Take out annually or Monthly from SIPP

GazzaBloom

I retire at the end of this year and will commence drawdown from April 2025 in the new tax year. I plan to determine and set the amount I will drawdown for the forward 12 months as a combination of TFLS and taxable money based on our budgeted forward annual expenses. I will set the taxable amount to keep within my personal income tax allowance and take this monthly and take the rest as a one off TFLS payment up front. The monthly ‘taxable’ drawdown amount will be held as cash within the drawdown account.

Rinse and repeat annually until all money is crystallised and TFLS consumed and therefore ongoing future drawdown is taxable. We have some lumpy one off discretionary expenses planned in the first few years of retirement drawdown hence planning to crystallise in lumps to use the TFLS strategically to pay for these (new car, home improvements, help kids etc). Once they are out of the way annual requirements settle down. Depending on growth of the declining uncrystallised pot we should get between 3-5 years without paying income tax. 

I ran a fag packet spreadsheet model to work out how much income tax we would pay using UFPLS vs tactical flexi access drawdown of TFLS and tactical wins short term but there's not a lot in it long term, depending on investment growth assumptions. I didn't taper off base living expenses income needs as we get older, I assumed they stay the same, so, there may be less income tax in later years if spend reduces.

I have found optimising drawdown of our pensions and income tax efficiency probably the most challenging part of DIY retirement planning.

Accumulating with salary sacrifice as a PAYE employee is a doddle in comparison.