Research for DIY drawdown

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
33 replies 3.4K views
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  • JohnWinderJohnWinder Forumite
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    Here's another source of info. If it's new to you it will open an Aladdins' cave of information treasure, despite US-centric.
  • westvwestv Forumite
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    tacpot12 said:
    This is a good overview article: https://www.trustnet.com/news/824990/what-is-the-best-way-to-receive-an-income-from-my-investments

    This blog has some excellent articles on safe withdrawal rates: https://earlyretirementnow.com/
    One thing I do find confusing about the trustnet article is the reference to fluctuating yield. Yes  the yield from a share will fluctuate as the price rises and falls but that doesn't mean the cash  value of the dividend will once you own the shares.
  • ThrugelmirThrugelmir Forumite
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    westv said:
    tacpot12 said:
    This is a good overview article: https://www.trustnet.com/news/824990/what-is-the-best-way-to-receive-an-income-from-my-investments

    This blog has some excellent articles on safe withdrawal rates: https://earlyretirementnow.com/
    One thing I do find confusing about the trustnet article is the reference to fluctuating yield. Yes  the yield from a share will fluctuate as the price rises and falls but that doesn't mean the cash  value of the dividend will once you own the shares.
    Dividends will reflect the underlying financial performance of the company.  IT's smooth dividends by calling on reserves in effect giving you some of your own money back. 
    It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." — George Soros
  • edited 8 February at 10:40AM
    westvwestv Forumite
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    edited 8 February at 10:40AM
    westv said:
    tacpot12 said:
    This is a good overview article: https://www.trustnet.com/news/824990/what-is-the-best-way-to-receive-an-income-from-my-investments

    This blog has some excellent articles on safe withdrawal rates: https://earlyretirementnow.com/
    One thing I do find confusing about the trustnet article is the reference to fluctuating yield. Yes  the yield from a share will fluctuate as the price rises and falls but that doesn't mean the cash  value of the dividend will once you own the shares.
    Dividends will reflect the underlying financial performance of the company.  IT's smooth dividends by calling on reserves in effect giving you some of your own money back. 
    How does that relate to my point about the yield (the dividend as a percentage of the share price) and the actual cash value of the dividend for shares already owned?
  • AlanP_2AlanP_2 Forumite
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    "Can you help me understand how you hold cash in a SIPP please? Does that mean bonds or do SIPPS have a simple cash savings mechanism built in? And if so, how do you ensure cash isn't eroded by inflation due to low interest rates? There seem to be fixed rate savings accounts that give better returns than bonds at the minute? Or am I misunderstanding?"


    A SIPP can hold cash, if you think about it they are holding cash for a period of time after money paid in until investments are purchased and / or for a period of time after investments are sold until funds withdrawn or transferred to a different platform.

    Holding a large amount of cash is just making use of that basic facilitry for a longer period of time.

    Cash held within a SIPP will probably earn 0% interest (and it may cost you money if platform fees are %'age based) so will lose out to inflation.

    BUT - The goal for the cash is not to match or beat inflation but to act as a very, very safe asset in case investments fall in value, earning a return on it is not a consideration.
  • AlbermarleAlbermarle Forumite
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    Of course you could hold no cash within the SIPP , but hold it outside in savings accounts , where it will at least earn a few quid and not taxed on withdrawal.
    In this case though you would have needed to build up the cash savings over the years, which may mean you have not gained from tax relief by contributing to a pension .
  • Notepad_PhilNotepad_Phil Forumite
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    westv said:
    westv said:
    tacpot12 said:
    This is a good overview article: https://www.trustnet.com/news/824990/what-is-the-best-way-to-receive-an-income-from-my-investments

    This blog has some excellent articles on safe withdrawal rates: https://earlyretirementnow.com/
    One thing I do find confusing about the trustnet article is the reference to fluctuating yield. Yes  the yield from a share will fluctuate as the price rises and falls but that doesn't mean the cash  value of the dividend will once you own the shares.
    Dividends will reflect the underlying financial performance of the company.  IT's smooth dividends by calling on reserves in effect giving you some of your own money back. 
    How does that relate to my point about the yield (the dividend as a percentage of the share price) and the actual cash value of the dividend for shares already owned?
    Once the cash has been paid out and is in your bank account then yes the value remains at that value. But you don't know what the next dividend will be before the company has declared it, and that can go up and down depending on how the company is performing . They could decide to half it, they could even decide to stop it altogether, so the future dividend yield is not known and hence does fluctuate (and even declared dividends can be halted under extreme circumstances).
    For some examples just look at the dividends paid out by UK stocks or for a high level summary take a look at something like https://citywire.co.uk/investment-trust-insider/news/uk-dividends-crash-57-as-coronavirus-takes-toll/a1380875 .
  • LintonLinton Forumite
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    westv said:
    westv said:
    tacpot12 said:
    This is a good overview article: https://www.trustnet.com/news/824990/what-is-the-best-way-to-receive-an-income-from-my-investments

    This blog has some excellent articles on safe withdrawal rates: https://earlyretirementnow.com/
    One thing I do find confusing about the trustnet article is the reference to fluctuating yield. Yes  the yield from a share will fluctuate as the price rises and falls but that doesn't mean the cash  value of the dividend will once you own the shares.
    Dividends will reflect the underlying financial performance of the company.  IT's smooth dividends by calling on reserves in effect giving you some of your own money back. 
    How does that relate to my point about the yield (the dividend as a percentage of the share price) and the actual cash value of the dividend for shares already owned?
    Dividends are paid as n pence per share.  So what you get depends entirely on how many shares you hold, not their value.  Yield is a value calculated after the event- the dividend in the past year  divided by the price now.  So it can be very misleading - a very high yield could mean that the price has recently crashed.

    Generally the amount of the dividend is more stable than the yield.
  • westvwestv Forumite
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    Linton said:
    westv said:
    westv said:
    tacpot12 said:
    This is a good overview article: https://www.trustnet.com/news/824990/what-is-the-best-way-to-receive-an-income-from-my-investments

    This blog has some excellent articles on safe withdrawal rates: https://earlyretirementnow.com/
    One thing I do find confusing about the trustnet article is the reference to fluctuating yield. Yes  the yield from a share will fluctuate as the price rises and falls but that doesn't mean the cash  value of the dividend will once you own the shares.
    Dividends will reflect the underlying financial performance of the company.  IT's smooth dividends by calling on reserves in effect giving you some of your own money back. 
    How does that relate to my point about the yield (the dividend as a percentage of the share price) and the actual cash value of the dividend for shares already owned?

    Generally the amount of the dividend is more stable than the yield.
    Which is what I said.
  • scdandemscdandem Forumite
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    Of course you could hold no cash within the SIPP , but hold it outside in savings accounts , where it will at least earn a few quid and not taxed on withdrawal.
    In this case though you would have needed to build up the cash savings over the years, which may mean you have not gained from tax relief by contributing to a pension .
    Thanks. I’m in the thick of creating a portfolio and am conscious that we have ALL our savings (exc pension) in our S&S ISA (£100k), having been advised by our IFA to cash in our £30k premium bonds and plough everything in there. Having read John Edwards and researched lots more, I’m feeling nervous that we now don’t have any ‘very safe’ emergency funds. I’ve read that we can put cash into a SIPP and get the relevant rate tax relief (rather than putting in a savings account outside the SIPP and therefore no uplift) but I’m not sure how that works, or if it’s a good idea (obviously tax benefit is good but Vanguard for eg charge 0.2% of any interest earned, and with the current rates, and inflation... but then 20% tax relief... ??? confused.com 🧐
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