SIPP drawdown plan.

skycatcher

I am retired and my DB pension covers all our needs.

My wife is 58 in 4 months time and is currently self employed bringing in roughly £500/month. She is planning on retiring at the end of this financial year.

She has a SIPP worth £62k (in cash with HL getting 3.9% interest) and will get a DB pension of £6k per annum (no TFLS) at age 60. My pension is increased by CPI and hers is also but limited to a max 5%. We are both due to get the max state pension.

She is planning on taking the TFLS from her SIPP this year to use as a travel fund (roughly £15K). The remainder she is planning on taking £500/month starting in April 2025 until her DB starts paying in Oct 2026. She is then intending to reduce her SIPP withdrawl to spread it out till her state pension when she is 67.

Her main reasoning is she doesn't want to have a drop in income at any point by taking too much up front. I can see her logic but was wondering if this is a sensible approach or should she consider other options?

Thanks for reading the above.

dunstonh

She is planning on taking the TFLS from her SIPP this year to use as a travel fund (roughly £15K).

Based on what you have said, a mixture of UFPLS and drawdown would seem a better idea.  Along with a better cash option as 3.9% is too low.   Especially if that is before the platform charge.

cloud_dog

skycatcher said:

She is planning on taking the TFLS from her SIPP this year to use as a travel fund (roughly £15K). The remainder she is planning on taking £500/month starting in April 2025 until her DB starts paying in Oct 2026. She is then intending to reduce her SIPP withdrawl to spread it out till her state pension when she is 67.

Her main reasoning is she doesn't want to have a drop in income at any point by taking too much up front. I can see her logic but was wondering if this is a sensible approach or should she consider other options?

If this was me, I would at least take up to the Personal Allowance (£12570) or £16760 using UFPLS.  This assumes there are no other inheritance tax considerations out there.  She can always reinvest the amount above £6k pa, if she wished, and then draw it once the SIPP pot is exhausted.

FIREDreamer

dunstonh said:

She is planning on taking the TFLS from her SIPP this year to use as a travel fund (roughly £15K).

Based on what you have said, a mixture of UFPLS and drawdown would seem a better idea.  Along with a better cash option as 3.9% is too low.   Especially if that is before the platform charge.

The SIPP is with Hargreaves - it seems to be wholly cash and there is no platform fee on cash so 3.9% is a pretty decent rate really.

cloud_dog

If you put it into a short term money market fund, e.g. Royal London Short Term MMF you'd be getting c. 5.2% before platform charges.