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How to take 25% and then Drawdown from a SIPP
EdGasket
Posts: 3,503 Forumite
Question: Lets say I have a fully invested SIPP (with SippDeal) but decide I want to take 25% lump sum and start the drawdown. Do I sell 25% of the holdings myself and turn it into cash in order to draw out as a lump sum and leave the remainder invested or does it work some other way? I guess a similar question arrises for each drawdown payment although the cash required would be less; would I have to keep selling bits and bobs to cover each drawdown payment or does the SIPP provider raise cash by selling a bit of each holding in order to pay the drawdown payment?
Thanks for any help.
Thanks for any help.
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Comments
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You'll probably need to sell the holdings yourself. We certainly do when we sort out a client's drawdown for them.I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
So does that mean that once I am taking drawdown, I have to leave a chunk of the pension in cash earning little or zero interest so the Sipp provider can pay it to me ?0
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Basically, yes. Unless they offer a phased sale option.So does that mean that once I am taking drawdown, I have to leave a chunk of the pension in cash earning little or zero interest so the Sipp provider can pay it to me ?I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
Ok thanks; that must take a bit of planning then i.e. to remember to regulalarly sell enough to cover the drawdown or else put up with a larger portion of the pension in cash than necessary to avoid having to keep messing around with small sales.0
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OP, I have done it for two drawdown pensions with sippdeal. My small sipp and my dh`s large sipp, which I manage. I made sure that there was enough cash for the 25% plus any fees and I did that by selling various holdings. I then arranged when I wanted the pension drawdowns to start. I have had 2 drawdowns ie one each year since start, from my own small sipp and I make sure there is enough cash in there by the due date. For this pension I have everything invested so that I get cash dividends to more than cover the drawdown plus I think £15 fee. I do drawdown once a year as there is only one cost and I have arranged that for both sipps
The second sipp is large and I anticipate enough cash from dividends but if not, then I will sell some holdings before the due date. Its all very simple to do
I take one drawdown each year because it cuts down the cost and I can put the cash into a savings account and draw from that. eg investec high5 at 3+ % and I just need to give them notice at the appropriate time0 -
I take one drawdown each year because it cuts down the cost and I can put the cash into a savings account and draw from that. eg investec high5 at 3+ % and I just need to give them notice at the appropriate time
That sounds more like phased drawdown and is usually done because you get to save money on tax as the 25% is tax free and using it as income means you dont have to pay income tax whilst leaving a greater chunk of your pension as uncrystallised benefits.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
That sounds more like phased drawdown and is usually done because you get to save money on tax as the 25% is tax free and using it as income means you dont have to pay income tax whilst leaving a greater chunk of your pension as uncrystallised benefits.
yes correct. I didn`t have to phase it but I chose to have drawdown paid yearly in arrears.
re putting the cash into a savings account: I did mean that I would be putting the drawdown cash into a savings account next summer as it is more cost effective ie no liquidations during the following year and more interest0 -
Question: Lets say I have a fully invested SIPP (with SippDeal) but decide I want to take 25% lump sum and start the drawdown. Do I sell 25% of the holdings myself and turn it into cash in order to draw out as a lump sum and leave the remainder invested
Yes.Sippdeal's drawdown is on a DIY basis so you need to make sure the money is in the SIPP account for them to pay to you on the due dates .They will not interfere with your portfolio.You choose the payment dates to suit yourself of course.
'I guess a similar question arrises for each drawdown payment although the cash required would be less; would I have to keep selling bits and bobs to cover each drawdown payment [
Depends how you arrange it.I have all my annual drawdown income paid out once a year into my bank account,so I only have to make sure the cash account is stocked up once. I then draw income from the bank account.Cashing in investments monthly to pay yourself income from a drawdown SIPP is not economic, as you are incurring transaction charges.
Like kittie, I allow dividend income to accumulate in the cash account over the year, which costs nothing and usually earns a modicum of interest, and then top up if required by selling when the payout date arrives.Trying to keep it simple...
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Thanks for this thread.
I understood most things about SIPPs but still did not fully understand this area....until now. All very clear and makes me more inclined to move my SIPP monies over to SIPPDEAL for total control and low costs
Thanks!THE NUMBER is how much you need to live comfortably: very IMPORTANT as part 1 of Retirement Planning. (Average response to my thread is £26k pa)0 -
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