SIPP portfolio and planning for drawdown
Posted: May 30th, 2024, 12:59 pm
Hi,
In 5 years, at age 57, I plan to reduce my independent consulting work and begin drawing a regular income from my SIPP.
Consequently, I'm considering gradually building up a high-yield income approach from uninvested cash.
Context
As background, I switched tax residency back to Hungary shortly after COVID border restrictions put an end to my live-in-Hungary/London consulting lifestyle. The treatment of foreign pensions (as per the Double Taxation Treaty) is favourable since the local tax authority applies no income tax (confirmed locally with professional advice). This treatment can change, of course, but for now, this looks to be a low probability.
In addition to my SIPP, I qualify for a mostly full state pension (extra years were bought where it made sense) and have a smallish DB pension. In theory, both should become accessible when I'm 67, but I won't be holding my breath (!).
When I reach 57, two of my three children will likely be at university or working. Bank of Dad is cash liquidated from ISAs prior to switching tax residency. These funds are now mostly held in Hungarian Treasuries to maintain spending power. Today, family running costs are relatively low at around ~5000EUR per month.
My SIPP income will mainly support my wife and me, in addition to a reduced consulting income and some extra money from MES Futures trading.
Portfolio idea
For the past 4 years or so I have primarily invested in UK small cap, high growth stocks. With careful risk management, I have achieved total returns I am happy with whilst sitting about 2/3 in cash (cash interest from ii at 3.5% ish). I plan to start diverting some of the uninvested cash into high-yield FTSE350 shares resulting in a 50% allocation to HYP (20 holdings w/2.5% max position size). A further 30% will be held in a FTSE250 tracker and 20% will be dedicated to growth stocks (i.e. a 10-13% smaller allocation than now). This suits my risk appetite.
If I treat the SP/DB pensions as bond proxies, then the obvious answer is to start pound cost averaging into these new positions, perhaps starting with out of favour sectors with depressed prices. Or am I trying to be too clever?
In 5 years, at age 57, I plan to reduce my independent consulting work and begin drawing a regular income from my SIPP.
Consequently, I'm considering gradually building up a high-yield income approach from uninvested cash.
Context
As background, I switched tax residency back to Hungary shortly after COVID border restrictions put an end to my live-in-Hungary/London consulting lifestyle. The treatment of foreign pensions (as per the Double Taxation Treaty) is favourable since the local tax authority applies no income tax (confirmed locally with professional advice). This treatment can change, of course, but for now, this looks to be a low probability.
In addition to my SIPP, I qualify for a mostly full state pension (extra years were bought where it made sense) and have a smallish DB pension. In theory, both should become accessible when I'm 67, but I won't be holding my breath (!).
When I reach 57, two of my three children will likely be at university or working. Bank of Dad is cash liquidated from ISAs prior to switching tax residency. These funds are now mostly held in Hungarian Treasuries to maintain spending power. Today, family running costs are relatively low at around ~5000EUR per month.
My SIPP income will mainly support my wife and me, in addition to a reduced consulting income and some extra money from MES Futures trading.
Portfolio idea
For the past 4 years or so I have primarily invested in UK small cap, high growth stocks. With careful risk management, I have achieved total returns I am happy with whilst sitting about 2/3 in cash (cash interest from ii at 3.5% ish). I plan to start diverting some of the uninvested cash into high-yield FTSE350 shares resulting in a 50% allocation to HYP (20 holdings w/2.5% max position size). A further 30% will be held in a FTSE250 tracker and 20% will be dedicated to growth stocks (i.e. a 10-13% smaller allocation than now). This suits my risk appetite.
If I treat the SP/DB pensions as bond proxies, then the obvious answer is to start pound cost averaging into these new positions, perhaps starting with out of favour sectors with depressed prices. Or am I trying to be too clever?