The Lemon Fool

Need to consider what to do by July 2023

Position, SIPP pot of £124000 all in cash at HL

SIPP has been designed to front run my teachers pension which I will take when I am 60, it will be about £20K a year plus the lump sum of £60K

So what would you do, annuity rates are better than they have been for a long time, so

Option 1:

Take £31K tax free stick it in my and my husbands ISA and invest in LGEN/AVIVA or similar dividend payers and take the income
use the rest to buy a 5 year annuity, currently figures are coming in at about £20.5K per year for five years

or Option 2:

something else

ideas?? anyone know the best way to get the absolute best annuity??

thanks all, I have been impressed with this forum since joining

There was a teacher in the same situation on a money board -Citywire forums I think- possible named eain
Had a pot of the same size required to produce approximately £20000 pa for 5 years till Teachers pension kicked in
Probably a stocks and shares SIPP
Was considering a gilt ladder but perhaps too late to set this up
I think he decided to go completely to cash ie take the tax free lump sum then take cash yearly from SIPP as required
Some SIPPs now have reasonable interest rates on cash balances which is a new situation and makes cash balances more acceptable
An annuity is another way and certainly gives a higher interest rate on the cash pot in return for inflexibility and loss of capital
Couldn’t fault either choice
xxd09

Option 1 sounds good to me. "Dividend payers" would not be my choice for an investment but best not get into that.

Have you thought about buying Additional Pension with the PCLS? I have no idea what the cost would be, but likely to be very reasonable at present and worthwhile getting a quote if you are still able to. You can always buy your "dividend payers" later with your 60k.

Don't forget as well that you can always feed £3600 gross per year into another SIPP until you reach 75. Not a huge benefit in doing that, but free money is always good value as far as I am concerned.

xxd09 wrote:Was considering a gilt ladder but perhaps too late to set this up.
xxd09

I’m interested in what make one too late to set up a bond ladder.

I used 5 year gilts ie bought one every year .After 5 years gilt matures and process is continued or matured gilt monies spent
So after 5 years the system is up and running -every year a gilt is maturing and is reinvested or spent
Could use shorter term gilts but 5 year gilts were my choice
I did it for some years then got fed up with the hassle-also some wanted US exposure so bought a global bond index tracker hedged to the pound instead
xxd09

Thanks. Why can I not, now, buy a gilt maturing next year, another maturing in two years, another in three years etc out to five years (or even out to 10 years)? After 5, or 10 purchases made today, it’s up and running.

That would work too-get you up and running sooner
Looking back I think I did in fact do something similar to get things going
A 5 year gilt however was the sweet spot for me so for many reasons so that was the ultimate aim of the ladder
Once a set of running 5 year gilts maturing year on year the ladder was functioning properly
Requires a bit of work!
xxd09

Could buy a 1-5 duration Gilts or Investment Grade Bond Fund/ETF

Sell down 20k each year perhaps ?