Taking first UFPLS from a small Hargreaves Lansdown SIPP

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  • I've just filled in the HL form "Application for flexible drawdown from the Vantage SIPP" for my wife and had a telephone conversation with HL to clarify a couple of things.This applies directly to my wife's situation where, as somebody with only a state pension as income, she wants to put in £2880 each year until she is 75 and draw out the maximum tax free 25% with the rest going to drawdown. She then wants to draw out the maximum income she can take each year without paying any tax according to her tax code. However, she wants as little involvement with HMRC as possible! After talking to HL, I've ticked the box to move my entire SIPP into drawdown. I've also ticked the box to take the maximum tax-free tax available and the box to take no regular income. The HL chap I spoke to told me to add a note saying that drawdown was not to take place until AFTER the top up from the revenue in March. It seems as though if I return the form without a note they could trigger the 25% tax-free payment from the initial £2880 BEFORE the £720 top up. I told him that my wife would be taking no income this year as it would then be taxed under an emergency code. I also told him that in subsequent years I wanted to take income of £10 (as suggested earlier by jamesd) to trigger HL getting a tax code for my wife and that she would then be taking the maximum income according to her tax code to ensure it was tax-free and that it would be a one-off income payment near the end of the tax year when HL would have a tax code for my wife. He told me this was O.K. The only downside is this only applies for a year and therefore we have to request and fill in the same form every year. However, we can telephone to trigger the income payments and find out my wife's tax code. Hope this helps anybody else trying to do the same thing.
  • Further to my last email, I've just checked and the tax-free top up will not happen until April 21st (i.e. the next tax year). Therefore, if we sent off the drawdown application form now, I assume the maximum (25%) tax-free withdrawal would only be based on £2880. We could keep the drawdown application until after April, 21st next year but will probably send the drawdown application through immediately and get a tax-free payment of £720. My wife will be able to withdraw the remaining £180 tax free in any case sometime later because of her tax code.
  • jamesd
    jamesd Posts: 26,103
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    That's why the HL chap said to include a note to wait until after the tax relief is added when sending off the form.
  • jamesd wrote: »
    That's why the HL chap said to include a note to wait until after the tax relief is added when sending off the form.
    Indeed. I think I'd got it in my head that if you requested drawdown HL would automatically wait until they had received the top up before moving it but it seems as though unless you tell them otherwise the lump sum requested will be taken from the current amount in the SIPP account as soon as they receive the form. In future years we will wait until the top up has been added and they send the drawdown application to HL and as soon as the residue has been moved into drawdown will request an income payment of £10 as you suggested to trigger the tax code for HL. I guess we could leave the £2880 for the current tax year in the SIPP account and then add another £2880 immediately in the next tax year but the top up for that payment would probably not be added until June? I guess if my wife then drew a £10 income immediately that should give time for her tax code to be passed to HL before the following April?
  • jamesd
    jamesd Posts: 26,103
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    Or just set up a regular monthly payment from the drawdown account that wouldn't cause it to run out for say fifteen months, then just forget about it except for taking the tax free lump sum each year and tweaking the amount being taken up a bit after the first year. That way HMRC will automatically send them a new tax code.

    Could even set up monthly £10 and when the tax code is in place take out the bulk of it, just leaving in initially £150. Or £1 and £15 if you want more out faster in a lump or want most of it invested most of the time.

    Whatever makes your life easiest while getting HMRC to do the admin without trouble is what I like.
  • jamesd wrote: »
    Or just set up a regular monthly payment from the drawdown account that wouldn't cause it to run out for say fifteen months, then just forget about it except for taking the tax free lump sum each year and tweaking the amount being taken up a bit after the first year. That way HMRC will automatically send them a new tax code.

    Could even set up monthly £10 and when the tax code is in place take out the bulk of it, just leaving in initially £150. Or £1 and £15 if you want more out faster in a lump or want most of it invested most of the time.

    Whatever makes your life easiest while getting HMRC to do the admin without trouble is what I like.
    Presumably, we could send back the flexible drawdown form immediately to HL and my wife could receive £720 (25% of the £2880 currently in her SIPP account) in the current tax year with the rest being moved into drawdown and no income taken in the current tax year. If we then added another £2880 into her SIPP account on April 6th, I assume that her top up of £720 from the original £2880 would then be added into the SIPP account on April 21st making a total of £3600 in her SIPP account which we could then take 25% and put the rest to drawdown or wait a month or so until another £720 top up was added to the second £2880 and then take 25% of the £4320 and put the rest in drawdown?
  • jamesd
    jamesd Posts: 26,103
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    Yes, you can do that.
  • jamesd wrote: »
    Yes, you can do that.
    I think that's the way we'll go. Many thanks for all your help on this subject. I finally think I understand a little bit about how drawdown works after all this advice!
  • Nationwide8
    Nationwide8 Posts: 362
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    edited 25 March 2017 at 3:34PM
    digannio wrote: »
    I have done this twice with HL, in June 2015 and June, 2016, in each case withdrawing £3,600 after depositing £2,880 into the cash account in my SIPP and this is how it worked for me.

    I ran through the simple risk questions over the phone (you can also send the form back through the post) and then was sent an application form detailing how much I wanted to withdraw etc. I sent this back and the money came into my nominated account within a few days.

    At the time of my last UFPLS there was no arrangement in place for them to just transfer the money over after a telephone request. Running through the risk questions and filling in the subsequent application was the only way to do it. Maybe that's been simplified more recently but the above is my experience of it so far. Guess I'll find out in June when I do it again.

    My UFPLS payment was taxed and I just claimed that back from HMRC straight away.

    Hope this helps.

    The £720 was added on the exact date it should have been 21st March:)

    Plan is/was to take out the 25% tax free ( £900 ) and then another taxable amount ( yet to be decided ) so my correct tax code goes from HMRC to HL.

    Phoned HL this morning and the process is still as you describe above,lump sum withdrawals cannot be done by phone or online,although I did notice a poster above managed to do it by phone ??

    Asked if the taxable amount will be paid out by HL in this tax year but lady on the phone not sure as it depends when HL gets the withdrawal forms and when they process it.
    On the other "£2880" thread though it seems it's too late to be processed for this tax year.

    Can I also ask,is the "easy" to claim the tax back ?? Having never done it its all new to me !!
  • bowlhead99
    bowlhead99 Posts: 12,295
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    edited 25 March 2017 at 5:07PM
    Phoned HL this morning and the process is still as you describe above,lump sum withdrawals cannot be done by phone or online,although I did notice a poster above managed to do it by phone ??
    The process may have changed from what Jerben described in terms of being able to do it exclusively over the phone if you have never taken a UFPLS before. According to them, they do need to receive a hardcopy signed application document with the various declarations which are made on the form. I don't know if this is relaxed if you are doing it on subsequent occasions.

    I spoke to HL a couple of days ago, as my Mum had not received the application form which they should have emailed after receiving the risk questionnaire which she had posted in (which she had done the morning after my first post in this thread). She had not followed it up, having been away on hol anyway.

    After I quoted her customer number the guy was able to confirm that her questionnaire had been received and quote the time and date the application form had been been sent out as a pdf (which was the same day the questionnaire would have arrived to them in the post); perhaps she accidentally deleted it or filtered it thinking it spam - but he just emailed the form again which they received fine that evening.

    Anyway, in the call I initially said the aim was to get the UFPLS arranged and paid before tax year end and he said it would be very tight. However after I'd explained that we'd already received the UFPLS information pack and questionnaire and sent it back, and he checked that they had indeed got it back, he said that they would need to get the application form in to proceed but if she completed it and posted it Friday with guaranteed next day delivery from a post office, it would definitely reach their offices on the Saturday (today) so they should be able to get it processed to complete the payment in time.

    I asked given that time was tight, could my mum just ring and go through whatever risk or other questions were needed (given they'd already got her bank account on file) etc or would it have to be a hardcopy paper application form with a physical signature, and he said they did already have the risk questions acknowledged but the application itself for the specific amount of money you want and the relevant declarations had to be the signed form.

    Anyway, the call was Thursday evening; after looking at the pdf application form from my parents I talked them through what boxes to tick and amounts to put in (pretty straightforward really) and there was a request for photocopy ID for proof of age. They sent all that off although didn't do it on Friday as planned, but it will catch the post this morning so HL should have it Monday 27th and then it's just a case of crossing fingers!
    Asked if the taxable amount will be paid out by HL in this tax year but lady on the phone not sure as it depends when HL gets the withdrawal forms and when they process it.
    On the other "£2880" thread though it seems it's too late to be processed for this tax year.
    On that thread someone mentioned the time of the month that a drawdown request would need to have been made for HL to process a monthly drawdown payment that month - which was part of what prompted me to kick my parents into action when I started this thread.

    But I got the impression that particular comment was for ongoing drawdowns, whereas UFPLS lump sums are by their nature more ad-hoc so one might think they can be processed as and when the applications are received (just like ISA withdrawals) rather than on a fixed day each month. Certainly the fellow seemed hopeful and positive that it would be OK if they got the final application in by today, compared to his initial reluctance and thinking it would be tight if only just starting the process. But if it drags into next week, who knows.
    Can I also ask,is the "easy" to claim the tax back ?? Having never done it its all new to me !!
    That's easy enough. If too much tax has been deducted, getting tax back is basically just a case of declaring to HMRC how much income you actually got for the year from different sources (salary, pension, bank interest etc etc) and how much tax has been deducted at source and then the number which is over or under-paid will just fall out as a figure at the bottom. You can give them bank details or request a cheque.

    In theory you can just write to tell HMRC your facts and the fact you have been over-deducted and they will check the facts and sort it out without you needing to do a full tax return if your personal tax affairs aren't complicated. But when your personal tax affairs are not complicated, an online tax return is pretty straightforward as it is only asking questions you should know the answer to, and only shows you the pages of the return that are relevant to your circumstances which you can set up with yes/no questions at the start, and it does the maths for you. The only hard bit is remembering your password / login details from year to year because it's a once-a-year thing to do.

    But still probably just as easy to register and do that 'self assessment' tax return than writing letters and being stuck on hold when phoning up to clarify things etc. Once you are set up with them online you can see your tax code and inform them of relevant changes etc, all quite simple when you get the hang of it.
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