Use Savings or draw on falling SIPP?

rosierunner

Hi all after reading your comments (and many many thanks for them all) I realise that I could have been more specific.  The SIPP is only about 100k in value and was just invested in to literally 'boost' my defined benefit pension until my state pension kicked in and took over, therefore maintaining a steady income level for the rest of my life.  The savings were just for those times that something happens and you can't plan for them.  I will still be able to save with the monthly income I will get, £500 per month at least.  We have a lot of money tied up in a big house too and as there are only two of us living here now (family flown the nest) we will release a significant amount of equity in the next 10 years or so when we downsize

Audaxer

rosierunner said:

Hi all after reading your comments (and many many thanks for them all) I realise that I could have been more specific.  The SIPP is only about 100k in value and was just invested in to literally 'boost' my defined benefit pension until my state pension kicked in and took over, therefore maintaining a steady income level for the rest of my life.  The savings were just for those times that something happens and you can't plan for them.  I will still be able to save with the monthly income I will get, £500 per month at least.  We have a lot of money tied up in a big house too and as there are only two of us living here now (family flown the nest) we will release a significant amount of equity in the next 10 years or so when we downsize

Okay, I see you have less in the SIPP than I thought, but still £100k plus £40k cash savings to provide £9.5k per year, rising with inflation, over 8 years. That still is more than enough providing your SIPP is not high risk like 100% equities. Another plus point that we didn't know that you will be downsizing and releasing equity in the next 10 years. If you don't want to deplete all your cash savings when markets are down, you could take half your income from cash and half from your SIPP.

I don't quite understand where your £500 per month savings are coming from. If you are able to save that amount, why do you need an extra £9.5k income drawn from your SIPP or cash?

rosierunner

Audaxer said:

rosierunner said:

Hi all after reading your comments (and many many thanks for them all) I realise that I could have been more specific.  The SIPP is only about 100k in value and was just invested in to literally 'boost' my defined benefit pension until my state pension kicked in and took over, therefore maintaining a steady income level for the rest of my life.  The savings were just for those times that something happens and you can't plan for them.  I will still be able to save with the monthly income I will get, £500 per month at least.  We have a lot of money tied up in a big house too and as there are only two of us living here now (family flown the nest) we will release a significant amount of equity in the next 10 years or so when we downsize

Okay, I see you have less in the SIPP than I thought, but still £100k plus £40k cash savings to provide £9.5k per year, rising with inflation, over 8 years. That still is more than enough providing your SIPP is not high risk like 100% equities. Another plus point that we didn't know that you will be downsizing and releasing equity in the next 10 years. If you don't want to deplete all your cash savings when markets are down, you could take half your income from cash and half from your SIPP.

I don't quite understand where your £500 per month savings are coming from. If you are able to save that amount, why do you need an extra £9.5k income drawn from your SIPP or cash?

Thanks Audaxer,  I hadn't thought about the 50/50 option (feel a bit thick now!) that would work for me I think, hedge my bets to a certain extent.  As to the £500 savings a month, that's just the savings mentality imprinted on my brain to save for a rainy day.  Drawing down just what I need is quite a difficult shift of mentality I'm struggling with.  

Audaxer

rosierunner said:

Audaxer said:

rosierunner said:

Hi all after reading your comments (and many many thanks for them all) I realise that I could have been more specific.  The SIPP is only about 100k in value and was just invested in to literally 'boost' my defined benefit pension until my state pension kicked in and took over, therefore maintaining a steady income level for the rest of my life.  The savings were just for those times that something happens and you can't plan for them.  I will still be able to save with the monthly income I will get, £500 per month at least.  We have a lot of money tied up in a big house too and as there are only two of us living here now (family flown the nest) we will release a significant amount of equity in the next 10 years or so when we downsize

Okay, I see you have less in the SIPP than I thought, but still £100k plus £40k cash savings to provide £9.5k per year, rising with inflation, over 8 years. That still is more than enough providing your SIPP is not high risk like 100% equities. Another plus point that we didn't know that you will be downsizing and releasing equity in the next 10 years. If you don't want to deplete all your cash savings when markets are down, you could take half your income from cash and half from your SIPP.

I don't quite understand where your £500 per month savings are coming from. If you are able to save that amount, why do you need an extra £9.5k income drawn from your SIPP or cash?

Thanks Audaxer,  I hadn't thought about the 50/50 option (feel a bit thick now!) that would work for me I think, hedge my bets to a certain extent.  As to the £500 savings a month, that's just the savings mentality imprinted on my brain to save for a rainy day.  Drawing down just what I need is quite a difficult shift of mentality I'm struggling with.  

That's good that you like the 50/50 option. If you are planning to draw out £9.5k for annual income, that would be around £792 per month (£396 from your SIPP and £396 from your cash savings). Are you saying that you would then pay £500 of that per month back into your cash savings? If so that is just the same as just drawing out £292 per month from your SIPP and leaving your cash savings alone.

I can understand it is quite hard to shift from a savings mentality, but you would still be in effect saving the £500 per month, as you would only be drawing around £3,500 a year for additional income, rather than £9,500.