Share this page:
Stay connected:
Welcome to the Citywire Money Forums, where members share investment ideas and discuss everything to do with their money.

You'll need to log in or set up an account to start new discussions or reply to existing ones. See you inside!

Notification

Icon
Error
A sustainable income from a SIPP using UT/OEIC's?
+ Reply to discussion
Options
Joe Soap
Posted: 19 February 2012 18:40:38(UTC)
#1

Joined: 24/01/2010(UTC)
Posts: 235

Thanks: 1 times
Was thanked: 7 time(s) in 6 post(s)
As I said in another thread, I currently hold about £100k in a SIPP with HL. Half is in draw down at 0% and the other half will be in draw down soon. Due ill health I am unexpectedly going to have to draw income from my SIPP at 55 rather than the previously planned 60/65-ish. Of course, at a relatively young age the income permitted under the current actuarial calculation is going to be very low. I guess about 3%?

Current strategy is to keep about £50k in Ruffer Total return to damp down volatility (I know this works both upside and downside) and the other £50k in a basket of four UK equity income funds that are fairly diverse in what they do, namely -

Unicorn Income
Walker Crips Income
Trojan Income
JOHM Income

What do the readers here think of this for a long term strategy drawing down about 3% per annum from the SIPP? This will supplement a pension from a previous employer of about £10k a year that I am arranging to draw on. Thanks.
Back to top Quote
Kenpen2
Posted: 21 February 2012 14:53:31(UTC)
#2

Joined: 17/07/2008(UTC)
Posts: 32

Thanks: 1 times
Joe, bad luck about the health issues, hope things may improve ? But if they don't, what are your priorities ?

I started my SIPP 3 yrs ago aged 59; a rank amateur. Decided my priority was to take the highest income I could until OAP kicks in @ 65; enjoy it while I can, carpe diem and all that. Was lucky with the timing of my GAD calculation, managed to get in under old rules (120% of equiv annuity, 5 years between assessments) and while market was high. Since last summer's crash my drawings look dangerously unsustainable but what the hell.

I keep enough in cash and solid stuff to cover my withdrawals until 65, then gamble recklessly with the rest, so far unsuccessfully. If banks, housebuilders and junior oils recover I'll be sitting pretty; if not I'll have to face the music at the next GAD reckoning but with the state pension as my safety net.

From my perspective your choices look, well, unexciting. Dividend income is all very well but where's your capital growth going to come from ? If you want to go down the income road, I guess that Tony Peterson, one of the doyens of these threads, would probably advise you to forget about funds and invest directly in income-bearing stocks - GSK, VOD, AV and the other usual suspects; long-term the ~1.5% TER saving makes a big difference.
Back to top Quote
PhilB
Posted: 21 February 2012 16:59:02(UTC)
#3

Joined: 24/06/2010(UTC)
Posts: 14

Was thanked: 1 time(s) in 1 post(s)
Two things you may not have thought about:
1) why look for income at all - with 3% drawdown you could just as easily go for growth, you will get 1-2% on most growth-oriented funds and then sell a small amount to provide the needed balance every (say) 6 or 12 months. Your capital will have best chance to improve and after 3 years you will have a recalc. based on a hopefully higher capital sum. In my view this is the only way to provide income over the long haul - you might live for another 50 years!
2) on the other hand, if you have a life-shortening health issue you might be surprised at the annuity rate on offer from an enhanced annuity. As I understand it such things are tailored specifically to the individual. Some or all your SIPP fund could be used for this purpose
Back to top Quote
1 user thanked PhilB for this post.
Guest on 21/02/2012(UTC)
Dennis .
Posted: 22 February 2012 09:17:20(UTC)
#4

Joined: 26/12/2007(UTC)
Posts: 182

Thanks: 1 times
Was thanked: 17 time(s) in 10 post(s)
One of the strategies I have employed over the past couple of decades has been to invest in Income funds/stocks and use the income to buy more income plus some growth funds/stocks. The logic is based on some advice I had back in the 80's that generating an income focuses the minds of fund managers since they have to perform every month, or quarter depending on the fund, whereas growth funds are more volatile and can be set up for short term bursts in the hope of beating an index to trigger bonuses or charges.
This might sound a bit pedestrian but long term it has delivered for me. I have a private sector DB pension so don't need the income anyway.
Back to top Quote
+ Reply to discussion

Markets

Other markets