Tax on a SIPP drawdown question

Thrugelmir

AnotherJoe wrote: »

So I'm content to run it down to a certain extent, I'm not planning in keeping it steady state, and at effectively 1% or 2% annual decrement (eg 5% or 6% minus the 'safe' 4%) it will outlast me anyway, plus when I get to 2021 I could drop to 2% or 3%. £600k when I'm underground or floating out of a chimney wont do me any good :rotfl:

Just wanted to be sure I wasn't missing something obvious.

The obvious fact is that the market as a whole could drop. Statistically there's 1 in 6 chance of a 15% drop in any year. If you are drawing at a higher rate then you'll deplete capital faster. Once gone capital is permanently lost. Markets historically have been far more volatile than recent history suggests.

A 10% loss in year one would significantly impact how long your capital would actually last. Something that rarely gets said in articles.

AnotherJoe

A 10% loss in year one would significantly impact how long your capital would actually last. Something that rarely gets said in articles.
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I think the Torygraph recently had a story on this along the lines of three different drawdowns identical except on started in year X, one X-1 and one X+1, and whatever the year they picked (which obviously was cherry picked) it made a huge difference.

Them's the breaks, you can guard against it to an extent with a decent buffer of cash (maybe a couple of years), with income from shares rather than from selling shares (only up to a point obviously once the companies cut dividends back you're stuffed), and perhaps cutting back in a bad year.

When you say "Markets historically have been far more volatile than recent history suggests" I'd have thought markets have been pretty volatile recently, I think I lost in the region of 30% around 2008/9.

Anyway, its that or a dire annuity which is like living in a stock market depression anyway, so there's not much alternative

maximumgardener

I reckon you have it pretty clear in your head what you want to do

maximise tax free cash and use that (invested). DD as a buffer for X years.
leave rest invested (as appropriate for you) & DD or convert to annuity when 75+?

Def see an IFA local to you, I'd say ( or 2 or 3 , then pick 1) . they will set all up for you and Bobs your uncle &
Fannys your Granny.......as they say. happy days .your sorted. well done.