The Lemon Fool

This may be a simple question, but it would be good to sanity check my assumptions.

Post retirement, the wife and I plan to get income from our SIPPs by drawing down regular (small) amounts of accumulated dividend cash. We'll also have ISAs using dividend payaway (dunno why the SIPPs can't do that, but hey ho). We'll both be under the income tax threshold.

Until our state pensions come in, we'll top up an income shortfall from a cash bridge for the first few years. Ratio of divis to cash bridge money roughly 2:1. Also have a decent cushion of other assets should the divis fall.

We'll have a joint current account for routine spending with the SIPP and ISAs dripping into it, and maybe top that up from the saving account perhaps once or twice year.

Does that sound sensible? Given the irregular nature of the income, I was toying with ditching our credit cards, but they do have consumer protections, so maybe not.

Gilgongo wrote:Post retirement, the wife and I plan to get income from our SIPPs by drawing down regular (small) amounts of accumulated dividend cash. We'll also have ISAs using dividend payaway (dunno why the SIPPs can't do that, but hey ho).

If you are going to try to emulate payaway manually ( so you are making varying payments each month ), this will be a pig to manage and I would be surprised if your provider doesn't charge you for doing it. Build up a float in each SIPP, and do the arithmetic to allow a set amount to be withdrawn each month.

Gilgongo wrote:
Until our state pensions come in, we'll top up an income shortfall from a cash bridge for the first few years. Ratio of divis to cash bridge money roughly 2:1. Also have a decent cushion of other assets should the divis fall.

We'll have a joint current account for routine spending with the SIPP and ISAs dripping into it, and maybe top that up from the saving account perhaps once or twice year.

Does that sound sensible? Given the irregular nature of the income, I was toying with ditching our credit cards, but they do have consumer protections, so maybe not.

Credit cards should just be a method pf payment. If you aren't running with enough income ditching them won't help. You should be holding a buffer for accidents/unexpected that would cope with monthly fluctuations in outgoings - e.g. how do you pay for intermittent lump spends like holidays.

I would keep a credit card.

As you say, it is useful for the inbuilt protection, but I also find it helpful as I try not to keep too high a balance in my current account. So if I want to spend a few hundred, I bang it on the credit card then have a few weeks for my pensions to build up the current account balance, or to shift what I need from an instant access savings account.

Of course I have the credit card set up to take the full balance by direct debit to avoid any risk of being charged interest.

I know transfers tend to be more or less instant these days, but even so, I'd rather just sort it out in my own time rather than buy using my current account then having to shift money the same day.

I live off my dividend income and have a collection account from which I would make payments to the joint account because of course unlike the SIPP payments, the dividend income will be 'lumpy' some months over provisioned and other months under. Your system should work though and it is a matter of trying it to see what you are most comfortable with.

I have a credit card although seldom use it because I do not like debts and prefer using my debit card. The credit card is useful though as a standby facility in case you get stuck.

Dod

genou wrote:If you are going to try to emulate payaway manually ( so you are making varying payments each month ), this will be a pig to manage and I would be surprised if your provider doesn't charge you for doing it.

It appears automatic, and they don't mention any charges: https://www.ii.co.uk/help/trading/usefu ... nd-payaway

genou wrote:Build up a float in each SIPP, and do the arithmetic to allow a set amount to be withdrawn each month.

Yes, that's what we're intending. Like I say, the SIPPs (with AJBell) don't do payaway.

Personal preference. There are no right or wrong ways to do this. My own preference is to accrue and draw down once per year.

Dod101 wrote:I live off my dividend income and have a collection account from which I would make payments to the joint account because of course unlike the SIPP payments, the dividend income will be 'lumpy' some months over provisioned and other months under.

Ah, I think that sounds more sensible than having the dividends feed straight to the main account, particularly as we'd be able to emulate the state pension payments that way too. So wouldn't notice the difference when we switch to that from the cash bridge.

BullDog wrote:Personal preference. There are no right or wrong ways to do this. My own preference is to accrue and draw down once per year.

I like that system, each March remove accumulated profits from the SIPP to complete annual income allowance. Extra funding taken from unsheltered or ISAs as needed to maximise all tax allowances, cgt, income, dividend, cash interest and CGT. Then pay income tax on additional SIPP requests if/as required

We have our income (dividends/pension) go into a collection account from which our bills are also paid.
Any interest paid in this account will then also help with any bill increases throughout the year.

From that account, we have standing orders to a savings account and another to our spending account (groceries/fun/etc).

Always keep things as simple as possible.

Gilgongo wrote:[...
It appears automatic, and they don't mention any charges: https://www.ii.co.uk/help/trading/usefu ... nd-payaway

From the link you gave:

This service is not available in Junior ISAs, SIPPs and CREST accounts.

It was the SIPP I was talking about.. For clarity, if you were going to try and have varying monthly payments out of a SIPP, you would struggle. But I think now you are saying that's not your intention.

Others have touched on this elsewhere, but weigh up the options of taking over your personal allowance and topping up ISAs (or rather not taking divis from ISAs, which eeffectively tops them up) as once the SP kicks in your tax free headroom diminishes.

We do things opposite to most on here apparently, we have our own personal accounts that our irregular dividend and regular pension (and in MrsF's case part time salary) and my automated unsheltered selldowns go.
We have a Santander 123 account with a linked savings account (pays about the same as Marcus, but easy to handle). We both pay a fixed amount into the Santander which covers all the household bills, and we have a rewards credit card we use for nearly all of our spending which also comes from that account.

In your case your cash buffer (or some of it) could go in the linked savings account and be dragged over within seconds if required, and the advantage for us is we have our own personal accounts which we can use discretely and which tend to accumulate.

Paul

Gilgongo wrote:I was toying with ditching our credit cards, but they do have consumer protections, so maybe not.

Almost all my spending is on a credit card. However I treat it as a debit card as I have a direct debit in place to pay the balance each month.

As others have said, you do at least need an emergency fund and I would argue that you need a float. That is enough money to make life easy. Yes I know "cash is trash", but we do need it.

I've been retired now for two months living off my current account. I've just transferred some cash from my ISA and, as per your other thread, instructed II to pay dividends directly to my current account.

My spreadsheet informs me that I'm likely to have to liquidate holdings to spend their value in the future, but that's the concept of a "pension". I'm putting off pension access while I get use to being retired and using funds from my ISA.

BTW, one complexity of my choices is that I've had to contact various charities to let them know that they shouldn't reclaim gift aid tax, as I'm not intending to pay income tax for a few years.

All very personal ways of doing the same thing
We (wife and I) have been retired 20+ years so our system seems to work
Run 2 SIPPs and ISAs in Accumulation mode (3 index funds only-simple to follow)
A high interest bank cash account (now supplemented with 2 instant access cash ISAs due to rising interest rates) is kept topped up with 2 years living expenses
We run a joint current account
We run a joint Visa card account via which we aim to do all our spending -gives us protection and a paper receipt and a months credit grace if required
Run Quicken 2004 on an old computer running Win XP (plus a similar set up on an old laptop as backup)
Reconcile once a week -we both enter our own visa receipts -then I pay off Visa and top up current account as required from high interest bank account
One major withdrawal once a years from SIPPs and/or ISAs to top up high interest bank account (or instant access cash ISAs)
The Quicken home page lets us both know our current financial state -no arguments!
Worked -so far
xxd09

xxd09 wrote:Run Quicken 2004 on an old computer running Win XP (plus a similar set up on an old laptop as backup)

I run Quicken 2000 Deluxe on my current Windows 10 desktop system and it works perfectly. I don't think there's any need for such an ancient setup.

I backup to the cloud, and keep an image of the original installation CD, suits me fine.

Scott.

It was working in Win 10 but I have a Flight Sim computer so upgrading to Win11 did for Quicken 2004
Second hand computers are very cheap -£150 each
Got to keep those finance records functional and secure-I think I would be rather upset to lose all that money info
xxd09

xxd09 wrote:A high interest bank cash account (now supplemented with 2 instant access cash ISAs due to rising interest rates) is kept topped up with 2 years living expenses
We run a joint current account
We run a joint Visa card account via which we aim to do all our spending -gives us protection and a paper receipt and a months credit grace if required
Run Quicken 2004 on an old computer running Win XP (plus a similar set up on an old laptop as backup)
Reconcile once a week -we both enter our own visa receipts -then I pay off Visa and top up current account as required from high interest bank account

Wow you are organised - I was sorting the credit card receipts on top of the printer last week and found out how much our curry was in October 2021. We do check the bill to make sure there is nothing on there we don't recognise, but see no need for accounting software or spreadsheets excpet for the occasional tally of our assets.

Paul

xxd09 wrote:It was working in Win 10 but I have a Flight Sim computer so upgrading to Win11 did for Quicken 2004
Second hand computers are very cheap -£150 each.

Got to keep those finance records functional and secure-I think I would be rather upset to lose all that money info
xxd09

My wife loves to use Quicken (on her iMac) and she enters all her expenditure onto it, to the penny.

I am the opposite and feel no need to record any financial information, other than what I need for tax reporting.

Opposites attract, I guess. But both systems seem to work. If you did lose it all, you would manage.