SIPP Withdrawal Amount Options

Julezy101

Thanks for the replies on this. As I said I appreciate that my focus should not be on saving as much tax as possible but I'm still interested to see if there is a significant difference in the 2 options. I have looked at my figures again.

With option 1 - the intention is to pay no tax outside of my PA until 67. My original calculation for ages 60-67 had me only being able to withdraw 8,760. As @Secret2ndAccount said this figure should be 6,093. So that would mean an extra 2,667 left in the SIPP each year - for 7 years thats an extra 18,669 overall. Overall in my SIPP at 67 I am approximating around 380k left (4% growth). 25% of that is tax free, leaving 285k to pay 20% tax on to empty - meaning 57k in tax

With option 2 - my calculations would stay the same, leaving 80k in the SIPP at 67 but this time 25% would be tax free (20k) leaving 60k to pay 20% tax on to empty - meaning 12k in tax.

Apologies if I'm being stupid but this makes it even more of a difference now.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/82169509#Comment_82169509

You do seem to be glossing over the tax you would pay each year under option 2.

So 57k vs 12k isn't really the full picture.

Isthisforreal99

https://forums.moneysavingexpert.com/discussion/comment/82163495#Comment_82163495

Assuming CS = Civil Service then a NPA of 60 would suggest a legacy scheme with perhaps an automatic lump sum? Is there a lump sum as don't see it mentioned?

eskbanker

Focusing specifically on minimising tax is usually less appropriate than aiming to maximise net return, so OP should model the two options in a spreadsheet to consider that in the round.

It clearly makes sense to fully utilise the full personal tax allowance every year, and also to phase SIPP withdrawals so that no higher rate tax is ever paid though, but properly modelling two options that entail different durations (of depleting the SIPP) should also encompass inflation, etc, as well as investment growth…

Julezy101

https://forums.moneysavingexpert.com/discussion/comment/82169547#Comment_82169547

Yes its a Civil Service Pension - the lump sum is around 22k. I had forgotten about that. I would use that towards my yearly expenditure or a one off luxury purchase.

Julezy101

https://forums.moneysavingexpert.com/discussion/comment/82169516#Comment_82169516

From my original calculation…

I've calculated its around £3.5k tax each year, 31.5k total over the 9 years to SP age.
This would reduce the SIPP pot (41k x 2, 33k x 7) to around 80k assuming 4% growth.

Julezy101

https://forums.moneysavingexpert.com/discussion/comment/82169551#Comment_82169551

Yes I have modelled this with a starting pot of 330k for both options each year til 67. Assuming 4% growth and then withdrawing the amounts specified each year. I have not factored in inflation but this applies to both options so both would reduce by the same amount.

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82169593#Comment_82169593

So how did the net return compare between the two options?

Julezy101

https://forums.moneysavingexpert.com/discussion/comment/82169598#Comment_82169598

Option 1 leaves approx 380k

Option 2 leaves approx 80k

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82169610#Comment_82169610

No, that's not what I mean by net return, the question is more about how much you actually have after emptying the SIPP and paying tax along the way.