Transcript
Training Transcript: Setting Up Pension Withdrawals and Liquidation Strategy (UK)
Welcome.
In this plan, we’re going to set up regular withdrawals from tax-free cash within pensions, as well as regular withdrawals from drawdown pension accounts.
At the moment, the liquidation order is set so withdrawals are taken first from taxable (unwrapped) general investment accounts, then from pensions and bonds, and finally from tax-free ISAs.
In this plan, there are two pensions for John and one pension for Sarah, and we’re going to specify exactly how we’d like money to be taken from each of them.
Pension Setup Reminder
Just to recap:
When adding a pension to the plan with tax-free cash available, it should be entered as a Money Purchase Pension (uncrystallised).
If a pension has already been crystallised and no tax-free cash remains, it should be entered as a Drawdown Pension.
Creating a What-If Plan
We’ll start by going to What-If, give the plan a name, and create it.
This creates a What-If plan, meaning any changes we make here will not affect the base plan.
Adding Planned Withdrawals – Tax-Free Cash
Next, we’ll select the plus button in the bottom right and choose Planned Withdrawals.
We’ll set up a £10,000 recurring withdrawal.
This withdrawal will come from the pensions.
Once a pension is selected on the right-hand side, you’ll notice a new field called Pension Strategy.
If you’re unsure what this does, the inline help explains it clearly.
In this case, we’ll choose Flexi, which allows the £10,000 to be taken as tax-free cash.
We’ll also select Sarah’s pension, so £10,000 is taken from each pension in the same year, giving us a total of £20,000 in tax-free cash.
If you wanted £10,000 split between John and Sarah instead, you could use Total, but in this case we want the withdrawals to happen simultaneously.
Timing the Withdrawals
We’ll now move to Timing.
Rather than restricting this to a specific stage like Early Retirement, we’ll allow it to continue for as long as possible, so we’ll select Mortality and click Done.
Adjusting the Liquidation Order
Next, we need to adjust the liquidation order.
Currently, the order is:
Taxable
Tax-Deferred
Tax-Free
However, because we’re now explicitly instructing pension withdrawals, we want pensions to be used last.
So we’ll move Tax-Deferred to the bottom of the list.
Now, you’ll see:
A sliver of orange representing tax-free cash from pensions
The remainder of income being topped up by blue, which represents the general investment account and ISAs
Adding Drawdown Pension Withdrawals
Finally, we’ll add another Planned Withdrawal.
This time, we’ll set up a £12,570 recurring drawdown pension withdrawal.
This will come from John’s and Sarah’s drawdown pensions
You won’t see the Pension Strategy option here, because there’s no tax-free cash available in drawdown pensions
We’ll go to Timing, and this time we only want the withdrawal to continue until State Pension age.
To do this, we’ll create an end event:
Double-click above the timeline
Set the event as the end event
This means the drawdown pension withdrawals will occur only in the first seven years of the plan.
On the chart, you’ll now see:
Pink bars representing drawdown pension income during those early years
Reviewing the Year View
Let’s switch to Year View to see what’s happening.
Under Pensions:
For Sarah, we can see £40,000 coming out of her pension:
£10,000 as tax-free cash
£40,000 crystallised, with £30,000 moving into drawdown
£12,570 withdrawn from the drawdown pension
For John, we don’t see withdrawals yet.
If we move to age 65, John’s pension then shows the same activity.
Why is John’s pension only starting at age 65?
Understanding Retirement Events and Withdrawal Limits
If we click on age 65, we can see that John’s retirement event occurs at this point in the plan.
Voyant will not access a pension account before its withdrawal limit, which by default is set to the retirement event.
You have two options here:
Remove or move the retirement event to the start of the plan, or
Go to Dashboard → Pensions → Withdrawal Limit and set it to Plan Start
We’ll set it to Plan Start, click Done, and now you’ll see the orange and pink income increase, as John’s pension is now being accessed from the beginning of the plan.
Transition to State Pension
Once State Pension age is reached:
The drawdown pension income stops
State Pension income begins
You’ll see the chart change from pink to dark blue, reflecting that transition.
Comparing Strategies
Now let’s go to Compare Plans → Chart View and compare this strategy to the default liquidation order.
You’ll notice:
Different colour patterns in the cash flow
A different distribution of taxes in the Taxes chart
On the left-hand side, you’ll see the tax scale differs between plans.
To align them:
Click the three dots in the top right
Select Zoom
You can also enable Cumulative Taxes to see projected total tax paid at each point in the plan.
Reviewing Assets
Finally, go to the Assets chart, turn Details off, and you’ll see the projected value of assets at future points in the plan.
From here, you can use Insights or additional What-If strategies to further stress test the plan.