Approaching retirement age - stuff ISA savings into our SIPPs?

nicknameless

I think I know the answer but just wanted to check to see if I am missing anything.  The question is basically whether there should be anything stopping us putting the majority (minus emergency fund) of our non pension wrapped savings into SIPPs prior to ceasing work?  Situation as follows;

Me - 51
Mrs me - 52
Retirement age - 55
DB pensions - me at 60 approx. £19k and mrs me approx £2750 - further DB pensions (approx 5k each) kick in at 67 and 65 respectively
Current SIPPs - me approx. £85k and mrs me £155k (still paying into these - total contributions approx £6k and £12K per annum respectively).
ISA / cash - approx. £100k at the moment most in S&S ISAs with £20k cash emergency fund a part of that.
Neither of us will be higher rate taxpayers at any point in retirement and mrs me wouldn't hit basic rate until state pension kicks in.

So the question is should we squeeze the last out of pension tax relief by moving as much of the ISA / cash savings into (mostly mrs me's) SIPP whilst we still have the taxable pay to do so?  Looking at a rough drawdown plan actually mrs me would still be paying basic rate on the majority of this additional money but we would gain with the 25% tax free.

Anything we've missed?  Many thanks in advance.

ussdave

It sounds like a solid plan to me.  You've not mentioned MrsM's salary but from the other things you've said you clearly understand that there will be a limit on pension contributions based on that (and her other contributions).

Another common one to point out is trying to balance retirement incomes, but again you're already on that.

Someone else more experienced may spot something I've missed though

What is the planned retirement age for both of you?

Albermarle

You do not mention the current tax rate you are paying. For a 20% taxpayer, the tax benefit of a pension is minimum 6.25%. Can be more if you can withdraw some of the pension below your personal tax allowance.
If you are a higher rate taxpayer, your plan is almost a no brainer, as the tax benefit is much higher.

One note of caution is that 55 is pretty early to retire, and although you look quite well set up, you may be better with a bit more of a buffer/safety net, that working even just a couple more years would give. In any case do your calculations carefully before taking the leap. 

nicknameless

ussdave said:

It sounds like a solid plan to me.  You've not mentioned MrsM's salary but from the other things you've said you clearly understand that there will be a limit on pension contributions based on that (and her other contributions).

Another common one to point out is trying to balance retirement incomes, but again you're already on that.

Someone else more experienced may spot something I've missed though

What is the planned retirement age for both of you?

She's currently on just over £32K and so we could get most of the excess in there if starting now.

Drawdown plan in excel is to try to be as tax efficient as possible.

Currently looking at when I turn 55 of or end of that financial year.

nicknameless

Albermarle said:

You do not mention the current tax rate you are paying. For a 20% taxpayer, the tax benefit of a pension is minimum 6.25%. Can be more if you can withdraw some of the pension below your personal tax allowance.
If you are a higher rate taxpayer, your plan is almost a no brainer, as the tax benefit is much higher.

One note of caution is that 55 is pretty early to retire, and although you look quite well set up, you may be better with a bit more of a buffer/safety net, that working even just a couple more years would give. In any case do your calculations carefully before taking the leap. 

I am higher rate atm and all my higher rate already goes into the SIPP, so this would be additional for my partner mainly.   My partner is a basic rate taxpayer.

I hear what you are saying re 55, especially with inflation as it is atm.  There is some leeway in the spend so if we did jump at that time I would hope we would have flexibility.  We have just mortgaged till 75 though - but with leeway in the plan for rates to rise to approx. 8% after initial term and average that.  If they turn out lower we will have more leeway.  If we return to 35-40 years past we would not lol!

Edited to add - we also have no dependents and haven't factored a possible / probably (?) inheritance of probably around £100k into the plan.  Also had been thinking about lifetime mortgage some point down the line to maximise illiquid asset spend - although that is just a tentative thought atm. 

Pat38493

You don't give a lot of info about your spending requirements in retirement and what about State Pension - if  you have full SP entitlement in addition to what you have mentioned above, you are looking at circa 50K real terms guaranteed income by the time you are 67?

Then let's say you have approx 400-420K (SIPP plus savings plus future contributions) for bridging.  

I am making assumptions here which may be wrong, but if I assumed that you want to bridge that income to maintain your spending at what it will be when you are both 67, I would also wonder about Albermarle's comments that your plan is a bit shaky if you retire at 55, unless you are sure that your spending requirements are much lower i.e. you might run out of money between 55 and 65.

Have you tried putting your figures into tools like cfiresim, Timeline or some of the other spreadsheet models available on the internet?

As regard the actual question you are asking - yes makes sense to me

leosayer

I'm a similar age to you and did the same about 6/7 years ago. Very glad I did.

The main things to note are:
- Make sure you won't need the money until age 55
- Make your contributions via salary sacrifice if possible
- Keep an eye on the annual allowance and lifetime allowance
- Consider whether you could take your DB pensions early

NedS

Will you both be able to access your SIPPs at 55, or will you be affected by the rise to age 57? If so, you may have to work on until 57 or keep some assets accessible at 55 to cover the additional two years.

Audaxer

I agree you should put as much into SIPPs in the next few years as you can. However once your both turn retire at 55, I would consider drawing down as much as possible from your SIPPs to fully use your personal tax allowances until your DB and SPs kick in.

Even if you don't plan to spend that much I would still drawdown up to around £16.5k each (roughly the amount up to personal tax allowances including 25% tax free) out of each SIPP and reinvest any excess in S&S ISAs. That way you would be able to get quite a lot out of your SIPPs without paying tax until your DB kicks in at 60. Mrs me should be able to get more out of her SIPP free of tax until her SP kicks in.

nicknameless

Pat38493 said:

You don't give a lot of info about your spending requirements in retirement and what about State Pension - if  you have full SP entitlement in addition to what you have mentioned above, you are looking at circa 50K real terms guaranteed income by the time you are 67?

Then let's say you have approx 400-420K (SIPP plus savings plus future contributions) for bridging.  

I am making assumptions here which may be wrong, but if I assumed that you want to bridge that income to maintain your spending at what it will be when you are both 67, I would also wonder about Albermarle's comments that your plan is a bit shaky if you retire at 55, unless you are sure that your spending requirements are much lower i.e. you might run out of money between 55 and 65.

Have you tried putting your figures into tools like cfiresim, Timeline or some of the other spreadsheet models available on the internet?

As regard the actual question you are asking - yes makes sense to me

Perhaps should have said I have a reasonable homemade spreadsheet modelling drawdown of liquid assets and have checked this against an independent tool.  We don't run out of money at any point and have some flexibility in our spending if we need to adjust due to investment returns along the way.  Of course I'll be very careful to recalculate this before making any leap and may even pay an IFA to check my calculations before doing so.  That's why I didn't post numbers but for reference we would be drawing approx. £50k until mortgage is done with and then much lower post 75.

p.s. we will both have full state pension and DB income on top of that of approx £32k from 67 (some of this starting beforehand - see OP).

Many thanks.

nicknameless

NedS said:

Will you both be able to access your SIPPs at 55, or will you be affected by the rise to age 57? If so, you may have to work on until 57 or keep some assets accessible at 55 to cover the additional two years.

both from 55 (I am 51 and my partner 52 now).