Semi-retirement SIPP withdrawals

Bianchiintenso

It seems retirement for me isn’t going to be an on off switch and due to work/client commitments I will have to let it wind down in a way that doesn’t cause issues to other people. Over the last year or so I have not chased or looked for work and it has dwindled to a satisfactory level that means no stress or hassle. 

My work will still bring in a basic income for a year or two but I will probably need to supplement it with some withdrawals from my SIPP the amount of which could vary quiet a lot from zero to a full months living wage.

The question is what would be the best withdrawal strategy? Have a lump sum in cash within the SIPP and drawdown as cash as and when needed? Tax wise, is there a better time of year to do this and should the initial withdrawal be small so as not to pay too much emergency tax? Or is there a better strategy for these circumstances?

Dazed_and_C0nfused

Bianchiintenso said:

It seems retirement for me isn’t going to be an on off switch and due to work/client commitments I will have to let it wind down in a way that doesn’t cause issues to other people. Over the last year or so I have not chased or looked for work and it has dwindled to a satisfactory level that means no stress or hassle. 

My work will still bring in a basic income for a year or two but I will probably need to supplement it with some withdrawals from my SIPP the amount of which could vary quiet a lot from zero to a full months living wage.

The question is what would be the best withdrawal strategy? Have a lump sum in cash within the SIPP and drawdown as cash as and when needed? Tax wise, is there a better time of year to do this and should the initial withdrawal be small so as not to pay too much emergency tax? Or is there a better strategy for these circumstances?

Tax wise do you ever expect to take more than £4,189 (of taxable income) at a time or will it be smaller amounts?

Ultimately any tax will be sorted when you complete your Self Assessment return but there are ways to minimise tax up front and pay it via Self Assessment if you really want.

Bianchiintenso

Dazed_and_C0nfused said:

Bianchiintenso said:

It seems retirement for me isn’t going to be an on off switch and due to work/client commitments I will have to let it wind down in a way that doesn’t cause issues to other people. Over the last year or so I have not chased or looked for work and it has dwindled to a satisfactory level that means no stress or hassle. 

My work will still bring in a basic income for a year or two but I will probably need to supplement it with some withdrawals from my SIPP the amount of which could vary quiet a lot from zero to a full months living wage.

The question is what would be the best withdrawal strategy? Have a lump sum in cash within the SIPP and drawdown as cash as and when needed? Tax wise, is there a better time of year to do this and should the initial withdrawal be small so as not to pay too much emergency tax? Or is there a better strategy for these circumstances?

Tax wise do you ever expect to take more than £4,189 (of taxable income) at a time or will it be smaller amounts?

Ultimately any tax will be sorted when you complete your Self Assessment return but there are ways to minimise tax up front and pay it via Self Assessment if you really want.

Thanks DaCO, it would be a maximum of £2,000 per withdrawal, but I would only know towards the end of each month if I needed to do that, So If I just withdrew as and when needed and filled it in on my self assessment that would suffice?

Dazed_and_C0nfused

Bianchiintenso said:

Dazed_and_C0nfused said:

Bianchiintenso said:

It seems retirement for me isn’t going to be an on off switch and due to work/client commitments I will have to let it wind down in a way that doesn’t cause issues to other people. Over the last year or so I have not chased or looked for work and it has dwindled to a satisfactory level that means no stress or hassle. 

My work will still bring in a basic income for a year or two but I will probably need to supplement it with some withdrawals from my SIPP the amount of which could vary quiet a lot from zero to a full months living wage.

The question is what would be the best withdrawal strategy? Have a lump sum in cash within the SIPP and drawdown as cash as and when needed? Tax wise, is there a better time of year to do this and should the initial withdrawal be small so as not to pay too much emergency tax? Or is there a better strategy for these circumstances?

Tax wise do you ever expect to take more than £4,189 (of taxable income) at a time or will it be smaller amounts?

Ultimately any tax will be sorted when you complete your Self Assessment return but there are ways to minimise tax up front and pay it via Self Assessment if you really want.

Thanks DaCO, it would be a maximum of £2,000 per withdrawal, but I would only know towards the end of each month if I needed to do that, So If I just withdrew as and when needed and filled it in on my self assessment that would suffice?

Yes.  The emergency tax code would be on the first payment so on £2,000 of taxable pension income you would pay £190 in tax.

Depending on what other income you have you might owe more or be due some back but ultimately it all comes out on the wash via your Self Assessment return.

Bianchiintenso

Many thanks DaCO

Albermarle

Bianchiintenso said:

It seems retirement for me isn’t going to be an on off switch and due to work/client commitments I will have to let it wind down in a way that doesn’t cause issues to other people. Over the last year or so I have not chased or looked for work and it has dwindled to a satisfactory level that means no stress or hassle. 

My work will still bring in a basic income for a year or two but I will probably need to supplement it with some withdrawals from my SIPP the amount of which could vary quiet a lot from zero to a full months living wage.

The question is what would be the best withdrawal strategy? Have a lump sum in cash within the SIPP and drawdown as cash as and when needed? Tax wise, is there a better time of year to do this and should the initial withdrawal be small so as not to pay too much emergency tax? Or is there a better strategy for these circumstances?

Remember 25% of the pot can be withdrawn tax free ( unless you have taken it already)
A modern SIPP will allow you to take the tax free part in stages, or in combination with taxable income.
What you can not do is take taxable income without taking some tax free at the same time ( or earlier).
You will need to talk to your provider about what exactly you want to do when you want to withdraw.

Bianchiintenso

Albermarle said:

Bianchiintenso said:

It seems retirement for me isn’t going to be an on off switch and due to work/client commitments I will have to let it wind down in a way that doesn’t cause issues to other people. Over the last year or so I have not chased or looked for work and it has dwindled to a satisfactory level that means no stress or hassle. 

My work will still bring in a basic income for a year or two but I will probably need to supplement it with some withdrawals from my SIPP the amount of which could vary quiet a lot from zero to a full months living wage.

The question is what would be the best withdrawal strategy? Have a lump sum in cash within the SIPP and drawdown as cash as and when needed? Tax wise, is there a better time of year to do this and should the initial withdrawal be small so as not to pay too much emergency tax? Or is there a better strategy for these circumstances?

Remember 25% of the pot can be withdrawn tax free ( unless you have taken it already)
A modern SIPP will allow you to take the tax free part in stages, or in combination with taxable income.
What you can not do is take taxable income without taking some tax free at the same time ( or earlier).
You will need to talk to your provider about what exactly you want to do when you want to withdraw.

Thanks , yes I will take as part of each payment, have no plans to take full tax free lump sum

Roger175

Bianchiintenso
You sound like you are in a very similar position to me. I am in the process of retiring, but as a self employed consultant, I have various existing contracts which I have to honour before I can finally disappear. I have however stopped taking on any new work and I reckon I'll be fully retired by about next Autumn, although it is already down to about half time and will gradually reduce further until I finish the last jobs.
In many ways it's quite a nice way to retire, ie a slow wind-down, although I hate the fact that I am still at the beck and call of clients who expect phone calls and emails to be answered promptly and of course they don't know which days I'm not working, so it can be a bit of a pain.

In our case we are holding a substantial amount of cash outside my SIPP, so we won't need to access the SIPP funds for many years - this came about as a result of selling a rental property - this wasn't planned, so we are limited as to how much of this money we can now put into my pension and ISAs - we are getting it in as fast as we can, but my lower earnings this year and the ISA limit, means we will be many years before we can get the cash down to a sensible amount. In the meantime we've put a lot into 1, 2 & 3 year fixed rate savings and can only thank our lucky stars that we are at least getting a good rate at the moment. 

Good luck with the early retirement. 

Bianchiintenso

Roger175 said:

Bianchiintenso
You sound like you are in a very similar position to me. I am in the process of retiring, but as a self employed consultant, I have various existing contracts which I have to honour before I can finally disappear. I have however stopped taking on any new work and I reckon I'll be fully retired by about next Autumn, although it is already down to about half time and will gradually reduce further until I finish the last jobs.
In many ways it's quite a nice way to retire, ie a slow wind-down, although I hate the fact that I am still at the beck and call of clients who expect phone calls and emails to be answered promptly and of course they don't know which days I'm not working, so it can be a bit of a pain.

In our case we are holding a substantial amount of cash outside my SIPP, so we won't need to access the SIPP funds for many years - this came about as a result of selling a rental property - this wasn't planned, so we are limited as to how much of this money we can now put into my pension and ISAs - we are getting it in as fast as we can, but my lower earnings this year and the ISA limit, means we will be many years before we can get the cash down to a sensible amount. In the meantime we've put a lot into 1, 2 & 3 year fixed rate savings and can only thank our lucky stars that we are at least getting a good rate at the moment. 

Good luck with the early retirement. 

Very similar fortunate position Roger, like you say am still at the beck and call, in fact still putting some work together as I type! Next November the State Pension kicks in and then there really will be no excuses (we'll see!)
As a lifelong motor racing fan I have a little sim racing project I'm planning to have a go at in the hope I'll spend less time working!
Good luck with your semi early retirement as well