preparing retirement sipp for phased drawdown

Need some thoughts on others in getting my sipp in shape for phased , multi stage drawdown until DB scheme (in 4 years) and SP (in 7 years).
The idea being the DC pots (two, current work sipp plus old serps aviva with profits) permit retirement in TWO years time.

Current SIPP is c. £150k (Aviva £40k but will leave as is).
Contributing £2k per month via salary sacrifice, no external cash.

Current sipp of £150 k across 4 multi asset funds (Vanguard LS 40, Royal Ldn Diversified Trust, Kames Diversified monthly income, MITon cautious montly income, all acc). No signficiant cash within SIPP at present.

So in TWO years hence i'd like to stop working and use SIPP savings for TWO years income...eg effectively withdraw £25k each year for TWO years, prior to modest DB scheme commencing (originally £12277 in 2012 linked to RPI).

It's how to go about preparing for that i'm unclear over.
eg. i might give all current funds a haircut to provide year 1 spending in cash, and , from now on over next year, make all contributions in cash...ie £25k plus £25k...which would mean in one year's time i'd have £50k in cash fund in sipp waiting for one more year before i draw upon it.

The bulk of sipp remains invested across this total of four year period...two of further accumulation, two of heavy drawdown..in preparation for further smaller withdrawals eg £10k pa for further THREE years until SP.

I hope i'm making sense...i realise i seem to have answered my query about providing for cash inside SIPP with method above, but interested to have others thoughts on merits of this. Please note no sigificant cash savings outside of pension ... my block is how to go about ensuring £50k cash to hand in a coupe of years time , without being obliged to sell current assets at a loss if we have a downturn.

Hence idea to sell some assets now to create cash fund.

Creating half of what's required immediately seems sensible, the rest over a year from contributions remaining in cash...

Are other cash-like assets worth a look...gold , short UK gilt funds perhaps ?

And i've left the old SERPS Aviva scheme out of it, as it came with a 4% guarantee on bonus ...i've resisted temptation to transfer in past.

I am talking short term i guess here ...2 more years of accumulation prior to accessing cash , so perhaps shouldn't be too concerned about creating a cash fund now within pension.

Look forward to hearing what others may have to say.

Comments

  • Triumph13
    Triumph13 Posts: 1,730
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    If you are putting £2k a month in for the next 2 years and want £50k of cash at the end of that period it would seem the obvious thing is to put your contributions into cash or similar (eg short dated bond fund).
    I'm intrigued though as to why you are holding acc units of income funds?
  • bostonerimus
    bostonerimus Posts: 5,617
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    Triumph13 wrote: »
    If you are putting £2k a month in for the next 2 years and want £50k of cash at the end of that period it would seem the obvious thing is to put your contributions into cash or similar (eg short dated bond fund).

    That was my thought too. I retired 3 years before my DB pension started and I spanned the gap with a cash allocation. Half my spending was covered by rental income and I just saved aggressively into a cash account and also deposited my final check from work for unused vacation time. This gave me around $50k in the bank which was enough to fund 3 years of spending. For the first year I took dividends, but I realized that I didn't really need the extra cash so I started reinvesting them again.

    I found that having a detailed budget was key to feeling secure. I tracked my spending was frugal and kept things in control. I also took advantage of all the benefits available because if my low taxable income.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • Triumph13
    Triumph13 Posts: 1,730
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    That was my thought too. I retired 3 years before my DB pension started and I spanned the gap with a cash allocation. Half my spending was covered by rental income and I just saved aggressively into a cash account and also deposited my final check from work for unused vacation time. This gave me around $50k in the bank which was enough to fund 3 years of spending. For the first year I took dividends, but I realized that I didn't really need the extra cash so I started reinvesting them again.

    I found that having a detailed budget was key to feeling secure. I tracked my spending was frugal and kept things in control. I also took advantage of all the benefits available because if my low taxable income.
    This could quickly turn into a version of the 4 Yorkshiremen sketch. OP's 2 year gap then bostonerimus with 3 years? Sorry, I can't resist it...
    Luxury!!! Ah've got an 11 year gap before my DB schemes come on line!
  • enthusiasticsaver
    enthusiasticsaver Posts: 15,445
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    Essentially then you need £25k cash in 2 years time and £25k cash in 3 years to cover you up to your DB drawdown date?

    I think I would reign back on the £2000 contributions each month and maybe just put in £1000 and put the other £1000 into regular savers or fixed term bonds to mature in 2 years.


    I am also curious as to why you are investing in accumulation units in income funds. Our investments are held in stocks and shares isas/sipps using acc units and then we have an income portfolio which provides monthly income to supplement pensions.
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  • tacpot12
    tacpot12 Posts: 7,893
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    I think your plan is sound. I wouldn't bother with "cash-like" instruments. Over the term you are considering, these instruments are as likely to reduce in value as equities, so I would stash the cash as cash.

    My own view is that Brexit create volatility in the UK markets until the economy settles down, which I think will take 18 months to two years after the April 2019 exit point. Your plan gives you time and resources to only draw on your investments when confidence returns to the UK markets.
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
  • bostonerimus
    bostonerimus Posts: 5,617
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    Triumph13 wrote: »
    This could quickly turn into a version of the 4 Yorkshiremen sketch. OP's 2 year gap then bostonerimus with 3 years? Sorry, I can't resist it...
    Luxury!!! Ah've got an 11 year gap before my DB schemes come on line!

    11 years is too long for most people to fund with cash......for that time scale you are back to drawdownn from a diverse set of investments that have a longer time horizon. So just set your equity to bond allocation, keep it diverse and take dividends and capital gains when you can and spend from a cash/very short term bond allocation when you need to.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • westv
    westv Posts: 6,060
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    Could one option rather than cash be putting the funds into the pension and then using it to buy a fixed term annuity? You gain the tax uplift then.
  • Triumph13
    Triumph13 Posts: 1,730
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    OP should most definitely put it into the pension to get the tax benefit. They may want to leave it as cash while it's in there though.
  • westv
    westv Posts: 6,060
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    edited 31 August 2018 at 6:00PM
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    Triumph13 wrote: »
    OP should most definitely put it into the pension to get the tax benefit. They may want to leave it as cash while it's in there though.
    Ok. I was just thinking that whilst the returns on FTAs are poor they aren't quite as poor as cash in a pension.
  • hyperhypo
    hyperhypo Posts: 179
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    ok yes and many thanks to you all... the £2k is going into pension ..company sipp after salary sac...to reduce exposure to paying higher rate tax...hence the amount inside scheme ... as far as comments on acc / income funds go i honestly thought it didn't make a great deal of diffference ...the units from either accumulate in same place and there are acc versions of income funds to buy...that said...

    i'm wanting to stick with VLS40 and the Royal London fund but undecided on my income err acc funds. perhaps find some others !!

    I might even admit to believing there wasn't a significant difference ..it all went down the same hole !

    But the general idea of paying all subsequent contribs as cash seems reasonable...the reason it's all into sipp is because of s. sacrifice ..lowering my exposure to 40% band....so two years at same rate should do it !

    It's a huge slice of my gross income though...i've never been able to work out where the "sweet spot" lies between high gross contributions ino sipp and saving after tax...hence my current level of paying in sipp so that a sufficient amount level net to live on.

    But therefore spare to save net of income tax.

    DB scheme ended June 2012...hence have saved c. 150k in DC since then...now it's a question of firmly hanging on to a portion of it to spend two years hence ....
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