What asset allocation for SIPP to be depleted within 6 years?

leosayer

My wife has a Vanguard SIPP currently valued at £81k which she plans to draw from when she turns 55 in mid 2025 ie.18 months from now.

The SIPP was created for tax efficiency reasons to utilise her personal allowance (by taking £16,760 per year) from age 55 to 59 before her LGPS pension starts. 

We have other savings so are not dependent on this income but it does form part of our planning.
Currently it's invested as follows:

- £27k (34%) in Vanguard Short-term Bond fund

- £54k (66%) in Vanguard FTSE Global All-Cap Index

However, in the event of an equity market crash, she could start the LGPS pension earlier than age 60 in order to avoid locking any investment losses.

I'd be grateful for opinion on what other factors should we consider and which allocation would be appropriate?
My initial feeling is that 50/50 is better so that we have at least 2 years of income in money market and or short term bond fund. 

michaels

IF you have isa headroom then I guess you might as well withdraw as much as you can tax free every year and put any you don't need to spend into an isa instead.

For the stuff that will be in for ore than a year I might be tempted to put it into index linked gilts with durations matching the withdrawal points to avoid inflation and volatility risk.

QrizB

michaels said:

For the stuff that will be in for ore than a year I might be tempted to put it into index linked gilts with durations matching the withdrawal points to avoid inflation and volatility risk.

I was going to suggest gilts too, ones you'd hold to maturity.

leosayer

 Thanks, gilts make a lot of sense. Wish I'd thought of that when yields were higher!

That will require a platform change but that shouldn't be too difficult if we do a cash transfer.

Linton

For short term money, cash or close to cash sectors such as  Short Term Money Market.  Avoid equity and long dated gilts otherwise you could end up with  less than you started. 

Audaxer

leosayer said:

My wife has a Vanguard SIPP currently valued at £81k which she plans to draw from when she turns 55 in mid 2025 ie.18 months from now.

The SIPP was created for tax efficiency reasons to utilise her personal allowance (by taking £16,760 per year) from age 55 to 59 before her LGPS pension starts. 

We have other savings so are not dependent on this income but it does form part of our planning.
Currently it's invested as follows:

- £27k (34%) in Vanguard Short-term Bond fund

- £54k (66%) in Vanguard FTSE Global All-Cap Index

However, in the event of an equity market crash, she could start the LGPS pension earlier than age 60 in order to avoid locking any investment losses.

I'd be grateful for opinion on what other factors should we consider and which allocation would be appropriate?
My initial feeling is that 50/50 is better so that we have at least 2 years of income in money market and or short term bond fund. 

As you are not dependent on it for income, she could withdraw the £16,760 each year by UFPLS and immediately reinvest it into the same funds in an S&S ISA.