Flexible Drawdown Strategies

Moonwolf

I'm currently thinking about more complex strategies for part crystalizing funds and drawing down the tax free and taxable elements at different times. I haven't found a good google question that finds me what I am looking for.

I'm currently 57. I have 3 DB pensions which between them kick in between 60 and 65 and currently should give me about £20,000 a year.  I qualify for full state pension ("You can't improve your pension anymore") so by 67 I will have a guaranteed index linked pension income of around £30,000 a year.  My partner is 15 years older than me and already retired and has pensions of about £17-18k a year but I'm mostly ignoring that in my calculations as they pay £300 a month into the joint account (utilities, home maintenance, basic shopping etc), I pay £1,000 a month which will drop to £700 when the mortgage is paid off. The basics are covered, I have more money left over than they do but mostly pay for holidays and nights out. (it is more complicated than that but we have been together 34 years and it works for us; I'd prefer not to get bogged down on if this strategy is sensible)

I budget household out of the joint account and hobbies, cars, holidays and going out from mine.

I have a DC pot of £300,000 (this is with Standard Life - Phoenix at the moment)

I have budgets based on current spend, and itemised future spend.  A comfortable budget of 30,000 and a big budget of £36,000 which has more holidays etc.  As my comfortable budget is covered by my pensions, and I have no-one to leave the money to apart from my older partner,  I'm not too worried about running out of money and don't plan to do safe withdrawal.  This is particularly true where I don't expect to be taking a lot of holidays when I am 90 and my partner is 105.  If we need care, particularly if I am on my own and need care, we can use the house. 

I have a spreadsheet that assumes I will spend about 50% of my DC pot on bridging to my pensions then the remaining 50% should give me about £6,000 a year and run out in my late 80s; depending what figure I use for pot growth above inflation, at 2.5% I just reach 90.  It changes obviously depending on if I retire at 58, 59 or 60. 

The spreadsheet is simplistic as it assumes 25% drawn down each year is tax free and the remainder taxed at basic rate.  This is fine but, for example, my budget also has £300 a month for a new car every 5 years.  Clearly not drawing down that money until I trade in my current car allows it to grow but drawing down £18,000 to add to the trade in value of my current car might push me into higher rate tax.  I can work around this by part crystallizing and drawing down tax free cash for large purchases.

So what sort of strategies are out there and do they make a big difference to how long the money lasts.  How much tax flexibility do I have if my DB pensions take my tax allowance. Is it best to suck it and see or are there well described strategies I can learn from.  Dows anyone have examples of how easy different platforms make it to draw down flexibly choosing what is taxable and what is tax free, and/or leaving crystallised funds in the portfolio.  Are some easier than others. 

squirrelpie

I suspect that if you just suck it and see you will do OK. You seem to have covered most bases and have enough capital to see you through, given your base of DB pensions. (Note that when your state pension starts paying, it will probably take all of your personal allowance so you'll pay BR on all other income - obviously numbers can change in budgets etc). Keep some money in easy access accounts - ISA if you can or otherwise banks etc. We recently had to replace our car unexpectedly, which we fortunately managed without needing to draw down extra from my SIPP.

LHW99

Dows anyone have examples of how easy different platforms make it to draw down flexibly choosing what is taxable and what is tax free, and/or leaving crystallised funds in the portfolio.  Are some easier than others.

Just on this point, it will depend on the platform. I believe HL keep crystallised and uncrystallised pots separate, whereas other (DIY) platforms keep it as one, but mark the % that has been crystallised. If you use an IFA, they presumably keep track on it for you.

Moonwolf

LHW99 said:

Just on this point, it will depend on the platform. I believe HL keep crystallised and uncrystallised pots separate, whereas other (DIY) platforms keep it as one, but mark the % that has been crystallised. If you use an IFA, they presumably keep track on it for you.

At the moment I am not using an IFA.  I have been able to sort out quite a lot myself and my basics are covered.  I keep wondering if the incremental benefit is worth the cost because an IFA will have to look at everything including the things I am happy about.  An IFA might help me decide I can retire, I'm just in the edgy area where is isn't quite enough yet, but will I still be saying that at 63 and regret not going earlier.

Moonwolf

squirrelpie said:

I suspect that if you just suck it and see you will do OK. You seem to have covered most bases and have enough capital to see you through, given your base of DB pensions. (Note that when your state pension starts paying, it will probably take all of your personal allowance so you'll pay BR on all other income - obviously numbers can change in budgets etc). Keep some money in easy access accounts - ISA if you can or otherwise banks etc. We recently had to replace our car unexpectedly, which we fortunately managed without needing to draw down extra from my SIPP.

Yes, I have £50,000 in instant or quick access cash and ISAs and hope to keep that float.  We also have £10,000 in the joint account which should cover emergency replacement of anything from white goods up to say a new roof.  There is lots of detail I didn't write about which I have planned for as well, what happens if/when one of us dies first, does the other have enough to live on?

squirrelpie

The only thing I can think to add is that £1000 /month seems rather high for regular outgoings but maybe I'm out of touch. Oh and whether and when you retire also depends a lot on your attitude to your work and your intentions after you retire. Only you can answer those and an IFA can't help you with them. Plan for the worst and hope for the best.

Moonwolf

squirrelpie said:

The only thing I can think to add is that £1000 /month seems rather high for regular outgoings but maybe I'm out of touch. Oh and whether and when you retire also depends a lot on your attitude to your work and your intentions after you retire. Only you can answer those and an IFA can't help you with them. Plan for the worst and hope for the best.

That is based on our current spend which is £1,300 a month - £450 (overpaid) mortgage so there is already £150 cushion. 

It includes gas and electricity £300 a month at the moment because the house is a 1929 built single skin semi so the insulation is poor, I'm looking at external thermal cladding but it is expensive so the payback period is quite long and I need to be confident it will last.

Approx, £80 a week food shopping, which is high for two but we like good cheese and wine. TV licence, telephone, TV and broadband bundle, Netflix, home and travel insurance and £100 a month into the joint emergency savings account.

We also pay National Trust out of it and a couple of other subscriptions.

There is space to make savings, particularly on the shopping and the subscriptions but as we can afford them and use them

Albermarle

LHW99 said:

Dows anyone have examples of how easy different platforms make it to draw down flexibly choosing what is taxable and what is tax free, and/or leaving crystallised funds in the portfolio.  Are some easier than others.

Just on this point, it will depend on the platform. I believe HL keep crystallised and uncrystallised pots separate, whereas other (DIY) platforms keep it as one, but mark the % that has been crystallised. If you use an IFA, they presumably keep track on it for you.

Fidelity also keep crystallised and uncrystallised pots separate.

DavidT67

LHW99 said:

Dows anyone have examples of how easy different platforms make it to draw down flexibly choosing what is taxable and what is tax free, and/or leaving crystallised funds in the portfolio.  Are some easier than others.

Just on this point, it will depend on the platform. I believe HL keep crystallised and uncrystallised pots separate, whereas other (DIY) platforms keep it as one, but mark the % that has been crystallised. If you use an IFA, they presumably keep track on it for you.

Also HL charge two separate account fees for the SIPP and Drawdown accounts, some other brokers don't. 

Albermarle

Moonwolf said:

LHW99 said:

Just on this point, it will depend on the platform. I believe HL keep crystallised and uncrystallised pots separate, whereas other (DIY) platforms keep it as one, but mark the % that has been crystallised. If you use an IFA, they presumably keep track on it for you.

At the moment I am not using an IFA.  I have been able to sort out quite a lot myself and my basics are covered.  I keep wondering if the incremental benefit is worth the cost because an IFA will have to look at everything including the things I am happy about.  An IFA might help me decide I can retire, I'm just in the edgy area where is isn't quite enough yet, but will I still be saying that at 63 and regret not going earlier.

You may be aware that there are regular threads on here on the subject of ' do I have enough to retire in x years time ?'
Although sometimes the answer is no, the usual answer is ' why are you still working? This one might be of interest.
What made you 'pull the trigger'? — MoneySavingExpert Forum

On the subject of outgoings there are also various threads. Some will spend a bit less than you, and some a bit more. Personally I think £80 for two shopping including some alcohol is rather low, and I would not want to be cutting back especially with food inflation at 15%.

Also as always you have to be careful with figures. Some people seem to have low outgoings but they do not include motoring or holiday costs for example. One guideline is here. Home - PLSA - Retirement Living Standards
You can quibble with some of the figures but it is just a guideline.

Steve_666_

DavidT67 said:

LHW99 said:

Dows anyone have examples of how easy different platforms make it to draw down flexibly choosing what is taxable and what is tax free, and/or leaving crystallised funds in the portfolio.  Are some easier than others.

Just on this point, it will depend on the platform. I believe HL keep crystallised and uncrystallised pots separate, whereas other (DIY) platforms keep it as one, but mark the % that has been crystallised. If you use an IFA, they presumably keep track on it for you.

Also HL charge two separate account fees for the SIPP and Drawdown accounts, some other brokers don't. 

That sucks, UFPLS rules!