Sunday, 21 June 2020

SIPP Drawdown - Year 8 Update

It's June, another 12 months has rolled by so it must be time to review my SIPP drawdown portfolio at the end of its eighth anniversary. Here’s a link to the previous update of June 2019.

The original plan when I started drawdown in 2012 was to generate a rising natural income from which I would withdraw 4% income which I calculated should be sustainable over the longer term without depleting the capital. This would bridge the 10 year gap between early retirement at age 55 yrs and state pension.

In 2018 my state pension kicked in - currently £9,000 p.a. - I also have tax-free income from my ISA if required and so I am no longer reliant on income from my SIPP which means I have more flexibility on investment choices.

Portfolio Changes

My efforts to move towards a more climate-friendly portfolio are well documented over the past 18 months and this naturally includes my drawdown portfolio so there have been a quite few changes. 

My main focus over the past year has been to move to fossil-free investments - and therefore the sale of the global multi-asset index funds which all hold significant percentages of the oil majors such as Exxon, Shell and BP as well as the big banks which finance their operations. I want my investments to support more sustainable solutions such as renewable energy and other environmentally friendly funds which are more aligned with my values.

It looks like the penny is starting to drop for the big oil companies. BP have scrapped their $75/barrel 30 year projection and will now work on $55, which I suspect is still overly optimistic. They have acknowledged that the pandemic will probably accelerate the pace of transition to a lower carbon economy. This excellent YouTube video by Carbon Tracker "You Can't Burn It All - A Tale of Two Investors" is well worth watching and a reminder of the growing risks of investing in fossil fuels.

Last year I introduced Bluefield Solar, TRIG, iShares Clean Energy ETF and this 'green' sector has expanded significanly over the past 12 months to include more renewable infrastructure trusts as well as a couple of stand alone company shares.

(click to enlarge)

The best (and luckiest) addition was ITM Power last August - the share price has really taken off in the past couple of months and is now worth 7x what I bought them for and this has given a significant boost to the portfolio value.

However, the sharp downturn in March reminded me to pay more attention to asset allocation and I have added some government bond ETFs to partly replace the bond element contained in the multi-asset Lifestrategy/HSBC holdings.


The big story dominating the news these past few months has been the coronavirus pandemic which started in China in January and quickly engulfed the whole world bringing it to a near shut-down. The markets took a sharp downturn in March but have recovered much of the lost ground over the past couple of months. I am expecting more volatility when the effects of the lockdown are fully realised and I think this may take some years to unravel and is likely to have far more impact on the global economy than I originally thought at the start.

Over the past 12 months, the FTSE 100 has seen a significant decline of 15.5% from 7,443 last June to currently 6,292. Following the sale of significant holdings in my global multi-asset funds last Autumn I was sitting on large cash proceeds for a while however my SIPP portfolio is now more fully invested and it is pleasing to see a gain of 33% over the year. Much of this is down to just a couple of individual shares - ITMPower adding £19,000 and Orsted adding £6,000.

I probably need to scale back my holding in ITM and diversify some of the gains into the wider 'green' market. One option would be Baillie Gifford Positive Change which I hold in my ISA and which will compliment the Trojan Ethical Fund. I probably should also increase the proportion of my government bond funds which currently account for just over 20% of the portfolio.

Here is the current portfolio
19th June 2020  (click to enlarge)


In June 2012 when I started this series on my drawdown journey, the FTSE 100 was 5,500 and has risen to 6,292 - a gain of just 14.4%. If we add in average dividends of say 3.8% each year, this gives a rough total return of 45%

In June 2012, the Vanguard LS 60 (acc) price was £105 and today stands at £199 - a gain of 89% or annualised average of 8.3% p.a.

Taking account of the income withdrawn over the past 8 years of £19,400, the total return including income is 135% which is very satisfactory and works out at an average annualised return of 11.3% p.a.

State Pension

For most of the past decade I have relied upon income from my SIPP to supplement my ISA income and bridge the 10 year gap between early retirement at age 55 yrs and state pension. This part of the journey became 'mission accomplished' in 2018.

My state pension has now been in payment for just over two year which is long enough for me to know that I do not need to continue with drawdown from my SIPP. As it is a flexi-drawdown arrangement, I can always dip in at any time for a lump sum withdrawal if required. I will therefore be less reliant on the income from my SIPP for essential living costs and it will become more for discretionary spending or more likely remain invested.

Unlike an annuity which, once purchased means the capital lump sum is lost forever, any residue in my SIPP will pass on to my children and free if I go before the age of 75 yrs and thereafter possibly 20% or tax free depending on circumstances. For those interested here's a link on the AJ Bell site.

Obviously I am really happy with my first few years of self-managing a flexi-drawdown sipp portfolio. For the first few years, the dividend income predictably rolled in much as planned and importantly, increased each year a little ahead of inflation. During the next three years I have withdrawn significant lump sums tax free and placed the excess which I did not require for income in my ISA. Of course, there are no tax liabilities for all monies subsequently withdrawn from my ISA.

I now need little or no income from my SIPP in the future and will therefore focus on longer term growth combined with environmentally responsible options. As I am no longer depleting the capital, this should hopefully grow much the same as during the accumulation phase before drawdown and in the knowledge the pot can be inherited by children and grandchildren possibly tax-free at some point in the future if not needed for care home fees!

For me, the big advantage of the SIPP is the flexibility it offers. I started off with a portfolio of income-generating investment trusts. I then introduced the multi-asset, globally diverse index funds such as Lifestrategy and now I can focus on more climate-friendly options and do my bit for the planet. It certainly feels much better to have aligned my investments with my values and lifestyle and know I am no longer investing in fossil fuels which are continuing to add to global warming and undermine efforts to tackle the climate crisis.

What's not to like!

If you are managing your SIPP accumulation or drawdown or you are planning to do this, feel free to share your experience in the comments below.


  1. Good update - it's good that you have gone from making your money work to making work for good.
    And you've been rewarded hansomely for it too!

    1. Thanks GFF. I like the idea of moving from a position where you are working for money to making money work for you...then making money work for the good of the planet adds a new twist!

      Of course, the personal reward has been an uplift in my portfolio but the ultimate reward is the chance of an inhabitable world for my grandchildren. When I see large areas of Siberia (above the Arctic circle) hitting 38C this weekend I get really worried...that's 30C above normal for the time of year.

  2. Great write up. 8 years of blog updates is good going, you are perhaps the father figure of the UK fire movement! It's good to have survived the covid 19 market correction. The market looks a lot different now than 6 months ago, with the oil majors and airlines dropping down, and tesla (for now), technology and pharmaceuticals in the ascendancy. In Sipp acc phase so long way off for me. Cheers

    1. Cheers Adam. The writing has been on the wall for some time in relation to big oil so I am not surprised to see their demise as we inevitably transition to cleaner more sustainable forms of energy. I hope we will be looking back in 10 years and wondering why we were investing in fossil fuels for so long!

      Good luck with your SIPP journey.

  3. Great update. I am 3 years off drawing on my SIPP and starting to reduce the volatility by moving some investments into lower risk core funds. I'm not following the green/sustainable route but my portfolio consists of 4 investment trusts and a number of passive funds. Like you, my plan (fingers crossed) is to generate 4% growth without eroding the capital. I have enjoyed following your blog and success.

    1. Thanks Ian.

      The good think about managing your sipp is that you have the freedom to choose the route to achieve your goals and destination. With a target of 4% p.a. I would certainly think this would be possible from a good mix of passive funds and some investment trusts.

      As I highlight above, the VLS60 has returned an average of 8.3% on average over the past 8 years.

      So, not long to go now. Good luck with the final three years!

  4. Great update, DIY - always enjoy how you're getting on with drawdown. It's been really interesting reading about your change in strategy from income to a broader index to now completely green portfolio.

    I was looking at ITM Power recently but fear that I have missed the boat on that one and that any gains are likely to be minimal if I was to buy now.

    1. Thanks weenie.

      FWIW I think there is much more to come from these hydrogen companies, we are just at the start of the transition from fossil fuels to renewables and I think green hydrogen will play a major role in many aspects - energy, transport, airlines, shipping etc.

      Obviously the shares are very volatile - ITM down 10% today and 30% past month but they could announce some news next month which sends the price back up.

      So, short term volatile but long term I am v positive for this sector. Of course, one or two may fail but hopefully several will make the real breakthrough which is why I have a good spread in my portfolio (ISA).

  5. Hi DIY - interesting update as ever. I'm curious if you have any thoughts on the iShares World SRI ETF which now tracks the MSCI World SRI Select Reduced Fossil Fuels index. No worries if not. L

    1. Thanks for flagging this one up L, it's certainly an improvement on most of the global index funds and the move to the new index last November has probably filtered out most of the 'baddies'. I think if you combined it with a quality bond fund and rebalanced between the two, it could offer a neat solution for those ethical investors who wish to keep it nice and simple.

      I must remember to include this in the next update of my book "DIY Simple Investing"!

  6. Interesting post - I've shuffled my own pension around after reading your blog. I was looking to decarbonise my pension and your portfolio really helped with finding green funds, fortunately I made the switch in January before the markets got turbulent (although it wasn't the cheapest time).

    1. Hi Greg,

      Good to hear you are shifting away from fossil fuels. The divestment movement seems to be gathering steam...last week Pope Francis was urging all Catholics to ditch coal, oil and gas investments.

      Out of interest, which green funds have you moved into?

  7. Congratulations on anoter great post and remarkably successful year. It's always disillusioning reading investment forums (like Citywire) where green options are barely mentioned so your blog is a great counterweight. Long may it continue.
    Incidentally, I was wondering what your thoughts were on Good Energy as a potential stock option. The company's been through a torrid few years and but the share price seems to be slowly on the move again. FWIW, I'm a long-term customer.

    1. Thanks bern and good to hear you appreciate some 'green' investing options.

      As for Good Energy, it has been on my reserve watch list for some time and I came very close to buying at 120p in March but there was so much other stuff going on and it didn't happen...currently 190p. I like the fact they seem to be really committed to green sustainable business and have a tie up with Orsted to secure some of their clean energy from N Sea offshore windfarm. Unfortunately the market is very competitive with lots of companies jumping on the green bandwagon and I suspect they will find it difficult to make much progress but I applaud their efforts and longstanding focus on climate-related issues.