Most effective method to withdraw...

hara____

Yes, I would just add: as you will be using a chunk of your cash savings, it would be a good time to review the asset allocation within your SIPP. You might want to reduce the equity risk within the SIPP, e.g. move some funds to short-term bonds or money market funds.

Juno_Moneta

Rodders2409 said:

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. 

Hi Rodders, this is what I would do:

Firstly a mindset is required whereby only the SIPP and ISA is needed.
The ISA is basically your ISA, savings and general rolled into one - you just withdraw from the ISA as you need, and so the other 2 ‘pots’ are not required. 

Assuming then your SIPP and ISA remain invested throughout and grow by a conservative 4% (anything could happen but we need something to calc).
Assuming your Savings grow by just 2% as we are entering a lower interest rate env and I have no idea if you can keep getting 4%.

The strategy is simply to draw the annual 10k you need from the pots you don’t eventually want until they are empty then you just use the ISA. 

But at the same time you are also depositing your annual 20k allowance into the ISA from savings - clearing that out faster and boosting your ISA. 

So for example in year 1 you use up all the general and 2k from savings and also put 20k of savings into the ISA. 
Following all the actions, you end up (market willing) with a good size SIPP and ISA by year 8 and have successfully taken the 10k out a year you need. 

Then you just live off the ISA first then SIPP. 

Rodders2409

Thanks hara and Juno,

The modelling is really helpful, appreciate the effort in posting it. I'm going to use it as a tool and look work out what's best. cheers.

Rodders2409

Hello Juno,

Can you advise the calc in going from 43000 in ISA to 64720...I add 20K then grow by your suggested 4% but it doesn't stack exactly as yours...what am I doing wrong?

Juno_Moneta

Sure, it’s just the order of operations, you add first, I grow first. It’s only a guide as your actual transaction timing may vary. Setup your model whatever way suits you good luck!

I used :

prior value * 1.04 (adding growth first) then added new 20,000 funding eg if 43,000 is in D6

D7 = D6*1.04+20000 = 64720

Juno_Moneta

“Then you just live off the ISA first then SIPP. ”

Rodders, one final thought on my comment above. There is no tax optimisation suggested. 

So for example instead of using up all the ISA funds for a few years before touching any of the SIPP, it would make sense to utilise your personal allowance each year (£12,570 currently) - so assuming you have no other source of income already making use of it - draw up to this amount from the SIPP.
Use the ISA for any extra cash needed beyond that or alternatively if you have spare cash just put that into the ISA if you have any of the £20k limit still free. 

In summary optimise your tax free income whilst focusing on building your ISA value as much as possible. 

And finally there is also the 25% tax free lump sum to consider - but that’s a whole other conversation and might change all the above completely!