I've been looking around at Stocks and Shares ISAs recently, thinking that it's time to diversify some of my cash holdings into, well, stocks and shares, but that would limit me to £20K Vesting every year, across all ISAs, including the cash ones I've got.
While I don't think I would exceed that £20K limit, as honestly I don't generally have £20K a year spare to stick into savings, nowhere near that, there might be one year in the not too distant future when I might exceed that, and a SIPP has a £60K investment limit.
On top of that the government gives you £20 tax relief, so for every £100 you pay in the government gives you £20.
So if you did stumble onto £60K and put that into a SIPP the government would put £15K into your bank account, although if that £60K came from inheritance or capital gains then you would have paid around 20% tax on it anyways so it's not as if you'd be gaining money overall, just not loosing any.
One can draw on a SIPP from age 57...
It was 55, but that's changing in 2028, actually just before I turn 55, but that doesn't really bother me as I don't think I could squirrel enough away in a SIPP before 2028 to make it worth drawing on anyway, so 5 years away rather than 3 years away works for me!
A possible plan...
I could transfer say £10K a year to a SIPP for the next five years, that'd give me £50K in there, and then I could use that money to subsidise my living from age 57 or maybe from age 58, before my Teacher's Pension kicks in....
One can take 25% lump sum tax free, so on £50K that'd be around £12K tax free but that's the only chunk yer allowed to take tax free, unless one takes it out when one's overall income is < the £12500 tax threshold, which is most unlikely to ever be the case!
But even with that 20% tax I could take out £8-10K for the following two years and then I've got a little bit left over for when I'm over 60.
And I've got my stocks and shares Vest too, I actually want something quite safe and secure!!!
And thinking about it to get £50K in, I'd only have to put in £40K, probably nearer £35K if I allow myself the luxury of assuming there will be some growth.
This would then allow me to work VERY MINIMAL HOURS from age 57/58 onwards...
I like this backwards financial planning...
I like the idea of putting money away for the long-ish term (NB I'm already pretty flush for proper retirement with my teacher's pension and what should be a full state pension) and stacking from the back, so putting money in a SIPP now ready to be used in 5-6 years time... thinking about financial freedom from the final year, rather than the first year, working backwards.
And other pots for other things...
So I'd obvs keep some cash, some other stocks and shares (probably in an ISA) and some metals, and obvs crypto, that'd be just for a slush fund, to yield me something, and for big-ticket items, such as a new car.
And mentally the SIPP money is purely to draw down in the medium term...
I don't want to SIPP to save for an annuity, that I've already got, this is purely for draw down, so mentally any money in here would be to spend from as early as 57 onwards...
Final thoughts...
I think I may need to do this, I may not make it to my £50K goal, but that's the target I'm going to have in mind.... it's not that far off, and it'll be nice to think of having £10K I can take out tax free in a few years time, and it is only a few years too.
Man, I am getting old!