Itchy Trigger Finger

Hal17

Thanks Beddie. Yes the thought is to ring fence some of the current fund to cover for market movement. The GP5 fund is around 65% equities. I had not even considered this until reading the post by SouthCoastBoy, so need to give it some thought.

Sarahspangles

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.

I’m planning towards next March, so in early May I moved my ‘minimum’ for 2025/26 into the Royal London MMF, within my SIPP. I don’t see a need to extract a lump sum, I’ve got the usual non-SIPP rainy day accounts if I need them. I’m planning to play it by ear for each subsequent year, but then my budget isn’t that tight that I can’t cope if there’s a rough year, and it’s not too long before my DB pensions commence.

But do what feels right for you - my OH is happier with cash savings, and the priority is a happy retirement.

rudebh0y

katejo said:

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.

When you put it that way , it doesn't start at 65 but yearly forecast figures  gives 65 as normal retirement date. But I guess  I can  ask for  figures  for any year. I definitely need to do this and weigh up options.

Sarahspangles

rudebh0y said:

katejo said:

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.

When you put it that way , it doesn't start at 65 but yearly forecast figures  gives 65 as normal retirement date. But I guess  I can  ask for  figures  for any year. I definitely need to do this and weigh up options.

I used to believe that people who ‘took’ early retirement were ‘penalised’ but I don’t think that’s actually the case, or at least not for all schemes. Some aim to pay out the same amount, just over a different time profile. So what you actually ‘lose’ is the years of potential salary. But in return you get your time back.

There’s also a widespread belief that it’s better to have the cash in the bank, from PCLSs, and that’s also questionable - especially for public sector schemes with poor commutation rates.

My spreadsheet aims to smooth income - from salary or pension - through to State Pension Age so I’m always using up my personal allowance but never straying into unnecessarily paying higher rate tax. I also don’t need to match my current salary, just what I actually spend.

Albermarle

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.

OP, the above in bold is an important point 

In your case money in the SIPP that will be needed to cover the 5 to 7 years before DB and SP kick in, should be in safer/less volatile funds. Currently the Money market funds are pretty safe and paying above inflation, so is a good solution for at least some of this money, but that sweet spot will presumably not last forever.
However as your SIPP is quite large, I presume it is likely that there will be some left for the longer term. This portion should remain invested in the markets, although in exactly what would be your choice.

Linton

You dont gain by delaying taking the TFLS provided you do the same thing with the money both in and out of the SIPP which is the only fair comparison...

Say your investments are earning 5% and you have a pot of £120K with a total TFLS of 25%...

1) So if this year you take out the £30K TFLS and put it in his and hers S&S ISAs in the same investments after one year you have £90K X 1.05 =£94.5K taxable in your SIPP and £30K X 1.05= £31.5 K in your ISAs.

2) If you left the money in your SIPP after 1 year you would have £120K X 1.05=£126 K in your SIPP with £31.5K being available tax free and £94.5K  taxable,  the same as in case (1). Yes you get a larger tax free sum in case 2 but the difference is the same as the investment gain of the early TFLS outside the SIPP.

So what I suggest you do is to:
a) Look at taking your DB pension early to see if the numbers work out.
b) If they dont and you have no other income,  you could put the money you will need in the next 5 years into a safe-ish investment and then withdraw  something like £12570 taxable at 0% + £27430 tax free at the start of the first year and put the £40K into his & hers S&S ISAs in the same investments.  You then live off the money in the ISAs during the year.

The numbers will change over the following years but with a bit of thought you could take a useful part of your £370K out of your SIPP completely tax free.

Marcon

Sarahspangles said:

rudebh0y said:

katejo said:

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.

When you put it that way , it doesn't start at 65 but yearly forecast figures  gives 65 as normal retirement date. But I guess  I can  ask for  figures  for any year. I definitely need to do this and weigh up options.

I used to believe that people who ‘took’ early retirement were ‘penalised’ but I don’t think that’s actually the case, or at least not for all schemes. Some aim to pay out the same amount, just over a different time profile. 

It was, and still is, common to refer to the early retirement reduction as a 'penalty'. That ignores the fact that the pension is being paid sooner and for longer than if you accessed your DB pension at the scheme's normal retirement date. Reduction factors are reviewed regularly and the objective is to be 'cost neutral' over the member's whole period of retirement. Clearly they rarely are, so it's more 'best guesstimate' by the actuary than anything more precise - but whether your get more or less by the time you die, it's a bit late to complain!

Sarahspangles

Marcon said:

Sarahspangles said:

I used to believe that people who ‘took’ early retirement were ‘penalised’ but I don’t think that’s actually the case, or at least not for all schemes. Some aim to pay out the same amount, just over a different time profile. 

It was, and still is, common to refer to the early retirement reduction as a 'penalty'. That ignores the fact that the pension is being paid sooner and for longer than if you accessed your DB pension at the scheme's normal retirement date. Reduction factors are reviewed regularly and the objective is to be 'cost neutral' over the member's whole period of retirement. Clearly they rarely are, so it's more 'best guesstimate' by the actuary than anything more precise - but whether your get more or less by the time you die, it's a bit late to complain!

The first part of my career was in Local Govt and at that point some people were being released through early retirement without reduction. The department had to pay ‘strain costs’ to enable this. By the time I was a manager that regime had ended, but my budget still had to cover the strain costs. I have a memory of the prospective retirees muttering in corners about ‘six and two thirds’ which must have been the deal you aimed to get… I still sometimes say ‘six and two thirds’ when I mean ‘six of one and half a dozen of the other’. In fact if I keep that up they may let me go…..

Marcon

Sarahspangles said:

Marcon said:

Sarahspangles said:

I used to believe that people who ‘took’ early retirement were ‘penalised’ but I don’t think that’s actually the case, or at least not for all schemes. Some aim to pay out the same amount, just over a different time profile. 

It was, and still is, common to refer to the early retirement reduction as a 'penalty'. That ignores the fact that the pension is being paid sooner and for longer than if you accessed your DB pension at the scheme's normal retirement date. Reduction factors are reviewed regularly and the objective is to be 'cost neutral' over the member's whole period of retirement. Clearly they rarely are, so it's more 'best guesstimate' by the actuary than anything more precise - but whether your get more or less by the time you die, it's a bit late to complain!

The first part of my career was in Local Govt and at that point some people were being released through early retirement without reduction. The department had to pay ‘strain costs’ to enable this. By the time I was a manager that regime had ended, but my budget still had to cover the strain costs. I have a memory of the prospective retirees muttering in corners about ‘six and two thirds’ which must have been the deal you aimed to get… I still sometimes say ‘six and two thirds’ when I mean ‘six of one and half a dozen of the other’. In fact if I keep that up they may let me go…..

The cost of unreduced early retirement can be eye watering - even more so if it is on grounds of ill health retirement and someone gets both an unreduced pension and the pension is based on the service they would have completed had they stayed in service until the scheme's normal retirement age. Think of a number and add at least one nought - probably two!

pterri

My trigger finger is trembling… I was planning on going this year at the earliest but a kitchen fire (not a write off but needs replacing, insurance doesn’t cover it) means that another year is needed so I’m not using savings. The kitchen needed doing in the next few years so probably better off doing now any way. July next year, 57. I’m gone! Can withdraw my DB at 60. If I defer it increases at 8% a year on top of RPI (the RPI increase is limited to 5%). I don’t have to make a decision about that now, I’ll have to do the sums.