Most effective method to withdraw...

Rodders2409

Hello all,

I'm looking for a sanity check on the most effective way to withdraw £10K net from a number of funds and accounts I have.
The backdrop being, home owner with zero mortgage, grown up children now fled the nest, better half has a terminal condition and we manage on PiP, Carers Allowance and rental income which utilises 10K of my personal allowance. Age 59.

I have the following funds and am not sure what's the best method or combination of methods to be able to extract approx' £10K per annum for the next 8yrs until my SP commences. My Fidelity SIPP comprises of a mix of funds following lots of reading on MSE etc...a mix of funds across territories and sectors etc, including bonds. 

Fidelity SIPP - £480K
ISA's - £43K
Savings (4% fixed) - £134K
General acct - £8K

All and any info on how to effectively balance withdrawal's to reach the 10K would be gratefully received. 

nomorekids

Sorry to hear about your other half.
I would use a combination of your General accounts and withdrawals from any flexible ISA's. Repay the flexible ISA's by April using the fixed rate savings as and when they mature whatever has the lowest interest rate and next lowest etc as you need cash.Then moving forward make sure you have some funds in flexible ISA's moving forward to "borrow" against anytime you need a cash injection and then worry about how to or whether to bother to repay the ISA later again according to the rate of interest you are getting.
Leave the SIPP well alone for as long as possible as you are still young.
All the best to you both.

ukdw

The simplest method I think is to rebalance back to your original fund percentage split as part of the drawdown,

That would automatically mean that you take larger withdrawals from the funds that have risen the most at the time of withdrawal.

Ideally timing and splitting the withdrawals to if possible not do big withdrawals when the market is down.

Rodders2409

Thanks UK and Nomore,

So utilise the ISA's first and Fixed savings accounts, topping up the ISA's every year from the Fixed Savings acoounts too...don't touch the SIPP at all...?

UKdw....Not sure what you mean by......"back to your original fund percentage split as part of the drawdown"

MallyGirl

You say that the SIPP uses£10K of your personal allowance. That means you have another £2k or £3k to play with (if OH has transferred marriage allowance to you). I would be drawing down a slice of the SIPP to make use of that remainder alongside using the ISAs and savings. Once SP kicks in you will be paying 20% on it all.

gm0

Rodders2409 said:

Thanks UK and Nomore,

So utilise the ISA's first and Fixed savings accounts, topping up the ISA's every year from the Fixed Savings acoounts too...don't touch the SIPP at all...?

UKdw....Not sure what you mean by......"back to your original fund percentage split as part of the drawdown"

When you sell investments in the SIPP the mix of funds changes - unless you sell a tiny slice of each.
Similarly if you have stuff in the SIPP like stocks and cash deposit outside.  When you run down the cash deposit accounts the % of stocks (of the total) rises.  Say you had 80% in a SIPP all in stocks and 20% in cash in accounts outside. And you spend the cash from deposit accounts which could be correct as discussed already.

You can leave it.  And are now 100% in stocks.  Or you could move some money (in the SIPP or take it out) and replenish cash to get back to 80%.

Putting things back to what you originally setup or intended is called "rebalancing".

Rodders2409

Thanks Mally and gm0.

Its not a SIPP that uses 10K of my PA but a rental property income, I've not touched the SIPP at all as yet. We're not married so I cant utilise her PA as far as I can work out....so would you suggest eating into the ISAs and Savings accounts until SP at 67?

Rebalancing....got it, thanks.
My SIPP is dreadful across 5 funds, with a bit of diversification across geographies, types of companies etc ...i appreciate that there's going to be a degree of commonality across them but roughly right and all that...😊....plus I've got dome in a bond based fund.

So would you also suggest tapping into the savings until SP and making sure ISAs are maxed out with savings too...or dipping into the SIPP too?

MallyGirl

That still leaves £2k or so that you could get out tax free - in fact the slice of SIPP could be a bit more as 25% of it would be tax free anyway. This would trigger the MPAA limiting future DC pension contributions to £10K in case that is an issue.

ali_bear

I think the general advice would be to draw from the savings first, once that is gone draw from the ISA, then finally the SIPP. 

To make the better use of your 12570 tax free allowance you could start to take pension income from the SIPP. Either as UFPLS or flexi-access drawdown if that is allowed by your scheme. So that would be a yearly taxable amount of 2570 and a tax-free amount of 856. But you're not paying tax on the taxable part so you would only need to supplement that 2570+856 with 6574 from the savings to give you 10k net. 

But you also are receiving taxable interest on your savings of some 5360 a year. This needs to be factored in. 

hara____

*edited to keep it far simpler 

How long are the fixed savings fixed for?

If not for long (a year or less), you could use that 142k to:

- give you the extra income of 10k

- and build your ISAs

- or even add to the SIPP via the minimum 3,600 allowance that anyone can add (you add 2,880 and the provider adds the 20% relief)

Rodders2409

Thanks all,

The savings are in 12 month fixed, currently at 4.3%....

I'll double check the rental income and make sure I utilise any remaining Tax Allowance I have after rental income is covered.
Investment / savings income is something I'd not really considered but obviously need to in the future. I'm assuming I need to compile income from them and detail them in my Self Assessment. 

So in summary, utilise £90K of savings, from Isa's and Fixed accounts made up of the capital and associated interest / income until SP kicks in.
Make sure I maximise the annual ISA allowance each year by transferring from savings accounts.
Leave SIPP alone to grow across the sectors.

Does that sound roughly right?