Preparing for moving to withdrawals. Help to simplify, consolidate and avoid tax traps

Takedap

Hello. I am hoping that someone can help and advise (in the non technical sense) regarding
starting withdrawals on investments.

I am 66 years old & am asking about a SIPP currently held with Best Invest and valued at
about £150,000 and an S&S ISA with Iweb valued at around £250,000.

These sums have been accumulated over about 30 years and some of the components are the
result of “early years learning” which I should have really sorted earlier and later, a move to Index Trackers which I believe are favoured by many here.

I also have a DB works pension which is already in payment and (currently) covers all
day to day expenses. The SIPP was set up to bridge a gap between early retirement while leaving the DB until SP age to avoid reductions. Due to a change in circumstances, the SIPP was never needed and not yet touched. There is also about another £100k in cash type investments chosen to pay at least 4%

The DB pension and now the State Pension takes up all my personal tax allowance at basic
rate and leaves about 10 – 12K before moving into the higher rate tax band,

There is a very haphazard shotgun type approach to anything I’ve done so far and I
know I’ve got where I am as much through luck as by judgement. But I feel that now is the time to simplify and start spending! I think I need to get rid of a lot of the funds and consolidate and I don’t know if I should also be moving to “safer” investments because of my age and current world events. I have no special attachment to any of the funds and would swap out anything if that was deemed to be the right thing to do. I may also need advice on whether to use Income funds or Accumulation funds going forwards.

Given the sums involved, I don’t know if I need professional advice regarding both
the investments and the tax implications when I start withdrawing. I don’t think I would need ongoing advice, maybe someone to look over and suggest rearrangements?

Personal circumstances are that I am married. Wife retired and claiming state pension. House owned outright. No major debt. No children or any other need to leave a legacy. I need to know about different methods of withdrawal, tax free lump sums. Whether to take ISA or SIPP first or a combination? And no doubt a load of other stuff that I haven’t even considered. I would ideally like a one-stop safe cheap “fire and forget” solution if possible.

I found the Accumulation part of this journey fairly easy. Basically, Throw it in and forget
about it. Decumulation will be much harder to get my head around. It’s trying to change the habits of a lifetime.

Below is a list of the investments as they stand now along with a roughish estimate of
the proportions held.

If any more relevant detail are needed, just ask.

Thank You for any help that can be given.

Best Invest SIP £150,000

LEGAL & GENERAL GLOBAL HEALTH & PHARMACEUTICAL INDEX I Acc 1%

LEGAL & GENERAL GLOBAL TECHNOLOGY INDEX I Acc 2.5%

LEGAL & GENERAL MULTI-INDEX 5 I Acc 34.5%

VANGUARD FTSE GLOBAL ALL CAP INDEX A Acc 2.0%

VANGUARD LIFESTRATEGY 60% EQUITY A Acc 30%

VANGUARD LIFESTRATEGY 80% EQUITY A Acc 30%

Iweb S&S ISA £265,000

FIRST SENTIER INV STWRT IN ASIA PAC LDRS B A  (CFAPLB) 4%

FIRST SENTIER INV STWRT IN IND SBCNT ALL CP B  (CFISBA) 3%

HSBC IDX TKR INV FTSE ALL WORLD INDEX C ACC  (MDAABG) 10%

INVESCO UK INVEST INVESCO UK EQ HI INC UK Z A  (BRINCO) 3%

JUPITER UT MNGRS JUPITER EUROPEAN I ACC  (RWAABJ) 5%

VANGUARD INV FDS FTSE GBL ALL CAP INDEX GBP  (VRXXA) 14%

VANGUARD INV FDS VANGUARD GBL EMG MKTS GBP  (VVXAF) 1.5%

VANGUARD INV UK LT VNGRD FTSE UK ALL SHARE IDX  (VVFUSI) 2.5%

VANGUARD LIFESTRAT VANGUARD LIFEST 60 EQ ACC  (VVLFST) 32%

VANGUARD LIFESTRAT VANGUARD LIFEST 80 EQ ACC  (VVLSRE) 25%

Marcon

With half a million quid and very limited expertise and knowledge in the investment area, some proper professional advice would be a really good thing to invest in. Have a happy and healthy retirement!

Linton

Want do you want the money for? If you have some objectives and time frames you can allocate the investments to ensure the money is available when you need it. A financial advisor will want to know this before they can make appropriate proposals. If you dont have some objectives you will probably die richer than you are now.

Have you thought through what would happen should you die many years before your wife? Your State Pension and presumably a significant part of your DB pension would be lost.

A couple of pointers to simplifying your portfolio...

I believe any allocation of less than say 5% is not worth the added effort of including it. It will make little difference anyway.

There is a lot of duplication in your investments. For example, all your global funds will hold much the same underlying shares. You could easily reduce the total number significantly, perhaps just to 2.

mrklaw

personally I’d spend some time reviewing those allocations and try and distill them into their fundamental components - eg if you can get to a ‘60/40 equities/bonds’ or similar, then you could simplify yourself. Or get paid for advice to do the same and tell you what to convert to.

practically if you don’t need the money it also doesn’t matter what you do with it. You could covert it all to cash for stability but it’d be eroded by inflation. Or leave it all 100% in equities as you don’t need to care about volatility. have a think about what job that money now has and that can help drive your attitude to risk and therefore asset allocation.

I would consider spouse protection as a high priority. Today your DB and SP cover your expenses adn you don’t need the SIPP or ISA. If you dropped dead tomorrow, what would your spouse get? she’d immediately lose the income from one state pension, and perhaps the DB has a 50% spouse pension so that drops too. Work out the gap - at minimum you need to ensure safe income to cover that gap if you die. The good news is thats a reducing amount over time so the longer you live the less time you need to cover your income loss so the reserved pot can drop. you could potentially consider a whole life policy or family income benefit to guarantee the gap - would be the simplest to insure that gap.

I woudl also look at utilising that basic rate allowance - if you have 10-12k available before high rate tax, I’d be drawing 11750-14000 (to get 10-12k taxable net) and move that to ISA

hara____

Building on the comments above with some additional details:

You could reduce each account to some mix of three funds, such as Lifestrategy 60, a global equity tracker, and a short-term bond fund (less than 5 years). That would give you more than enough levers to choose an appropriate level of risk. I suggest a short-term bond fund because Lifestrategy already contains intermediate to long-term bonds. There's something to be said for continuing with some of the funds you already know, like Lifestrategy 60, when doing this simplification, if only to avoid radical changes you might second guess.

Have you considered taking the 25% tax free lump sum from the SIPP? Could be worthwhile given your own tax situation. Then maybe the remainder of the SIPP becomes a 'reserve' fund for your wife, to cover the scenario Linton outlined, where she survives you. Just an idea to consider.

And if you want to be fee efficient, a glance at the Best Invest website suggests to me that you could do better holding the SIPP elsewhere. So maybe: reduce the number of funds while at Best Invest, then transfer somewhere cheaper, then take the tax free lump sum if you want to. But start by checking your current fees.

Albermarle

Given the sums involved, I don’t know if I need professional advice regarding both
the investments and the tax implications when I start withdrawing. I don’t think I would need ongoing advice, maybe someone to look over and suggest rearrangements?

Many IFAs ( normally best to avoid FA's who are not Independent) seem to be not very interested in offering 'one off' advice ( sometimes referred to Transactional, rather than Ongoing). Apart from preferring an ongoing fee ( naturally), changes in regulations/liability insurance seem to have made this kind of arrangement less of interest to them. Plus many have a full book of clients so can be choosy.

In any case the withdrawal process is an ongoing process, and if you are going to pay for an IFA, you might be better to let them manage the cash flow/tax optimisation and the admin.

Takedap

Lots to read & think about. Thanks for the answers so far. Looks like professional advice may be on the horizon. WRT Linton's point of "What do you want the money for?", I've always found that one the hardest to answer. Right from the beginning. That's probably one of the main reasons why I've avoided the IFA route so far. But travel would be the main thing at this moment in time. I feel we've got to the "if we don't do it now, we ain't going to do it at all" stage. And it would be good to do it in style...

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82011264#Comment_82011264

This forum ( and others on MSE) have regular threads about ' after years of saving, I am struggling to start spending' or various variations on that theme. So you are definitely not alone !

This thread is just one example of many.

How to let go of the purse strings — MoneySavingExpert Forum

Takedap

https://forums.moneysavingexpert.com/discussion/comment/82011273#Comment_82011273

It's almost as if dying is something that only other people do. We all know it's coming but really don't want to think about.....

dunstonh

Looking at the funds you have in the SIPP, none of them are best in class. Plus, they're a bit of a mess. It's hard to see what you're trying to achieve with those funds. Similar to the ISA

There are clearly going to be annual tasks involved. So it's your choice whether you want to do them yourself or use an advisor.

Effectively, you have to work out your objective over the remainder of your life. Then look how you're going to a fund that and the best way to achieve that tax efficiently and then structure the portfolio in a suitable way to meet your objectives. There are various ways of doing that.

Many people can map out their plans for many years or decades. Others cannot, but they know how much they need to spend.And as long as it's a figure that they like, they will live within that. So mapping out the future doesn't need to be complicated.

Once the future's mapped out, you can then bucket the portfolio accordingly to your chosen investment strategy (which will be different from your accumulation strategy in most cases) and utilise the appropriate tax wrappers each year.

zagfles

BI may do one off advice, you might also look at "investment pathways" which I think all SIPP drawdown providers offer now.