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Drawdown plan
Please can you critique my drawdown plan?
1: Basic needs are covered by partners defined benefit pension plus an Index Linked Bond Ladder covering between retirement and State pension age.
2: Nice to have’s, holidays new cars etc etc are to be covered by a SIPP pot plus S&S ISA’s (x2 one for me one for my partner)
3: We would like some left to gift to our kids under the IHT threshold and the above budget includes funding JISA’s for grandchildren and paying bills/gifts to the limits allowed.
4: SIPP and ISA are roughly 90% equity 10% bonds (not including the bond ladder) Will move to around 70/30 or 80/20 once bond ladder is gone.
The plan for drawdown:
Use a hopefully safe initial starting withdrawal rate of 2.8% which covers what we need based on our budget. We originally planned to use 3.2% as the SWR and will use that later in the plan when drawing from the ISA's)
Each tax year, take out what we need to cover this budgeted amount from both the S&S ISA and the Pension in the following way:
For first few years we take the amount needed to cover budget plus £40000 (2x ISA limit) using the £12570 allowance from crystalised funds, the rest from the TFLS of which £40000 is basically bed and ISA’d into the same funds as the SIPP in our ISA’s – this increases the amount we can take out at SWR each year after this from ISA’s tax free and hopefully reduces tax to pay. I pay no tax for these first few years.
Once all TFLS is used up.
We take 3.2% from the ISA tax free.
I take £12570 from SIPP tax free
What is left to take for the budget is taken from SIPP and taxed at 20%
Additionally, I’ve also included using a modified Guyton-Klinger guard rail in my calculations so that each year we cut 15% when it says to cut (but top up from the cash buffer), we increase by inflation if between rails or increase by 10% if things are good. (We have a cash buffer in cash ISA’s to cover 4 years budget which we will use for years that the rails say we should cut). If we run out of cash buffer we then go to normal guard rails.
Thought’s please?
Comments
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Don't know your ages.
Don't know your required income.
Switching between percentages and actual amounts make it difficult to understand what you are doing, especially without knowing the initial amounts.
Mention of a cash buffer right at the end but unsure how this fits in.
3 -
Additionally, I’ve also included using a modified Guyton-Klinger guard rail in my calculations
If your financial knowledge is advanced enough to be aware of Guyton- Klinger guard rules, I am not sure you need advice from random strangers on the internet !
3 -
Have you checked hat the survivor is left with when either one goes?
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Hi NoMore
Both 55, not sure required income matters to the plan outlined.
Basically the plan is to use the TFLS to cover the required each year plus top up the S&S ISA so that once TFLS is used up our drawdown is tax efficient (we draw some from ISA as we've moved the TFLS into the S&S ISA as much as possible in first few years of retirement)
Cash buffer is just to cover any shortfall if needed following the guard rails cuts.
0 -
You have clearly given the drawdown plan a lot of thought and have done a lot of research (I have no idea about the different guardrails you mention!). It should be sensible.
Lots of people are coy about posting figures. Either they think they are too low or they think they are too high. But obviously if you are thinking of taking £40k a year out of the SIPPs no-one on here will know whether that will last you one year or fifty.
One thought: you mention basic needs being covered by partner's DB pension (and the ILG ladder). When that DB pension starts you are going to have an imbalance in what you can draw from the SIPPs before you go over the personal allowance. Are the SIPPs similarly imbalanced? So can you draw more from your SIPP than your partner and the SIPPs last the same length of time?
With the DB pension there will also be a lump sum (I imagine). That may or may not have an impact on the tax free lump sum your partner can draw from their SIPP (again depends on the figures which we don't know - the SIPP would need to be over £1mill for this to be a concern)
1 -
Random strangers on the Internet often have great knowledge - I've been around this forum for long enough to know there are a number of very clever people on here. I've learned a lot from this forum and other sites etc but that doesn't mean i have thought of everything and I could have missed something. Also if it's a good plan then maybe i've given something back - i've certainly got a lot from these forum personally.
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Good point - the DB pension has survivor cover and the SIPP can be left to my wife. So yes i believe so.
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My wife will pay tax on her DB pension straight away and the SIPP is all mine so it will be my tax bill we're trying to minimise. She will have to pay tax on her pension from the get go.(which is fine i'm not trying to pay no tax).
Info on guard rails:
I do feel the guard rails are more useful if your trying to leave a legacy though. Also one of the drawbacks is that during a bad run in the stock market the cuts could mean you don't have enough to live on if you use them for your basic needs budget - hence we're planning on using the cash to top up in those cases.
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Ah. I misread your first post - I thought you both had SIPPs but the x2 was only for the ISAs.
1 -
I have been on here a couple of years and
Guyton-Klingersounds like something out of star-trek to me 😀2
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