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    • Gallygirl
    • By Gallygirl 14th Sep 17, 2:33 PM
    • 8Posts
    • 0Thanks
    Help with drawdown strategy
    • #1
    • 14th Sep 17, 2:33 PM
    Help with drawdown strategy 14th Sep 17 at 2:33 PM
    My OH and myself are approaching retirement in the next few years. Ahead of that I am trying to understand which method to use to access our SIPP's either Flexi–access drawdown or Uncrystallised Funds Pension Lump Sum (UFPLS).

    Our SIPP's are approaching £300,000 each and we have ISA's of 250,000 each. We would like to ideally live off the natural yield from the mixture of funds, IT's, REITs we have until we hit State pension age and then either use that and reduce how much we are taking from our SIPP so we can leave something for our children or perhaps defer SP for a few years and then reduce withdrawals from SIPP.

    What I cannot get my head round is how to take the yield from the SIPP's. We do not need a tax free lump sum ( mortgage free) and will have 2-3 years of planned annual spending in cash (£30,000 pa is our target) Do I crystallise them in one go? , in stages? How do I maintain the % allocation to funds if some are crystallised and some are not. We are currently with Interactive Investor but would consider moving if it makes managing this easier.

    What method, flexi-drawdawn or UFPLS would suite our requirements best and how do we put these into practice.


    Last edited by Gallygirl; 14-09-2017 at 2:34 PM. Reason: punctuation
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    • Jerben
    • By Jerben 18th Sep 17, 3:25 PM
    • 58 Posts
    • 27 Thanks
    UFPLS was my initial way of thinking of going but now I'm not so sure, I will have to look at II's charges more. I wonder why you feel it necessary to keep 2 years worth of cash in the SIPP, surely thats money not earning any interest/dividends ?
    Originally posted by Gallygirl

    First reason is to avoid some of the uncertainties you outline in your original post!
    I always will know that my next two years 'pay' is sat waiting and will not disappear. Half of it is always within 12 months of being required.
    Cash is an important part of a whole portfolio, (even though this part will not earn interest).
    A lot of the advice on this and other forums says 'don't invest what you need in the near future as it could go down in value'.
    Also I won't have to 'sell' investments in a hurry if there is a major market drop. I might even top up some of the funds with the some cash if there was a substantial crash. (Sort of rebalancing - but non of us are exactly sure how we'll act in these circumstances). I've written some 'notes to myself' on this sort of thing which I will try to stick to!
    • Jerben
    • By Jerben 18th Sep 17, 3:38 PM
    • 58 Posts
    • 27 Thanks
    Charges quoted on the II website are as follows.

    'Flexi–access drawdown, per annum£170 + VAT.

    Uncrystallised Funds Pension Lump Sum (UFPLS) £40 + VAT'

    There are a few notes and conditions associated with the above, which I haven't totally analysed and understood!
    • maximumgardener
    • By maximumgardener 18th Sep 17, 3:50 PM
    • 267 Posts
    • 111 Thanks
    We are in our mid 50's but would like to reduce to part time in the next couple of years and see how that goes rather than just stopping all work suddenly. If we like it we may retire fully more quickly, it would be nice to have the options.
    As for and IFA, I would be happy to pay a one off fee with an IFA who could go over the options , check my assumptions and write me out a plan, but all seem to want a yearly fee for continuing advice and I am trying to keep my costs down. Thank heavens for this forum.
    Originally posted by Gallygirl
    we are in our mid 60's now and both drawing SP's plus couple of small pensions. topping up with tax free money from investment account.
    We scaled down work starting in early 60's moving from full time to 3 days then two then none. Its a good transition and we are delighted we did it that way.
    You have time on your side . load up on your isa's ??
    Fully appreciate the need & your desire to keep costs down . we figured using a goof IFA was very cost effective for us and that has proven to be the case ......its early days 3 years far so good. (I could not trust myself not to "tamper"if /when markets fall!!!!)
    we have about 200k in DC personal pensions and same in isa's plus 50k in investment /cash a/c for DD.
    we tend to keep working cash balance in bank of about 15k ( for emergency purposes/unforseen expenses). that represents about 18months DD for us.
    • cjking
    • By cjking 18th Sep 17, 4:13 PM
    • 53 Posts
    • 18 Thanks
    So roughly 3% income wanted from 300K pension plus 250K ISA?

    Just mulling the simplest plan, which I know isn't objectively the best, but let's see how it does.

    1. Crystallise everything, 225K goes into drawdown and 75K tax free lump sum.
    2. Assume 250K ISA, 225K drawdown fund and unused portion of 75K in dealing account are all invested in the same way
    3. Withdraw enough from pension each year to use up personal allowance
    4. It takes about three years to use up almost all the 75K, 20K goes into ISA each year plus a few K taken to get income up to to target. The tax on dividends from 75K will be virtually nothing, I calculate £20 for the first year, assuming 2K dividend allowance and no CGT.
    5. Once the lump sum is used up, supplement pension from ISA.

    Don't let natural income be a constraint, it's very artificial and means you won't be looking at the issues that matter. But if you must use that as your withdrawal algorithm, then realise that selling 100 shares in one account and buying 100 in another means no change in the overall number of shares, you've effectively just shifted 100 shares from one account to the other.

    In terms of maintaining allocations, just have a spreadsheet where you add up your shares across all accounts, in the early years you will be buying in one account while selling in another, you can make buy and selling choices so you are constantly moving towards you target allocation.
    Last edited by cjking; 18-09-2017 at 4:19 PM.
    • ams25
    • By ams25 18th Sep 17, 6:47 PM
    • 110 Posts
    • 103 Thanks
    Goodness me! (explicit language self censored). Where is the easy to understand guide to this. I only have 3 years to get my head around it

    Seriously, is it me or is this more complicated than it should be.
  • jamesd
    It's not too bad once you get used to it. The getting used to it bit can take a while, though!

    There are a range of options and different ways to do things to cater to the different situations that people are in, so each can do whatever is best for their own situation.
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