Early Retirement

income drawdown - godiva
Income Drawdown – Defined Contribution Pension to a SIPP
9th October 2018
Commercial Property Purchase
Commercial Property Purchase
9th October 2018



Richard and Marie were exploring early retirement. However, they wanted to understand whether their pensions, savings and investments would cover the cost of their desired lifestyle for the years to come.

Richard and Marie are both 55 years old. Richard is an IT Consultant and Marie works for the local authority as a higher-level teaching assistant.

The couple own a home worth £300,000, with no mortgage. They have around £80,000 in cash Deposits and £32,000 in Cash ISAs. Richard has accumulated £267,000 in his employers Defined Contribution scheme and deferred benefits in two Occupational Defined Benefit schemes, both with previous employers. Marie has been accruing benefits under her local authority pension scheme.

Godiva Wealth Management specialises in providing a professional, high quality, bespoke advice service to both private and corporate clients


• Richard wanted to retire and pursue his hobbies; Marie was happy to continue working for a few more years. They wanted to understand what their cost of living in retirement would be and how they would meet this with their pensions.

• Richard conducted some research and thought he should take his annual pension from the Defined Benefit pensions. He then sought to transfer his Defined Contribution pension to a SIPP and draw out the maximum tax-free lump sum of 25% (around £66,750) to add to his savings and additional income.


At Godiva Wealth Management, we completed a budget planner and established that Richard and Marie needed £10,000 for the first year to cover their desired lifestyle. We discussed their attitude to investment risk, their investment experience and their capacity for loss; all in order to ensure any recommendations were suitable.

We concluded that they should take the following actions:

• Richard should defer his two Defined Benefit pension scheme of approx. £15,000 until age 65.

• Transfer Richards’s Defined Contribution Pension to a SIPP and crystalise £14000 to enable a phased income of £10,500 per annum and Tax-Free Cash of £3500. This can be used for one year’s income shortfall.

• Transfer the Cash ISAs in order to benefit for longer term growth and potential income, suited to their risk profile.

Maximise ISA allowances for the current tax year and repeat for the following tax year(s)



We secured enough income for Richard and Marie to cover the cost of their desired lifestyle.

By not taking the full tax-free lump sum in one go, Richard has the potential for his tax-free lump sum to increase in the future, subject to stock market growth.

By selecting an income below the personal allowance, Richard’s income of £10,500 wouldn’t be taxed.

On an ongoing basis Richard and Marie can adjust their income needs to suit their lifestyle, either from Richards pension or topped up from their ISA savings which are deemed tax free.