Drawdown strategy

[F1n4nc3 h31p]

I’m after a bit of PH wisdom in relation to drawdown from a SIPP.

I’m in a privileged position to be accessing my SIPP within the next 6 months and have started to try and formulate a withdrawal strategy.

Do I exhaust the TFLS then pay tax on future withdrawals, or is a blended approach more favourable? With the more recent drop in fund values there’s a draw to using up TFLS to begin with.

I appreciate everyone’s circumstances are different, but I’d be grateful for some views or experiences.

Many thanks

[otherman]

I guess it depends on what other pension provisions you have. One of my issues has been getting money out so that it's spendable, so I took the full 25%, and now I take as much as a can within the 20% tax band each year.

[xeny]

F1n4nc3 h31p said:

With the more recent drop in fund values there’s a draw to using up TFLS to begin with.

I'm not seeing this draw. Presuming fund values increase in the future, won't the 25% (allowing for the fact it is now limited at ~£250,000) be larger as asset values recover?

[Huzzah]

I draw down the taxable bit up to my personal allowance then top up from the tax free lump sum.

Everything stays invested in the same funds.

[Steve H]

There’s a few calculators for this kind of stuff, well worth a bit of time plugging some numbers in.

https://www.guiide.co.uk/

[alscar]

Fwiw from my "private" Pension for the first 3 years of not working I took the amount chosen with 25% of each years drawdown being tfc paid in one lump sum and then the balance monthly.
I then took the entirety of the remaining tfc in the pension as one lump sum to give to my 3 adult children as part of their house purchase funds and increased the drawdown amount accordingly.

[F1n4nc3 h31p]

Thanks everyone for tips so far, food for thought.

[LeoSayer]

The best strategy is whatever one meets your spending needs whilst minimising the tax % and tax paid over your full retirement.

Personally, I intend to take £50,270 income plus £16,576 tax free cash each year which will avoid me paying 40% income tax now and hopefully in the future.

Anything I don't spend goes into my ISA or my wife's meaning that all future growth is tax free. If it was to remain in the pension then I would be paying more tax on that growth.

Inheritance tax is less of a consideration now that it is planned for pensions to be brought into scope in 2027.