Still confused by drawdown

Liffy99 · 18 January 2018 at 2:40PM

I have a SIPP with Interactive Investor, at present comprised of just 4 funds.
Now 61, I don’t intend withdrawing anything from this SIPP for 2 or 3 years, but want to start taking money from it then.
I don’t need an upfront, tax free lump sum (I assume this is what is known as the PCLS).
I also think I understand that I would therefore pay tax on 75% of each withdrawal ( is this UFPLS ?).
My question is about the mechanics of how I do this;
A ) do I simply ask II to send me a sum of cash and they sell investments as needed ?

do I personally sell investments thereby providing a cash pot I can withdraw
C) or do I need to somehow convert the pot into ‘drawdown’ ? Do I convert the whole pot (which I assume remains invested and thence subject to the activities in A and

Looking at II charges, it would make sense for me to simply withdraw a single sum at the end of each tax year, rather than seeking income.
Thanks

AnotherJoe · 18 January 2018 at 3:37PM

I don’t know II but based on HL which I would expecto be very similar, you can do either or both A/B but you are better off deciding which investments to sell to release the cash you need. I have a vague recollection they have some means to determine which investments to sell should you not have enough cash but I think that would be a bad idea to leave it to that.

With HL, so I’d expect II, you do need to put the fund into a “drawdown state” which as I recall was basically signing forms and possibly providing ID (don’t recall) to prove you were entitled to withdraw and to indicate you understood the consequences and also setting up a default bank account.

bostonerimus · 18 January 2018 at 4:02PM

Many people keep about a year's cash in the bank and then top that up at 6 month intervals with money from drawdown, that might come from dividends, capital gains or in a bad market capital They will use the sales to rebalance back to their target allocation.

Liffy99 · 18 January 2018 at 6:21PM

Thanks but I am not worried about strategy but the mechanics of actually getting the money out.

Linton · 18 January 2018 at 6:52PM

Liffy99 wrote: »

......
A ) do I simply ask II to send me a sum of cash and they sell investments as needed ?
do I personally sell investments thereby providing a cash pot I can withdraw
C) or do I need to somehow convert the pot into ‘drawdown’ ? Do I convert the whole pot (which I assume remains invested and thence subject to the activities in A and
Looking at II charges, it would make sense for me to simply withdraw a single sum at the end of each tax year, rather than seeking income.
Thanks

You look at http://www.iii.co.uk/sipp/useful-forms

You then send this form to ii:
http://www.iii.co.uk/pdf/466456/taking-pension-benefits
to register the fact that you are about to start taking benefits and to specify your first drawdown.

The Ts and Cs require you have the appropriate cash available in your account when payment is to be made.

bostonerimus · 18 January 2018 at 10:27PM

Liffy99 wrote: »

Thanks but I am not worried about strategy but the mechanics of actually getting the money out.

Then a call to your pension administrator/provider would be useful. I'm sure they'll send you the necessary info/forms/weblinks

zagfles · 18 January 2018 at 11:24PM

Taking a UFPLS doesn't put your pot into drawdown, that's the point of it, you take a lump sum without crystallising the pot.

green_man · 18 January 2018 at 11:37PM

I’m in a similar position to the OP, looking to drawdown in a couple of years. As far as I can tell going into ‘drawdown’ means taking the 25% tax free upfront and then taking the rest of the pot as required. If you want to do what the OP (and I) want, then it seems you are taking instead a series of UFPLS. Many providers charge per UFPLS which means taking these as Monthly income might not be cost viable. Or am I misunderstanding here, surely that I and OP require must be pretty common.

Liffy99 · 19 January 2018 at 10:30AM

Thanks, but I find the forms unhelpful and trying to get through to II at the moment is an art form !
What does ‘crystallising ‘ the pot actually mean and what effect does it have ?
Does it mean I can no longer contribute to it even though it may stay invested ?

So what then, if UFPLS does not crystallise the pot, is the difference if remaining funds still remain invested ?

Am I right in thinking that taking an upfront tax free lump sum (PCLS, not UFPLS ?) will not crystallise the pot and contributions can continue to be made up to £40k per year (if sufficient income ) ?

If taking UFPLS, there is a charge per withdrawal (£60 inc VAT) so doing this once at the end of the tax year is cheaper than opting for monthly income.

Liffy99 · 19 January 2018 at 10:33AM

So, it seems to me I;

1) sell some investments to hold the cash amount I want to withdraw
2) submit relevant form on UFPLS to II
3) II then deduct appropriate tax and send me the balance
4) pay II £60 and repeat annually

Although now retired I can still pay in £2880 to the pot if I wan to.

zagfles · 19 January 2018 at 6:35PM

Crystallised means you have taken the PCLS, any further income you draw from the crystallised pot will be taxable in full.

Taking a UFPLS does not crystallise the pot. So you can take further UFPLS or PCLS.

You can partially crystallise a pot ("phased drawdown"). Say you have a £200k pot and want £25k PCLS out. You crystallise half the pot, take £25k PCLS, remaning £75k crystallised. Other £100k is uncrystallised.

So you can draw taxable income from the crystallised £75k but no PCLS or UFPLS from that part. But you can take UFPLS from the uncrystallised £100k, or contribute more, or take PCLS by crystallising more.

Still confused by drawdown

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