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  • FIRST POST
    • GSP
    • By GSP 29th Dec 17, 10:26 AM
    • 162Posts
    • 34Thanks
    GSP
    £780k pot how much would you drawdown each year
    • #1
    • 29th Dec 17, 10:26 AM
    £780k pot how much would you drawdown each year 29th Dec 17 at 10:26 AM
    Hi,
    I am four months into drawdown fund of £780k. The wife will be eligible for a fund of £150k in 4.75 years time. SPA age for me is 12 years time, my wife 15 years and we have to make 5 years contributions for full SPA.

    She has given up work and we intend to have some good holidays though keeping an eye on the fund.
    I have been reading posts regarding safe withdrawal rates etc. Some posters are cautious, but some say enjoy what you can.

    I will be having reviews with my IFA but with differing opinions out there be interesting to know how much people would withdraw each year. Excluding shopping, all regular household bills are less than £500 a month, no loans or mortgage.

    Thanks
Page 1
    • Drp8713
    • By Drp8713 29th Dec 17, 10:31 AM
    • 762 Posts
    • 632 Thanks
    Drp8713
    • #2
    • 29th Dec 17, 10:31 AM
    • #2
    • 29th Dec 17, 10:31 AM
    I would draw around £30k a year, which would be taken from the natural yield of the investments.

    First £7.5k would be tax free, then use the £11k personal allowance and pay 20% tax on the rest.
    • Lokolo
    • By Lokolo 29th Dec 17, 10:33 AM
    • 19,884 Posts
    • 14,970 Thanks
    Lokolo
    • #3
    • 29th Dec 17, 10:33 AM
    • #3
    • 29th Dec 17, 10:33 AM
    Have you drawndown your 25% tax free yet?
    • GSP
    • By GSP 29th Dec 17, 11:29 AM
    • 162 Posts
    • 34 Thanks
    GSP
    • #4
    • 29th Dec 17, 11:29 AM
    • #4
    • 29th Dec 17, 11:29 AM
    Thanks so far.

    Lokolo, I withdrew £11,500 taxable and had to claim some c£3.5k back due to no tax code. Withdrew the rest tax free. Intend to do that part and part. Assume my tax free portion has a chance of growing still further being invested.
    • dunstonh
    • By dunstonh 29th Dec 17, 11:34 AM
    • 90,396 Posts
    • 57,174 Thanks
    dunstonh
    • #5
    • 29th Dec 17, 11:34 AM
    • #5
    • 29th Dec 17, 11:34 AM
    be interesting to know how much people would withdraw each year.
    Hopefully, no more than they need to draw. General rule of thumb is to only draw what is needed for financial need and/or tax efficiency.

    What other people draw is really of no benefit to you.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • enthusiasticsaver
    • By enthusiasticsaver 29th Dec 17, 11:47 AM
    • 5,190 Posts
    • 9,865 Thanks
    enthusiasticsaver
    • #6
    • 29th Dec 17, 11:47 AM
    • #6
    • 29th Dec 17, 11:47 AM
    I agree with Dunston in that you should only draw what you need to. From a tax efficiency point of view you should each draw up to the personal allowance so no tax to pay.

    Our regular bills amount to around the same as you and we aim for income of £2500 per month. This is mainly met by DB pensions though rather than drawdown.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • michaels
    • By michaels 29th Dec 17, 11:52 AM
    • 20,155 Posts
    • 92,910 Thanks
    michaels
    • #7
    • 29th Dec 17, 11:52 AM
    • #7
    • 29th Dec 17, 11:52 AM
    Hopefully, no more than they need to draw. General rule of thumb is to only draw what is needed for financial need and/or tax efficiency.

    What other people draw is really of no benefit to you.
    Originally posted by dunstonh
    Isn't it worth moving the tfls as quickly as possible (given annual isa allowance) from the pension wrapper to an isa wrapper?

    To answer the op cfiresim can be used to model safe withdrawal rates but someone like jamesd is much more inowledeable in how to cinfigure your idividual scenario.

    As a rule of thumb you could use excel solver to work out what level income you could get including your and dw state pensions once they become payable with 2% return on your remaining funds which are exhausted at age 100.
    Cool heads and compromise
    • GSP
    • By GSP 29th Dec 17, 11:53 AM
    • 162 Posts
    • 34 Thanks
    GSP
    • #8
    • 29th Dec 17, 11:53 AM
    • #8
    • 29th Dec 17, 11:53 AM
    Hi dunstonh and good to have you back.

    Quite agree everyone has different circumstances. I was interested in views and opinions from the cautious to not so cautious. I am drawing £28k p.a. to start with. Should be enough for us but could we be drawing out more?
    • dunstonh
    • By dunstonh 29th Dec 17, 11:59 AM
    • 90,396 Posts
    • 57,174 Thanks
    dunstonh
    • #9
    • 29th Dec 17, 11:59 AM
    • #9
    • 29th Dec 17, 11:59 AM
    Hi dunstonh and good to have you back.

    Quite agree everyone has different circumstances. I was interested in views and opinions from the cautious to not so cautious. I am drawing £28k p.a. to start with. Should be enough for us but could we be drawing out more?
    Originally posted by GSP
    Honestly, that rule of thumb is pretty solid. Only what you need for your objectives and tax efficiency (the latter could be to utilise personal allowances to feed other allowances for example. i.e. someone needing £8k may be better to draw £14k to use up their personal allowance for tax free income and put the excess into a S&S ISA. 14k being split between 75%/25% to give £11k taxable.)

    So, if you need £28k then that is what you would draw. Using phased flexi-access if possible to keep the tax down and avoid crystallising the whole fund at once.

    The pension is not part of your estate. It is invested tax free. So, taking more out than you need and paying tax on it is just wasted money.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • GSP
    • By GSP 29th Dec 17, 12:06 PM
    • 162 Posts
    • 34 Thanks
    GSP
    Thanks for your replies.
    Agree paying no tax is the goal. I could crystallised the whole amount and taken nearly £200k tax free, but decided as wasn't going to use left it invested so it might grow a bit more. Know amounts and limits will change but based on today was hoping to take out say £16.5k tax free each year which should last 11 years.
    • OldBeanz
    • By OldBeanz 29th Dec 17, 3:27 PM
    • 715 Posts
    • 558 Thanks
    OldBeanz
    Just wondering whether money in a pension is likely to be more at risk if some left wing, communist, zealot got into power in 5 years time and upped the tax rate significantly while finding it more difficult to tax ISA income.
    • dunstonh
    • By dunstonh 29th Dec 17, 3:38 PM
    • 90,396 Posts
    • 57,174 Thanks
    dunstonh
    Just wondering whether money in a pension is likely to be more at risk if some left wing, communist, zealot got into power in 5 years time and upped the tax rate significantly while finding it more difficult to tax ISA income.
    Originally posted by OldBeanz
    ISAs can be abolished just as easily and as their wealth is more easily taxed in other ways. Everything is fair game when you get extremists in power.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Linton
    • By Linton 29th Dec 17, 3:49 PM
    • 8,863 Posts
    • 8,900 Thanks
    Linton
    My policy is to withdraw as much as I can whilst remaining in the basic rate tax band. Any money not used can be put in an S&S ISA. This minimises the risk that once I take my deferred SP I will be unable to withdraw enough to run down my pension without paying higher rate tax.

    Similarly my wife draws down sufficient to remain just within her tax allowance until she becomes a tax payer with her SP.
    • Fermion
    • By Fermion 29th Dec 17, 4:34 PM
    • 75 Posts
    • 29 Thanks
    Fermion
    I was interested in views and opinions from the cautious to not so cautious. I am drawing £28k p.a. to start with. Should be enough for us but could we be drawing out more?
    I'm now 2 years into drawdown. I started out with a pension pot (after 25% tax fee) of £705K. Initially I started drawing £27K/annum (£2,250/month) which was my estimated natural yield at the time, however many of my funds, particularly Global Equity funds, have done much better than expected (partially due to Brexit & the £) and as a result my pot now stands at £814K. As a result I increased my annual drawdown amount to £30K (£2,500/month) which again should be covered by the natural yield as stated by other posters and also keep me within basic rate tax limits.

    You need to be careful about following a strategy of only "drawing what you need to live on" as suggested by some posters as if the pension pot continues to grow you might find yourself with a tax liability when the pension pot is revalued at age 75.
    • dunstonh
    • By dunstonh 29th Dec 17, 4:57 PM
    • 90,396 Posts
    • 57,174 Thanks
    dunstonh
    however many of my funds, particularly Global Equity funds, have done much better than expected (partially due to Brexit & the £) and as a result my pot now stands at £814K. As a result I increased my annual drawdown amount to £30K (£2,500/month) which again should be covered by the natural yield as stated by other posters and also keep me within basic rate tax limits.
    Just remember that good years need to be averaged out with the bad and the nothing. So, be prepared to lower the draw again and not to continuously eat up gains as those gains will be needed in the bad years. Regardless of the reason, there are usually events that create a bumper year or two in every economic cycle. So, your returns were not better than expected. They are part of an expectation of any given year in a period. You just dont know when it will happen.
    You need to be careful about following a strategy of only "drawing what you need to live on" as suggested by some posters as if the pension pot continues to grow you might find yourself with a tax liability when the pension pot is revalued at age 75.
    Note the comments did say "objectives and tax efficiency".
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • bostonerimus
    • By bostonerimus 29th Dec 17, 6:09 PM
    • 1,413 Posts
    • 831 Thanks
    bostonerimus
    Hi,
    I am four months into drawdown fund of £780k. The wife will be eligible for a fund of £150k in 4.75 years time. SPA age for me is 12 years time, my wife 15 years and we have to make 5 years contributions for full SPA.
    Originally posted by GSP
    If you have a 60% equity allocation and 40% in fixed income then I'd say you can withdraw £27k in your first year and increase that amount by inflation each year and have a very high probability of having money left after 30 years. If you use a financial advisor that might be a bit less as you'll have to pay their fees.
    Misanthrope in search of similar for mutual loathing
    • zagfles
    • By zagfles 29th Dec 17, 6:16 PM
    • 12,572 Posts
    • 10,663 Thanks
    zagfles
    Just wondering whether money in a pension is likely to be more at risk if some left wing, communist, zealot got into power in 5 years time and upped the tax rate significantly while finding it more difficult to tax ISA income.
    Originally posted by OldBeanz
    I would say the opposite. Don't rule out capital taxes, John McDonnell has spoken in favour of them, see http://www.telegraph.co.uk/news/2017/03/09/revealed-john-mcdonnell-calls-20-per-cent-wealth-tax-richest/

    I suspect they wouldn't want to be seen "raiding pensions" again, so maybe money would be safer in a pension.

    But then I think the biggest risks are the indirect effects, ie what happens to the pound, inflation, shares etc. It's happened time and time again in other countries, even in recent decades, where govts who want to spend but don't want or can't raise the money in taxation, they print it and the currency gets trashed.
    Last edited by zagfles; 29-12-2017 at 6:18 PM.
    • bostonerimus
    • By bostonerimus 29th Dec 17, 6:17 PM
    • 1,413 Posts
    • 831 Thanks
    bostonerimus
    I'm now 2 years into drawdown. I started out with a pension pot (after 25% tax fee) of £705K. Initially I started drawing £27K/annum (£2,250/month) which was my estimated natural yield at the time, however many of my funds, particularly Global Equity funds, have done much better than expected (partially due to Brexit & the £) and as a result my pot now stands at £814K. As a result I increased my annual drawdown amount to £30K (£2,500/month) which again should be covered by the natural yield as stated by other posters and also keep me within basic rate tax limits.

    You need to be careful about following a strategy of only "drawing what you need to live on" as suggested by some posters as if the pension pot continues to grow you might find yourself with a tax liability when the pension pot is revalued at age 75.
    Originally posted by Fermion
    Increasing withdrawals in good years is bad as the good years have to fund withdrawals in the bad years. Also that increased withdrawal compounds down the years. Sustainable withdrawal rates are conservative because they are set so you can survive some of the worst combinations of markets, so be careful and at least have a plan to slash spending if you have to.
    Misanthrope in search of similar for mutual loathing
    • Thrugelmir
    • By Thrugelmir 29th Dec 17, 6:52 PM
    • 56,747 Posts
    • 50,114 Thanks
    Thrugelmir
    I'm now 2 years into drawdown. I started out with a pension pot (after 25% tax fee) of £705K. Initially I started drawing £27K/annum (£2,250/month) which was my estimated natural yield at the time, however many of my funds, particularly Global Equity funds, have done much better than expected (partially due to Brexit & the £) and as a result my pot now stands at £814K. As a result I increased my annual drawdown amount to £30K (£2,500/month) which again should be covered by the natural yield as stated by other posters and also keep me within basic rate tax limits.
    Originally posted by Fermion
    What contingency have you allowed for a recovery in the £ -$ and £ - € exchange rates. Companies such as BP, Shell, HSBC for example. Pay their dividends in foreign currency. Yields may look attractive currently. Far from guaranteed though.
    ďOpportunities come infrequently. When it rains gold, put out the bucket, not the thimbleĒ
    ― Warren Buffett
    • zagfles
    • By zagfles 29th Dec 17, 6:59 PM
    • 12,572 Posts
    • 10,663 Thanks
    zagfles
    Isn't it worth moving the tfls as quickly as possible (given annual isa allowance) from the pension wrapper to an isa wrapper?
    Originally posted by michaels
    Generally - yes. Less chance of the LTA becoming an issue. When you die it's usually more tax efficient (overall) to leave crystallised funds than uncrystallised.
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