Itchy Trigger Finger

rudebh0y

I plan to reitre in May 2025 when I will be 59. I have a DB pension that commences at age 65 and also have a SIPP with current value £370k. This SIPP will allow me to retire and be stop gap until DB and then State pension kick in .  I am starting to get a little nervous that the value in my SIPP  may tank (probably irrational but could happen) before next May and hence scupper my retirement plans and perhaps forcing me to postpone it.  One thing I am considering is taking full 25% tax free now so 92.5K and have about three years living money guaranteed. So if market was to tumble in next 10 months I could live off that.  But the popular advice is not to take full lump sum as you most likely lose out in tax free cash in long run which I understand and agree with.  So one hand I guarantee I can retire next May but other hand I'm losing money in long run.

Just wanting people thoughts on what they would do? Or is there anything else I may have missed.

cloud_dog

I (we) are in a very similar boat, having DC pots to support early retirement and DB/SPs (predominantly) for later, with us stopping December this year and drawing from April 25.

For the money required to support retirement prior to SP age a reasonable proportion of the money has been moved into short term money market funds (CSH2 / Royal London Short Term Money Market Fund), and I was toying with moving some of this in to 2028 / 2029 gilts (but I think I may have missed the boat on that). 

Marcon

rudebh0y said:

I plan to reitre in May 2025 when I will be 59. I have a DB pension that commences at age 65 and also have a SIPP with current value £370k. This SIPP will allow me to retire and be stop gap until DB and then State pension kick in .  I am starting to get a little nervous that the value in my SIPP  may tank (probably irrational but could happen) before next May and hence scupper my retirement plans and perhaps forcing me to postpone it.  One thing I am considering is taking full 25% tax free now so 92.5K and have about three years living money guaranteed. So if market was to tumble in next 10 months I could live off that.  But the popular advice is not to take full lump sum as you most likely lose out in tax free cash in long run which I understand and agree with.  So one hand I guarantee I can retire next May but other hand I'm losing money in long run.

Just wanting people thoughts on what they would do? Or is there anything else I may have missed.

If you take the money out of the tax-favoured environment of a SIPP, where would you invest it? There's only so much you can put in an ISA each year.

If you do take the money out of your SIPP, you'd presumably be looking at some sort of deposit fund to ensure the value doesn't drop.

Mightn't a better alternative be to put a good slug of your SIPP into different and less volatile funds than those in which you are currently invested? Have you checked to see what your SIPP provider offers - might be pretty close to exactly where you'd invest if you withdrew the cash...and you'd still have the tax advantages/flexibility of the money still being in your SIPP until you need to access it.

NoMore

Just move 3 years worth of expenses into less volatile assets within the pension, don't see the need to take all of the tax free cash to achieve your objective.

Maybe look at the risk/volatility of your entire portfolio as well

SouthCoastBoy

I plan to retire at 60 (early next year) and I have moved seven years of £16750 plus a little more to allow for potential tax band increases (i live in hope) into the Royal London Short Term Money Markey fund.

The rest of the money required will come out of cash savings. This has meant I can ignore short term volatility in the equity markets.

Hal17

This is an interesting thread for me.

Turning 70 next month and have no current need to draw from my Royal London GP5 fund. However, I have been thinking of perhaps taking £10K/£20K per year for the next 5 years to use as Bucket List money whilst still in generally good health or pay for family holidays or treat the grandchildren. Any money left over each year could be put into a cash ISA.

Having read the replies above about Royal London Short Term Money Market Fund, I was wondering if this would be a good option for me in light of these future plans. Sorry I didn't mean to distract from the OP original question. 

leosayer

Why note take your DB pension 6 years early in order to reduce the reliance on your SIPP? It will be reduced but you'll get an extra 6 years of guaranteed income.

In any case, taking tax free cash from your SIPP is not the answer. The key is ensuring your SIPP is invested in funds that are suitable for your time horizon and income needs.

rudebh0y

  So yeah I would be maxing out cash ISAs with my spouse  with  the  92.5k so 40k now and 40 K April.   Seems like moving invested funds into safer areas is way to go.  I think it is already in lower risk stocks as it moved as I was approaching my target retirement age but I need to  out what options I have. I will ask for some early DB payment quotes also and go from there.  Thanks for all the replies guys much appreciated.

eastcorkram

leosayer said:

Why note take your DB pension 6 years early in order to reduce the reliance on your SIPP? It will be reduced but you'll get an extra 6 years of guaranteed income.

In any case, taking tax free cash from your SIPP is not the answer. The key is ensuring your SIPP is invested in funds that are suitable for your time horizon and income needs.

Are you saying that using tax free cash from a SIPP, while waiting for DB and state pension to kick in, is not a good use for a TFLS? If so, what would be a good use of it??

Beddie

Hal17 said:

This is an interesting thread for me.

Turning 70 next month and have no current need to draw from my Royal London GP5 fund. However, I have been thinking of perhaps taking £10K/£20K per year for the next 5 years to use as Bucket List money whilst still in generally good health or pay for family holidays or treat the grandchildren. Any money left over each year could be put into a cash ISA.

Having read the replies above about Royal London Short Term Money Market Fund, I was wondering if this would be a good option for me in light of these future plans. Sorry I didn't mean to distract from the OP original question. 

I think that's an excellent idea - take the £20k each year and enjoy it, spend it on family etc. 

The Royal London Money Market fund is low risk and stable, but I'm not sure why you need that in terms of annual withdrawals. Is it to "ring fence" some of the money before you withdraw it? If so, seems sensible enough.

katejo

rudebh0y said:

I plan to reitre in May 2025 when I will be 59. I have a DB pension that commences at age 65 and also have a SIPP with current value £370k. This SIPP will allow me to retire and be stop gap until DB and then State pension kick in .  I am starting to get a little nervous that the value in my SIPP  may tank (probably irrational but could happen) before next May and hence scupper my retirement plans and perhaps forcing me to postpone it.  One thing I am considering is taking full 25% tax free now so 92.5K and have about three years living money guaranteed. So if market was to tumble in next 10 months I could live off that.  But the popular advice is not to take full lump sum as you most likely lose out in tax free cash in long run which I understand and agree with.  So one hand I guarantee I can retire next May but other hand I'm losing money in long run.

Just wanting people thoughts on what they would do? Or is there anything else I may have missed.

Slightly surprised that your DB pension starts at 65. I am 61 and will have access to the majority of mine by 65 but small  parts of it won't be available in full if I retire before 66/67. My official retirement date is in Feb 2029.