Am I being too cautious with my SIPP?

Ceme3000

I've just turned 55 and have 100k in my SIPP and am retired. I want to take 15k a year for 5 years until I claim DB pension at 60.

I've just sold funds leaving 75k in cash with the remaining 25K invested in Troy Trojan, CGT and VLS 20.

Thinking about it though would I be better keeping 50K in cash and having 50K in 100% equity? Assuming a worse case scenario that a market correction knocks 50% of the equity portion, I'm still left with the 75k I need to live on,  the flip side being that I stand to get a better return over the 5 years.

2nd_time_buyer

If you can afford to use up the 100k before 60 (your second example) - why not keep it in cash and take 20k a year? 

i.e. perhaps you are over cautious in your spending 

Joey_Soap

If that's all you have to live on, then no, you are not being overly cautious. It depends of vourse on your attitude to risk. I have quite a high risk tolerance. But if I needed the cash to live off for the next five years, I would not have it in the stock market.

MaxiRobriguez

Agree with both comments.

Duration timeframe is small, inflation won't be that much over the next five years and probably loaded more towards the first year or two so why not something like:

Year 1: £18,500
Year 2: £19,500
Year 3: £20,250
Year 4: £20,750
Year 5: £21,000

dunstonh

Focus on your objective rather than risk it.  However, if you have your objective covered, then you have scope to take on some risk with the excess amount not needed to meet the objective.  However, you probably have other objectives and how does this pension fit in with those?

[Deleted User]

Ceme3000 said:

 Assuming a worse case scenario that a market correction knocks 50% of the equity portion, 

Its not “worst case”. 

Ceme3000

Deleted_User said:

Ceme3000 said:

 Assuming a worse case scenario that a market correction knocks 50% of the equity portion, 

Its not “worst case”. 

Very true! but you have to make some sort of assumption when planning.

Thanks for the other comments as well.  It's true I am averse to spending, I have a healthy S&S ISA and another DC pension that is linked to my DB scheme. My DB pension should be around 21K at aged 60 with nearly 100K tax free from the linked DC pot. My motivation for taking the SIPP now is to make use of my annual tax free allowance. 

When I finished working my salary was 33k so by the time state pension kicks in I'm looking at having a pension provision of about 90% of final salary. 

I'm single with no dependents but it's still hard to get into the habit of spending after years of saving. 

[Deleted User]

Personally I hate having a lot of money in cash because it guarantees a loss to inflation.  You are essentially giving a free loan to your brokerage.  

Having said it, 5 years isn’t very long and the damage from inflation will likely be tolerable. Any other option requires a certain amount of volatility tooerance.

Audaxer

Ceme3000 said:

I've just turned 55 and have 100k in my SIPP and am retired. I want to take 15k a year for 5 years until I claim DB pension at 60.

I've just sold funds leaving 75k in cash with the remaining 25K invested in Troy Trojan, CGT and VLS 20.

Thinking about it though would I be better keeping 50K in cash and having 50K in 100% equity? Assuming a worse case scenario that a market correction knocks 50% of the equity portion, I'm still left with the 75k I need to live on,  the flip side being that I stand to get a better return over the 5 years.

I don't think it too cautious to have that £75k in cash, to withdraw tax free over the next 5 years. What maybe is a bit over-cautious is to have the other £25k in these two cautious funds and IT, if you will not need access to these funds even when your DB pension kicks in.

Joey_Soap

Audaxer said:

Ceme3000 said:

I've just turned 55 and have 100k in my SIPP and am retired. I want to take 15k a year for 5 years until I claim DB pension at 60.

I've just sold funds leaving 75k in cash with the remaining 25K invested in Troy Trojan, CGT and VLS 20.

Thinking about it though would I be better keeping 50K in cash and having 50K in 100% equity? Assuming a worse case scenario that a market correction knocks 50% of the equity portion, I'm still left with the 75k I need to live on,  the flip side being that I stand to get a better return over the 5 years.

I don't think it too cautious to have that £75k in cash, to withdraw tax free over the next 5 years. What maybe is a bit over-cautious is to have the other £25k in these two cautious funds and IT, if you will not need access to these funds even when your DB pension kicks in.

That's a very fair comment indeed.