What to do with S&S/cash ISAs when you retire?

Lois_and_CK

I've done lots of research and read several books on retirement planning, and husband and I now have in place company/personal pensions, S&S ISAs, and cash ISAs.

I'm happy with the savings vehicles we've put in place, but I've noticed in everything I've read so far about retirement planning that whereas there is lots of advice on various ways of saving for retirement, it all falls short of advising the reader what to do with it all when they actually come to retire.

Pensions are easy enough - when the time comes, I know to shop around for an annuity. But what do I do with S&S ISAs and cash ISAs? I know with S&S ISAs I could switch from accumulation to income paying, but what if I don't want to retain my capital? What if I want to spend it? Is it as simple as withdrawing the money and popping it in my current account? Or then will I open myself up to paying tax on it? Same with cash ISAs - I'm sure I read that if I use money from a cash ISA as income, then it is tax free, but how do I use it as income? Again, is it as simple as just withdrawing the money?

Does anyone have any recommendations on reading I can do to learn more about how to spend my savings as an income in retirement? I looked on Amazon for a book, but couldn't find anything suitable.

wakeupalarm

Yes!, its as simple as just withdrawing it when you want to spend it.

redbuzzard

With the ISAs just withdraw as you need /want it, bearing in mind how long you want it to last. It's yours, there's no tax on what you draw out. You could use the government annuity rates as a starting point for what is reasonable to draw out if you need it to live on; at the other extreme, if you have enough to cover that from other sources, then you might want to use it for special holidays, new car etc while you have the health and energy to to that, making sure you actually get to spend those savings!

An interesting question is what to be invested in at that stage. It's more important to avoid loss in real terms, than to seek high returns, whether you "have enough" or because you haven't, and can't afford to be even worse off. I've only just started to think about that myself, so I'll be interested in other replies too.

Regarding annuities - I have pretty well given up on the idea, given the inflation risks on level annuities and the ludicrous cost of RPI linked ones.

Drawdown looks better for us. We can take the lump sum, and if we want we can defer taking any further income. We shouldn't need to touch my SIPP until I'm 65, when I expect to have at least £20,000 of secure income from other sources, so we (I) should be able to do flexible drawdown too. On my death, the remaining fund can be transferred to my wife to buy an annuity or continue drawdown, which providing the money doesn't run out sounds better than a 50% spouse's annuity.

You don't say how old you are - one of the things I liked about the drawdown approach, as I tried to repair my broken pension prospects in my 50s, was the fact that I can reasonably stay invested longer in riskier assets for the growth I need - if I was committed in my mind to buying an annuity, I would have been substantially in cash or near cash already with little prospect of even matching inflation, so I would have largely missed out on this year's rise in equities for example.

Not a recommendation for you of course, but you might want to look into it. As with savings, your fund stays invested at your risk so investment choices are needed.

My own main concerns at the moment are inflation, and the seemingly movable pension goalposts.

As usual, just thoughts, not advice. E&OE.

dunstonh

but I've noticed in everything I've read so far about retirement planning that whereas there is lots of advice on various ways of saving for retirement, it all falls short of advising the reader what to do with it all when they actually come to retire.

Probably as advice is regulated by the FSA and there is no one size fits all answer that can be given. So, they have to be careful not to give advice.

I know with S&S ISAs I could switch from accumulation to income paying, but what if I don't want to retain my capital? What if I want to spend it? Is it as simple as withdrawing the money and popping it in my current account?

There are multiple ways of doing it depending on your investment strategy, your investment platform and your own preferences and opinion. Each has pros and cons.

Lois_and_CK

Oh ha ha! It really is that simple then. I honestly thought it was going to be complicated. That'll explain why I can't find any books about spending in retirement: "withdraw it; spend it" :-)

Thank you for taking the time to reply; much appreciated. And thanks also for the extended advice, Redbuzzard.

I've chosen the Vanguard Lifestrategy fund for my S&S ISA, and my general idea at the moment is to gradually reduce it over the years from the 80% equity fund down to the 20% one. From there, I'm not so sure. My company pension is a bit more restrictive as it's an Aviva pension and it's not an automatic lifestyling fund. I'll need to do more research into Aviva's other funds and change it as I get older.

My husband and I are both 39. I don't know about drawdown vs annuities yet - drawdown is not something I know a great deal about, but I'll look into it at some point in the next 20 years :-)

margaretclare

You don't have to do anything about them, anything different that is. Retirement makes no difference.

Lois_and_CK

dunstonh wrote: »

Probably as advice is regulated by the FSA and there is no one size fits all answer that can be given. So, they have to be careful not to give advice.

Many thanks for your reply. Sorry for using the word "advice". I'd hoped that the rest of my original post would put my question in context, but obviously I didn't word it terribly well. I wanted to know HOW to go about taking my money out of cash or S&S ISAs to use as retirement income; NOT whether I should go ahead and do it or not. Having been an avid reader of this forum for quite some time, I know that no one can give advice, only opinions. My apologies for the confusion and I do hope that I've put my original question into a clearer context now.

westy22

gradually reduce it over the years from the 80% equity fund down to the 20% one

That would be the conventional method of reducing risk / volatility as you approach retirement but I'm not sure that holds true today. Bonds are probably more risky than equities at this precise moment - still, you should not need to assess that for at least another 10 years. I'd stay where you are in 80% equities and revisit the issue in about 2023.

bigadaj

In some ways this highlights the advantage in splitting contributions, some into pensions, some into isas as one is tax free on the way in. And one tax free on the way out. So changing your isas into income paying means potentially a good chunk of tax free income during retirement.

bigfreddiel

its all very simple

one vague rule was to take 4% of your fund each year a income - if it's nicely balanced it will still go down and up but the trend will be upward in the long term - just stick to your chosen portfolio strategy through thick and thin


see ya!

fj

bigfreddiel

Lois_and_CK wrote: »

.....will I open myself up to paying tax on it?

you've paid tax on the cash before paying into an isa that's why income is tax free

pensions use tax free money going in thats why its taxed when you take an income from it

simple innit

see ya!

fj