adviser directly what the asset split is.

DonnieCorko

Browney7 wrote: »

He should have a statement from the company he has the pension with outlining which fund he's in and you should be able to find out the asset split from their website. That, or ask the adviser directly what the asset split is.

Sorry. I meant to say a small amount in equites, not deposits. Ill try get access to that statement, thanks.

metricspaces

Browney7 wrote: »

switch 100% to cash investments in his policy if he wants - he'll lose about 0.5% to 1% in fees over the year if he does this

You'd pay 1% more in fees by switching from equities to cash?