Moving investments to cash

safe_hands2

I'm thinking ahead about the process of switching some of my SIPP into cash a few years before starting to spend it. My SIPP purpose is to boost the small pensions I'll get from 60 onwards until 67, when I'll have a liveable income again with full pension and state pension.

I'll still be working when I want to start switching to cash, so can't go into drawdown then as I'll pay tax on the non 25% proportion. Has anyone experience of doing anything similar? I know I can switch investments to cash in my platform, but that means they'll sit doing nothing for a few years and not earning interest.

TadleyBaggie

Even if you are holding everything as cash in your SIPP, if you will still have to drawdown and potentially pay tax as it will be deemed income.

masonic

You'd normally switch those assets you wish to draw down into a money market fund or short dated bond fund. If you're not intending to do this imminently, then that should be ok. While inflation remains very high and interest rates are being rapidly hiked, bonds are likely to lose value, so cash earning nothing could still be preferable. This low risk buffer can be maintained while you draw from your other investments and used as an insurance policy against market crashes while you are drawing down.

safe_hands2

TadleyBaggie said:

Even if you are holding everything as cash in your SIPP, if you will still have to drawdown and potentially pay tax as it will be deemed income.

Thank you, yes I know this. I'm engineering it that what I drawdown from 60 onwards will be largely tax free as I'll top up over 12000 from ISA. But if I drawdown from 57 onwards I'd have to pay tax.

safe_hands2

masonic said:

You'd normally switch those assets you wish to draw down into a money market fund or short dated bond fund. If you're not intending to do this imminently, then that should be ok. While inflation remains very high and interest rates are being rapidly hiked, bonds are likely to lose value, so cash earning nothing could still be preferable. This low risk buffer can be maintained while you draw from your other investments and used as an insurance policy against market crashes while you are drawing down.

Thank you, that's helpful. I hadn't thought about the idea of keeping buffer and drawing from other investments. Now thinking I could always use existing cash savings for this.