Moving to cash

Linton

eastcorkram said:

Bostonerimus1 said:

eastcorkram said:

dunstonh said:

Like everyone else, I've no idea how it's going to perform in the future. 

And that is the normal for everyone at all times.

If I sell the funds, and just leave it as cash, then I'll know where I am. Just leave it in the SIPP, but withdraw £4k per year, until it's all gone. Maybe increasing the drawdown each year by a couple of percent. 

Pretty much guaranteeing you will run out of money and statistically likely to be the worst option.

Assuming I'd be absolutely fine, knowing that the money would run out in say 20, 25 years or whatever, (which I am),  is this a reasonable idea? 

No. Its daft.   You are planning to run out when you still have a good chance of being alive.

You may as well buy an annuity as that will give you more and not run out.

I know what you're saying, but in 30 years time, I'll be 95. If the value of it has halved, I'll probably not be too bothered. However, in theory , left as it currently is, it could halve tomorrow. 

Why would it halve tomorrow?  Are you invested that high risk?     Risk is not on/off.  It is a sliding scale.   Looking at investment risk at either end of the scale but nothing in between is not a good idea.

You should either buy an annuity or bucket your portfolio to reflect your drawdown plan.  Going 100% into cash is a really bad idea.

Thanks for that. You need to bear in mind though , I won't run out of money. The money in that sipp will run out. Big difference.

I'll look at an annuity, but can't help initially thinking this. 
 
My daft plan, that money runs out when I'm in my 90s. My other pension income carries on.

My daft plan, if I die at say 75, I'll have taken out £40 odd thousand, the balance would go to whoever was on the EOW form. 
 
With annuity, if I die at 75, that's it. 
 
Substitute any age into that, and the annuity only becomes better as I get well on towards being a hundred. 

I do though, like how simple an annuity would be once set up! 

An annuity isn't an investment, it's insurance that guarantees an income for life from the returns the insurance company makes on your money and also from the money of people who die before you. I think you need to do some reading about investing and income generation as your idea of going all cash is a really big mistake. I would probably used part of your pot to buy an annuity and then invest what remains aggressively in a global equity index fund because once you have secured your $4k/year for life (either flat of RPI) you don't need what's left and can take some risk in the hope of good gains.

Then if it's that simple, show me in simple terms, how big a mistake it would be.

How old would I have to be to benefit financially, from the annuity route?

For someone aged 65 with no long term health issues a fixed rate annuity costing £110000 with no spouse benefit or guarantee period would pay out about  £7900/year so would break even (ie paid you £110000) at 65 + 110000/7900 = about 79 years old.

See https://www.hl.co.uk/retirement/annuities/best-buy-rates.  The information there should give you enouugh info to model a wide range of scenarios.

Triumph13

How old would I have to be to benefit financially, from the annuity route?

Based on what you've said, you would benefit immediately.  You've said that you just want to be able to take £4k a year, ideally increasing with inflation.  If you go the single life, no guarantee, RPI indexed annuity route you can guarantee that for life.  The immediate benefit though, is that you suddenly have more than £20k left over to do with what you will, which you didn't have under your plan because it was saved for your future withdrawals.  So in the only way that matters you are £20k better off - plus having your £4k guaranteed come what may.