ii SIPP

EdSwippet

Justso65 said:

...
I intend to use those pots to get me from 57 to 67.  At which time my self and my wife each have DB pensions and state pensions to live off.

The combined pots have a current value of around £450k ...

Have you factored in the possibility of bumping up against the Lifetime Allowance? Assuming the stated £450k is your own "combined pots", and don't include anything owned by your wife, then a decently sized DB pension added to these DC pensions could take you over. Worth checking closely.

If that's the case, then barring inheritance tax motivations, this can argue for crystallising the DC pensions more fully and more early than otherwise.

RoadToRiches

I’d leave the tax free lump sum in the SIPP unless you are in danger of exceeding the LTA then I’d look into possibility of taking it out to top up ISA each year and grow this outside the pension.

ukdw

I suspect your pension would stand withdrawing a fair bit more than £12.7k a year and still have plenty left at age 67 to continue a smaller amount of drawdown indefinitely.
The extra £220k could probably support and additional £6k-£10k drawdowns (which would be taxable at 20%).

Albermarle

ukdw said:

I suspect your pension would stand withdrawing a fair bit more than £12.7k a year and still have plenty left at age 67 to continue a smaller amount of drawdown indefinitely.
The extra £220k could probably support and additional £6k-£10k drawdowns (which would be taxable at 20%).

Yes do not take out just £12570 just because that means you pay no tax . Take out what you need ( if your pot can stand it) and pay a bit of tax if necessary. 
The strategy should be to minimise tax, but not necessarily paying zero if that is working against your other needs.

anselld

The II platform works well enough however it is fixed fee (after the initial free offer) so the sooner you make a decision the sooner you will be making savings from closing your other pensions.  There is no point opening the II SIPP until you are close to making a decision as the six month fee free offer seems to be a continuous promotion.

RoadToRiches

II also have promotion on for pension transfers into them - up to £500 max if you transfer in £500k - Fixed fees will save you money over percentage fees with them if you have a big enough pot..

Justso65

QrizB said:

Justso65 said:

This is why I love this site.  So many great respondents and quick too.  Thank you.

So are you saying crystallise £40k per year and take £10k from that each time? Then the remaining uncrystallised continues to grow?  Would I then take my £12700 personal allowance from the crystallised funds totalling around £22.7k per year tax free?  Then top up from my non-pension pot with £14k making £36.7k tax free per year.

If this is you’re idea it wasn’t something I considered possible but sounds a good option if it is. 

My main concern in any option is some kind of market downturn affecting my plans for the 10 years until DB and state pension start.

Thank you again for your input. 

Yes, that's pretty much it. In principle your SIPP investments can be the same ones you would have chosen for a S&S ISA, leaving you free to use your existing £140k if you want some of your assets in cash or PBs.

A downturn would affest a S&S ISA in the same way as a SIPP, so you won't avoid that risk even with your original plan.

Could I ask what would your strategy would be in retirement to ensure your plans aren’t affected by an big downturn in UK or world markets?  I can see that when I’m younger I can accept a big downturn and hope investments recover, as they have, over a longer period.  But when you’re actually drawing on investments in retirement how do you mitigate a big downturn that may cause you to have to rethink what you can take from the funds?

I had considered crystallising 5 years of required funds at day one and then add another year each year to keep a 5 year cash buffer.  So in any downturn I could pause the withdraws and still have 5 years to work with in the hope the investments recover in that period.  Maybe 5 years is too much of a buffer or maybe the idea is just silly anyway.  I’m interested in people’s strategies for downturns especially in these covid times.

Justso65

EdSwippet said:

Justso65 said:

...
I intend to use those pots to get me from 57 to 67.  At which time my self and my wife each have DB pensions and state pensions to live off.

The combined pots have a current value of around £450k ...

Have you factored in the possibility of bumping up against the Lifetime Allowance? Assuming the stated £450k is your own "combined pots", and don't include anything owned by your wife, then a decently sized DB pension added to these DC pensions could take you over. Worth checking closely.

If that's the case, then barring inheritance tax motivations, this can argue for crystallising the DC pensions more fully and more early than otherwise.

Assuming the value of the DB pension is the transfer value for assessment against the lifetime allowance last I checked that was £370k.  So still a bit away from the lifetime allowance.  Combined values at this point are circa £820k. My wife’s only got a DB pension which is not included in this figure.

RoadToRiches

A 3-5 year cash buffer for that scenario is critical in my view. You don’t want to be selling anything in the event of a major crash, if anything buying more would be a more prudent approach in my opinion. Markets historically recover. :-)

Albermarle

Justso65 said:

QrizB said:

Justso65 said:

This is why I love this site.  So many great respondents and quick too.  Thank you.

So are you saying crystallise £40k per year and take £10k from that each time? Then the remaining uncrystallised continues to grow?  Would I then take my £12700 personal allowance from the crystallised funds totalling around £22.7k per year tax free?  Then top up from my non-pension pot with £14k making £36.7k tax free per year.

If this is you’re idea it wasn’t something I considered possible but sounds a good option if it is. 

My main concern in any option is some kind of market downturn affecting my plans for the 10 years until DB and state pension start.

Thank you again for your input. 

Yes, that's pretty much it. In principle your SIPP investments can be the same ones you would have chosen for a S&S ISA, leaving you free to use your existing £140k if you want some of your assets in cash or PBs.

A downturn would affest a S&S ISA in the same way as a SIPP, so you won't avoid that risk even with your original plan.

Could I ask what would your strategy would be in retirement to ensure your plans aren’t affected by an big downturn in UK or world markets?  I can see that when I’m younger I can accept a big downturn and hope investments recover, as they have, over a longer period.  But when you’re actually drawing on investments in retirement how do you mitigate a big downturn that may cause you to have to rethink what you can take from the funds?

I had considered crystallising 5 years of required funds at day one and then add another year each year to keep a 5 year cash buffer.  So in any downturn I could pause the withdraws and still have 5 years to work with in the hope the investments recover in that period.  Maybe 5 years is too much of a buffer or maybe the idea is just silly anyway.  I’m interested in people’s strategies for downturns especially in these covid times.

It is a subject discussed a lot on this forum - that is drawdown strategies to cope with different scenarios,
So I suggest to become a regular reader would be a good step forward.
As a starter here is a thread going at the moment. Foolishness of the 4% rule — MoneySavingExpert Forum

Like most longer threads it can go a bit off topic and get a bit personal but there is some useful info all the same .

To directly answer your question , it is good to start with a cash buffer separate from the pension but that is just one way to do it.
A big downturn early in your retirement is more dangerous than one later . It is called Sequence of Returns Risk ( google it)