Best drawdown / access strategey for a SIPP

segovia

I’m looking for some advice a guidance on drawdown strategy for my wife’s SIPP, current value £390,000.00 

I am claiming my state pension and still working through my own limited company, I don’t take a salary, but my wife does just under the NI threshold circa £880.00 a month net. As I am planning to stop working and close my Ltd Company it won’t have the funds to continue paying her a salary. Hence, the query on the best approach to use the SIPP to replace the £880.00 salary from the Ltd Company.  

My initial thought was to take the 25% lump sum tax-free and crystallize the remaining £292,500.00 and drawdown £1,000.00 a month less tax would give us the £880.00 a month income and have the £97,500.00 in the bank at a deposit rate or circa 4%. However, I’m now having a rethink, we are not in any desperate need to have a large sum on deposit and interest rates are going to fall anyway.  I’m thinking would uncrystallized funds pension lump sum (UFPLS)  of circa £12,000.00 taken annually, initially for the next 4 years when my wife gets her state pension and review after that. She would be paying tax on 75% of £12,000.00, this would give us £850.00 a month and cover the loss of the salary from the Ltd Company. I am assuming further down the line if we needed a large lump sum we could change the strategy, is that correct?  

I have my own SIPP circa 1 Million, and we have a regular income from rented commercial property so any question about running out of funds in our retirement does not come into the equation. My main concern is am I going to be able to spend it, I'm 70 this year and probably have 15 years at the most.      

Any advice welcome

Dazed_and_C0nfused

You haven't said exactly what other taxable income (and type of income as that is quite important) your wife has but presumably she has some - just rental income? - as otherwise no tax would be payable on the £9k pension.

SVaz

She could UFPLS £16500 a year and not pay a penny tax or she could take the 25% tfls then draw £12570 and pay no tax, she may as well use her full personal allowance until she gets State pension.

Dazed_and_C0nfused

SVaz said:

She could UFPLS £16500 a year and not pay a penny tax or she could take the 25% tfls then draw £12570 and pay no tax, she may as well use her full personal allowance until she gets State pension.

I just picked up on this 

we have a regular income from rented commercial property

PropertyGuru_Wannabe

segovia said:

I’m looking for some advice a guidance on drawdown strategy for my wife’s SIPP, current value £390,000.00 

I am claiming my state pension and still working through my own limited company, I don’t take a salary, but my wife does just under the NI threshold circa £880.00 a month net. As I am planning to stop working and close my Ltd Company it won’t have the funds to continue paying her a salary. Hence, the query on the best approach to use the SIPP to replace the £880.00 salary from the Ltd Company.  

My initial thought was to take the 25% lump sum tax-free and crystallize the remaining £292,500.00 and drawdown £1,000.00 a month less tax would give us the £880.00 a month income and have the £97,500.00 in the bank at a deposit rate or circa 4%. However, I’m now having a rethink, we are not in any desperate need to have a large sum on deposit and interest rates are going to fall anyway.  I’m thinking would uncrystallized funds pension lump sum (UFPLS)  of circa £12,000.00 taken annually, initially for the next 4 years when my wife gets her state pension and review after that. She would be paying tax on 75% of £12,000.00, this would give us £850.00 a month and cover the loss of the salary from the Ltd Company. I am assuming further down the line if we needed a large lump sum we could change the strategy, is that correct?  

I have my own SIPP circa 1 Million, and we have a regular income from rented commercial property so any question about running out of funds in our retirement does not come into the equation. My main concern is am I going to be able to spend it, I'm 70 this year and probably have 15 years at the most.      

Any advice welcome

She is 63 and you are 70.  If I were you, I would take out just enough money to keep your and her personal income below the high tax payer bracket.  You don't need to crystalize all of your pension.  With both your state pensions, it's not a great deal more and even if you don't need the funds now, you can store them into ISA's where you can take them out penalty free whenever.  You're probably both never going to run out of money in your lifetimes so taking the money out and avoiding the 40% tax threshold would be a good objective to aim for.

Albermarle

My main concern is am I going to be able to spend it, I'm 70 this year and probably have 15 years at the most.      
Unless you have some specific illness, you have a 50% chance of reaching 85, and therefore a 50% chance of living past that age. If you have no bad habits ( not too bad anyway) are well educated with family and no money worries, you are likely to have more than a 50% chance of exceeding 85, and a 25/30% of reaching 90.
As a couple there is about a 30% chance one of you will reach 95.

segovia

Dazed_and_C0nfused said:

You haven't said exactly what other taxable income (and type of income as that is quite important) your wife has but presumably she has some - just rental income? - as otherwise no tax would be payable on the £9k pension.

Good point, she has a DB pension £800.00PM Gross and about the same 50% share in rental income. So she will be paying tax on anything taken from the SIPP

JohnB47

Albermarle said:

My main concern is am I going to be able to spend it, I'm 70 this year and probably have 15 years at the most.      
Unless you have some specific illness, you have a 50% chance of reaching 85, and therefore a 50% chance of living past that age. If you have no bad habits ( not too bad anyway) are well educated with family and no money worries, you are likely to have more than a 50% chance of exceeding 85, and a 25/30% of reaching 90.
As a couple there is about a 30% chance one of you will reach 95.

As a 73 year old male, this post has comforted me greatly.

As I now make medium term changes, like putting up a new fence or having a new boiler installed with a 12 year guarantee, I find myself thinking "well, I won't have to do this again" and it feels odd.

segovia

Albermarle said:

My main concern is am I going to be able to spend it, I'm 70 this year and probably have 15 years at the most.      
Unless you have some specific illness, you have a 50% chance of reaching 85, and therefore a 50% chance of living past that age. If you have no bad habits ( not too bad anyway) are well educated with family and no money worries, you are likely to have more than a 50% chance of exceeding 85, and a 25/30% of reaching 90.
As a couple there is about a 30% chance one of you will reach 95.

I cycle over 100 miles a week, I don't drink much, and my weight is stable for my height. However, I have coronary artery disease, prostate cancer which is being monitored and high blood pressure, so I'll settle for 85

segovia

JohnB47 said:

Albermarle said:

My main concern is am I going to be able to spend it, I'm 70 this year and probably have 15 years at the most.      
Unless you have some specific illness, you have a 50% chance of reaching 85, and therefore a 50% chance of living past that age. If you have no bad habits ( not too bad anyway) are well educated with family and no money worries, you are likely to have more than a 50% chance of exceeding 85, and a 25/30% of reaching 90.
As a couple there is about a 30% chance one of you will reach 95.

As a 73 year old male, this post has comforted me greatly.

As I now make medium term changes, like putting up a new fence or having a new boiler installed with a 12 year guarantee, I find myself thinking "well, I won't have to do this again" and it feels odd.

Same here, everything seems to be "this is the last time I'll do this that and the other"

Secret2ndAccount

"Ask not what you are doing for the last time. Ask what can I do for the first time"

JFK (something like that)