Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • williegofar
    • By williegofar 14th Jul 17, 2:05 PM
    • 195Posts
    • 108Thanks
    williegofar
    Sipp
    • #1
    • 14th Jul 17, 2:05 PM
    Sipp 14th Jul 17 at 2:05 PM
    Hi,
    I am being made redundant very shortly. At 53 I'm not sure what my prospects will be for getting another job. I think if I use my pensions correctly it should ease any financial worries considerable. Here's my situation;

    I have a final salary scheme pension. My intention is to leave this alone entirely until I'm 65. That pension, plus the state one when I turn 67 should provide for that time in my life okay.

    Separately, I have around £145k in a defined contributions pension. My thinking was to drawdown sums from this to supplement earnings between ages 55 & 65. If its all used up by the time I'm 65 then that's fine. However.... I've been told that I can only drawdown twice during the lifetime of the policy. I can transfer to a SIPP or buy an annuity.

    My idea is, when I turn 55, transfer to a SIPP and hope to be able to drawdown around £20k a year for 10 years.

    Apologies for this long drawn-out post, but my question is, does the above sound doable, or daft?

    Thanks in advance for any advice.
Page 1
    • AlanP
    • By AlanP 14th Jul 17, 2:16 PM
    • 854 Posts
    • 586 Thanks
    AlanP
    • #2
    • 14th Jul 17, 2:16 PM
    • #2
    • 14th Jul 17, 2:16 PM
    i'm not sure your plan will work for the 55-65 period.

    £20k a year for 10 years = £200k but you only have £145k now which means you would need it to increase by a 1/3rd over 2 years which is very, very unlikely.

    Basic premise of moving to a SIPP and taking an annual draw makes sense in principle but perhaps not as much per year as you hoped for.

    You may be better taking the DB scheme earlier and smoothing your income. Putting together a s/sheet should help to plan that out.

    Any other income / pensions to come, from a partner perhaps?

    Other savings?
    Last edited by AlanP; 14-07-2017 at 2:18 PM.
    • Spreadsheetman
    • By Spreadsheetman 14th Jul 17, 2:19 PM
    • 40 Posts
    • 33 Thanks
    Spreadsheetman
    • #3
    • 14th Jul 17, 2:19 PM
    • #3
    • 14th Jul 17, 2:19 PM
    That sounds absolutely fine in principle. I wouldn't have thought you'd get anything like £20k pa out of it though. £14k-£15k maybe depending on how much was in equities.
    • williegofar
    • By williegofar 14th Jul 17, 2:19 PM
    • 195 Posts
    • 108 Thanks
    williegofar
    • #4
    • 14th Jul 17, 2:19 PM
    • #4
    • 14th Jul 17, 2:19 PM
    Thanks for the reply.
    I'm not sure I understand what you mean by increasing by a 1/3 over 2 years. It would be over the 13 years starting now.
    With a growth rate of 4% yearly I thought this was possible. But I'm not sure as I know so little about SIPPs.
    • AnotherJoe
    • By AnotherJoe 14th Jul 17, 2:24 PM
    • 7,053 Posts
    • 7,519 Thanks
    AnotherJoe
    • #5
    • 14th Jul 17, 2:24 PM
    • #5
    • 14th Jul 17, 2:24 PM
    Yes that seems like it will work, and you could transfer it to a SIPP now if you wished.
    The above sounds very doable, at least i hope so as thats essentially what I'm doing (minus the having a job bit)
    There is one small proviso in your case though due to you having a job

    You can put your earnings in your new job into a pension (which might well be your new SIPP)

    However, the scheme to reduce pension contributions from £10k to £4k after drawdown has started looks like its being revived according to a story i read this morning. Which means you wont be able to contribute more than £3,200 of your earnings. So £20k drawdown for 10 years out of £145 seems ambitious !

    Even so its worth doing the contributions.

    That £3,200 gets bumped up to £4,000.
    When you take it out, which you can immediately as you'll be 55, 1/4 is tax free, so that's £1,000.
    You'll pay 20% tax on the £3,000 = £600 leaving £2,400.
    So thats £3,400 from a contribution of £2,200 eg a free £200. So still worth doing.
    • williegofar
    • By williegofar 14th Jul 17, 2:32 PM
    • 195 Posts
    • 108 Thanks
    williegofar
    • #6
    • 14th Jul 17, 2:32 PM
    • #6
    • 14th Jul 17, 2:32 PM
    Thanks again for the replies, very grateful.

    Unfortunately, I will be unemployed at the end of the month and I've no idea what chance I will have of getting a new job.

    Looking again at my sums, a growth rate of 6% will probably be required to allow my 10 annual withdrawals of £20k. I'm guessing though that 6% is overly ambitious??
    • AnotherJoe
    • By AnotherJoe 14th Jul 17, 2:47 PM
    • 7,053 Posts
    • 7,519 Thanks
    AnotherJoe
    • #7
    • 14th Jul 17, 2:47 PM
    • #7
    • 14th Jul 17, 2:47 PM
    Thanks again for the replies, very grateful.

    Unfortunately, I will be unemployed at the end of the month and I've no idea what chance I will have of getting a new job.

    Looking again at my sums, a growth rate of 6% will probably be required to allow my 10 annual withdrawals of £20k. I'm guessing though that 6% is overly ambitious??
    Originally posted by williegofar
    Yes, because it assumes no dips. Suppose theres a 30% stock market dip in early years? Carry on taking out £20k and it will all be gone in 5 or so years. My drawdown plan has a buffer of cash, in bad years, i take from that so i dont 'double deplete' my SIPP eg draw down when stocks are low

    However, can you not get a job of some kind? Say £10k a year ? Might even be part time?
    With that, then your £20k overall is very doable. Thats why i said i thought it would work, because in your OP you talked about "supplementing earnings" which implies earnings which implies a job !
    • williegofar
    • By williegofar 14th Jul 17, 2:56 PM
    • 195 Posts
    • 108 Thanks
    williegofar
    • #8
    • 14th Jul 17, 2:56 PM
    • #8
    • 14th Jul 17, 2:56 PM
    Thats why i said i thought it would work, because in your OP you talked about "supplementing earnings" which implies earnings which implies a job !
    Originally posted by AnotherJoe
    I did indeed, sorry. I will be looking for work of some sort and all should be well.
    Thanks again for taking the time to reply.
    • Mnd
    • By Mnd 14th Jul 17, 3:06 PM
    • 73 Posts
    • 51 Thanks
    Mnd
    • #9
    • 14th Jul 17, 3:06 PM
    • #9
    • 14th Jul 17, 3:06 PM
    Why are you saying drawdown to 65..you won't get sp at 65
    • williegofar
    • By williegofar 14th Jul 17, 3:15 PM
    • 195 Posts
    • 108 Thanks
    williegofar
    sp? you mean State pension? I will be 67 before I get that.
    • williegofar
    • By williegofar 14th Jul 17, 3:16 PM
    • 195 Posts
    • 108 Thanks
    williegofar
    I will start taking my defined benefits (final salary scheme) pension at 65.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

2,070Posts Today

7,270Users online

Martin's Twitter