So how is this pension thing going to work...?

My savings over the past ten years

My last earned income was paid into my bank account on the 6th May 2019.  From this point on I'm relying on the money saved in my pension pot (the red line in the graph above) and my other savings (the gap between the red line and the blue line).

So what is my cunning plan to ensure I don't run out of money over the next few years?  Many people go for the annuity option, buying a guaranteed income for life, but I've decided against that for a couple of reasons.

• One, as a 55 year old, the rates are pretty poor in my opinion.  If I go for a flat annuity until I die, I can get about 4.24%.  If I want it to increase over time, so that I can maybe keep my income in line with inflation, then I'd get 2.48% to start and a small increase each year.  If I want Linda to have some continuing payment after I'm gone, then the payment drops even further - and she'll only get 50% of what I received. 
• Reason two is that with an annuity, OK you get the certainty of income until you die, but once you're gone, that's it, nothing left.

Well I think I can do better than buying annuities.  I think I can get a higher initial income, that will keep pace with inflation and will be available for Linda, should I die before her.

In simple terms, I believe that I will be able to buy a selection of shares that pay dividends and live off those dividends, without having to sell the shares.  In theory, that should provide an income for life, it should have the potential to increase over time and there should be no decrease in income if I should die before Linda.

Of course, there is no guarantee that there wont be a stock market crash, but I believe I can invest in a diverse range of stocks that should significant mitigate any downside risks.

My current position is that 72% of my retirement fund is held within a pension wrapper and 28% is held in other investments (mostly shares in an ISA). I'm happy with what the non-pension investments are doing - but I do need to make up my mind about the pension wrapped savings.  At the point of leaving IBM, about 20% of my pension was in a SIPP, with the rest contained in IBM's money purchase scheme.  Unfortunately, actually getting any money is not a fast process.  Because I want to use "flexible draw down" rather than buy an annuity, I have to transfer my pension out of the IBM scheme into an alternative that will support flexible draw down.  I completed the forms required for this and sent them off to the pension company before I left IBM - however, they wont process any instructions for a transfer out until they get confirmation from IBM that I have actually left IBM.  I could see that things were moving on the 11th June, as the funds in my IBM pension were sold and the money transferred out.  Six day's later, the money arrived on June 17th and was credited to my SIPP account.

I now have to decide how to invest that money and also go through the process of requesting the 25% tax free lump sum that I'm able to claim upon retiring.  So far I've completed the initial "I want my money" form and submitted it on Tuesday 18th.  This resulted in a questionnaire being sent to me on the 20th which needs to be completed before I can proceed any further.  I've completed that and returned it - so now I wait....

At the moment my pension fund is about 80% cash - I've decided to leave it that way until I've got my 25% out.  Once that occurs, I'll post on what I've decided to invest in and what my plan will be to draw down the remaining funds in the pension wrapper.