Change of plan?

GunJack

enthusiasticsaver said:

 Our annual income is almost £40k and we only spend about half of that 

If this is the case, can't you rebuild your cash buffer over several years just through income, whilst leaving the investments to regain any recent losses before selling? Just looking at your signature would imply you can do £36k between 22/23/24, so back up around £56k.

Albermarle

We have always had sufficient income for essentials and a few luxuries (holidays) just on DB income (£38k gross) 
Our annual income is almost £40k and we only spend about half of that 

With a regular spend only half of your income, and two state pensions on the way, you will have maybe nearly triple the guaranteed income that you need for everyday living. So in this case I do not think there is any need to worry too much about the size of cash buffers, or selling investments in a downturn.

enthusiasticsaver

Thank you all for your input and we have decided from next year we will start to drawdown as originally planned from our S and S ISAs and SIPPs. That was the original plan and we have to take the view that we saved for this  and although we have a cash buffer and leeway in our monthly budget we do not want it to go too low. There is also the very real possibility that our annual spend will increase over the next few years now we are back to travelling and some possible private health costs coming up. 

We have more than enough invested to see us through the next two years until the first state pension kicks in and we want to help our family and take expensive holidays now.

Just emailed our financial advisor to see the best way of doing this.  Ideally I would like £1k per month so monthly transfers but not sure if that is a cost efficient way of drawing down. 

Albermarle

Just emailed our financial advisor to see the best way of doing this.  Ideally I would like £1k per month so monthly transfers but not sure if that is a cost efficient way of drawing down. 

With the SIPPs, many posters who have no other income, take £12570 pa of taxable income + some tax free cash each year. As £12570 is your personal tax allowance, you actually pay no tax at all and this maximises the use of the personal allowance, which other wise is 'wasted' 

Once the SP's start, they are taxable income, so the scope for drawing from the SIPPs tax free is reduced.

You can of course withdraw from the S&S ISA tax free at any time.

enthusiasticsaver

Albermarle said:

Just emailed our financial advisor to see the best way of doing this.  Ideally I would like £1k per month so monthly transfers but not sure if that is a cost efficient way of drawing down. 

With the SIPPs, many posters who have no other income, take £12570 pa of taxable income + some tax free cash each year. As £12570 is your personal tax allowance, you actually pay no tax at all and this maximises the use of the personal allowance, which other wise is 'wasted' 

Once the SP's start, they are taxable income, so the scope for drawing from the SIPPs tax free is reduced.

You can of course withdraw from the S&S ISA tax free at any time.

I already use most of my personal allowance with DB pensions.  I have also given some of it to DH by way of marriage allowance so our IFA is looking into the best way of drawing it. Taking it from the ISAs is the least problematic but I cannot see a way of avoiding paying tax if we use the SIPPs.