Pension Drawdown - Annual or Monthly ?

Linton

segovia said:

GenX0212 said:

 have always invested in income producing investments so there is a constant income flow sufficient to meet any future draw down needs ( in my case via planned UFPLSs) without necessitating investment sales at times when underlying capital values may have crashed.

My question to those who don't have income producing sipp assets, do you still sell assets at times of significant market  falls to meet your income drawdown, or make sure you always have sufficient cash in the kitty to meet 1 year's drawings? 

Doesn't that cut both ways, by holding 'cash' you could be losing out on investment growth?

Holding cash IMHO is a waste, what you get on interest does not cancel out inflation. Cash in an ISA invested in ETF's is an option but obviously with risks, better to leave it where it is in my SIPP until it's needed.    

With a fairly steady demand for cash to meet ongoing expenses and a volatile equity-based investment pot having a significant cash buffer is from my experience essential as it enables you to decouple your expenditure from realising assets.  You do not want to be living from pay check to pay check with a mainly equity pension pot.

I recommend that you put all income into the cash pot and take all expenditure from it.  As long as your total income exceeds your normal expenditure your cash pot will increase in size over time enabling you to pay for major one-off expenditures.  Accessing the money for major expenditure direct from your pension investments runs the risk of having to sell a significant amount of investments at short notice when prices are low and then paying higher rate tax on the proceeds.

In retirement, needing to chase maximum return is good evidence that your planning has been faulty and that your pension pot is insufficient to meet your planned expenditure whilst enjoying a stress-free life.

MK62

Linton said:

segovia said:

GenX0212 said:

 have always invested in income producing investments so there is a constant income flow sufficient to meet any future draw down needs ( in my case via planned UFPLSs) without necessitating investment sales at times when underlying capital values may have crashed.

My question to those who don't have income producing sipp assets, do you still sell assets at times of significant market  falls to meet your income drawdown, or make sure you always have sufficient cash in the kitty to meet 1 year's drawings? 

Doesn't that cut both ways, by holding 'cash' you could be losing out on investment growth?

Holding cash IMHO is a waste, what you get on interest does not cancel out inflation. Cash in an ISA invested in ETF's is an option but obviously with risks, better to leave it where it is in my SIPP until it's needed.    

With a fairly steady demand for cash to meet ongoing expenses and a volatile equity-based investment pot having a significant cash buffer is from my experience essential as it enables you to decouple your expenditure from realising assets.  You do not want to be living from pay check to pay check with a mainly equity pension pot.

I recommend that you put all income into the cash pot and take all expenditure from it.  As long as your total income exceeds your normal expenditure your cash pot will increase in size over time enabling you to pay for major one-off expenditures.  Accessing the money for major expenditure direct from your pension investments runs the risk of having to sell a significant amount of investments at short notice when prices are low and then paying higher rate tax on the proceeds.

In retirement, needing to chase maximum return is good evidence that your planning has been faulty and that your pension pot is insufficient to meet your planned expenditure whilst enjoying a stress-free life.

Agreed......I do similar. I would add though that the higher the equity content of your portfolio, the bigger the cash pot should be relative to your annual spending........the actual size is a personal decision of course - 2-3 years worth of normal spending hits the sweet spot for me, with a roughly 67:33 portfolio, but others might feel a different level fits better........however, too small and it may not be effective as a buffer in adverse investment periods.

SVaz

It’s total insanity not to have a cashpot available to draw on.
Crossing your fingers and hoping the markets don’t tank right before you sell a chunk of investments is the financial equivalent of Russian roulette.   

QrizB

SVaz said:

It’s total insanity not to have a cashpot available to draw on.

Statistically, staying invested will usually leave you better off.

SVaz said:

Crossing your fingers and hoping the markets don’t tank right before you sell a chunk of investments is the financial equivalent of Russian roulette.   

Timing the market would suggest that you think you can beat it, which would make you better than the majority of professional fund managers.

segovia

SVaz said:

It’s total insanity not to have a cashpot available to draw on.
Crossing your fingers and hoping the markets don’t tank right before you sell a chunk of investments is the financial equivalent of Russian roulette.   

Fortunately I do have a cash pot to fall back on, and it raises another question, would AJ Bell cease the payroll if I instructed them to pause ?   

Triumph13

It all comes down to what your cash pot is for.  In the face of volatile investment returns your three options are annuitise, hope for the best, or cut spending in downturns.  A cash pot buys you time to make decisions on cutting spending - at the cost of lowering your expected returns long term.  It does not allow you to avoid the spending cut in a prolonged downturn, if anything it makes it more likely by depressing returns, but it can make it easier to manage.

FIREDreamer

segovia said:

SVaz said:

It’s total insanity not to have a cashpot available to draw on.
Crossing your fingers and hoping the markets don’t tank right before you sell a chunk of investments is the financial equivalent of Russian roulette.   

Fortunately I do have a cash pot to fall back on, and it raises another question, would AJ Bell cease the payroll if I instructed them to pause ?   

You can always reduce the drawdown to a nominal £1 / £50 / £100 per month depending on what their minimum acceptable amount is.

Albermarle

FIREDreamer said:

Smudgeismydog said:

SouthCoastBoy said:

Smudgeismydog said:

SouthCoastBoy said:

when I come to drawdown, if I do, currently moving towards an annuity, I'm planning on taking the full amount the preceding March, for the following tax year. For the first year of retirement I will live of cash savings.

For example if I retire Jan 2026, live off savings until Mar 27, withdraw 12 mths spending Mar 27 live off that until Mar 28 etc.

Retiring Jan 26?

Are you finally going to do it?

Most probably not. That was just an example

Of course, you just need ‘one more year’

For him, it sounds like “one more decade” 🤣🤣🤣

Maybe 2026 was a typo, and he meant 2036  !

Ciprico

SouthCoastBoy said:

when I come to drawdown, if I do, currently moving towards an annuity, I'm planning on taking the full amount the preceding March, for the following tax year. For the first year of retirement I will live of cash savings.

For example if I retire Jan 2026, live off savings until Mar 27, withdraw 12 mths spending Mar 27 live off that until Mar 28 etc.

It took HL well over a month to put my sipp into drawdown. You might be advised  to put sipp into drawdown much earlier and get the main admin done in slow time.

 Even when drawdown is set up there are date thresholds for withdrawing. 

MK62

QrizB said:

SVaz said:

It’s total insanity not to have a cashpot available to draw on.

Statistically, staying invested will usually leave you better off.

SVaz said:

Crossing your fingers and hoping the markets don’t tank right before you sell a chunk of investments is the financial equivalent of Russian roulette.   

Timing the market would suggest that you think you can beat it, which would make you better than the majority of professional fund managers.

.... perhaps some are more concerned with failure rates than chasing that bit of potential extra return....... statistically, being invested 100% in equities is most likely to give you the highest returns too if that's the priority .......but it also has the highest failure rate. In the end it always boils down to trading potential higher returns off against increasing risk of failure........added to the fact that some are more tolerant of a variable income than others, which is another key consideration.