SIPP withdrawal/drawdown

Is withdrawing money from your SIPP after 55 the same thing as "drawdown"?

It seems various platforms charge various fees (HL nothing, Fidelity nothing) for "drawdown" out of your pension plan.

Bestinvest quote a fee of £25 for "Ad hoc income payments". So does this mean I would be charged £25 each time I withdraw any money?
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  • Malthusian
    Malthusian Posts: 10,898
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    A_T wrote: »
    Is withdrawing money from your SIPP after 55 the same thing as "drawdown"?

    Not necessarily. Drawdown essentially means "crystallising" all or part of the fund and taking out the 25% tax free cash, but leaving the other 75% invested to provide income. There is also UFPLS, where you take out both the 25% tax free cash and the 75% taxable part all in one go.
    Bestinvest quote a fee of £25 for "Ad hoc income payments". So does this mean I would be charged £25 each time I withdraw any money?

    Only if it was an ad-hoc, one-off withdrawal and not a regular one. So if you write to them and ask to withdraw £X, they would charge you £25, but if you asked them to pay you £X every month, they would not charge you £25 every single month. But they would charge you £25 once for "Alteration of payment amount or frequency".
  • dunstonh
    dunstonh Posts: 116,044
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    Bestinvest quote a fee of £25 for "Ad hoc income payments". So does this mean I would be charged £25 each time I withdraw any money?

    Is that the fee for withdrawals on a plan that is already in drawdown? i.e. is there a fee to cystalise the fund to begin with and then all future ad-hoc payments are £25?
    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.
  • A_T
    A_T Posts: 959
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    dunstonh wrote: »
    Is that the fee for withdrawals on a plan that is already in drawdown? i.e. is there a fee to cystalise the fund to begin with and then all future ad-hoc payments are £25?

    Hi I'm not sure on that I'll have to check.


    Is it not possible just to sell all or part of a holding within a SIPP then withdraw the cash, as one might do with an ISA or share dealing account?
  • AnotherJoe
    AnotherJoe Posts: 19,622
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    A_T wrote: »
    Hi I'm not sure on that I'll have to check.

    Is it not possible just to sell all or part of a holding within a SIPP then withdraw the cash, as one might do with an ISA or share dealing account?

    Yes but there will still be tax to pay (or not, "it depends")

    A SIPP is not an ISA and the rules are different regards tax.
  • zagfles
    zagfles Posts: 20,279
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    A_T wrote: »
    Hi I'm not sure on that I'll have to check.


    Is it not possible just to sell all or part of a holding within a SIPP then withdraw the cash, as one might do with an ISA or share dealing account?
    You can sell holdings, but withdrawing the cash is a bit more complicated as apart from the 25% tax free, they need to pay the rest through PAYE (normally) so it gets taxed.
  • Audaxer
    Audaxer Posts: 3,506
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    zagfles wrote: »
    You can sell holdings, but withdrawing the cash is a bit more complicated as apart from the 25% tax free, they need to pay the rest through PAYE (normally) so it gets taxed.
    I'm over 55 and have just started looking at investing in a SIPP. I was under the impression it was fairly straightforward in that you could withdraw as much cash as you like when over 55, but for every withdrawl 25% would be tax free and the rest would be taxed at 20% (for a standard rate tax payer). Is that not the case?
  • dunstonh
    dunstonh Posts: 116,044
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    Audaxer wrote: »
    I'm over 55 and have just started looking at investing in a SIPP. I was under the impression it was fairly straightforward in that you could withdraw as much cash as you like when over 55, but for every withdrawl 25% would be tax free and the rest would be taxed at 20% (for a standard rate tax payer). Is that not the case?

    That is the case. However, each withdrawal is a new benefit cystallisation event. So, the background work and the potential consequences are greater than drawing from, say, an ISA.

    There are also different ways of doing it. You may draw the lump sum as 100% from your existing crystallised funds pot. Or you may crystallise a greater amount but only take 25% of that amount tax free leaving the 75% invested. Or you may do a bit of both.

    So, a bit of thinking from a tax point of view (mainly) is needed first.
    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.
  • AnotherJoe
    AnotherJoe Posts: 19,622
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    Audaxer wrote: »
    I'm over 55 and have just started looking at investing in a SIPP. I was under the impression it was fairly straightforward in that you could withdraw as much cash as you like when over 55, but for every withdrawl 25% would be tax free and the rest would be taxed at 20% (for a standard rate tax payer). Is that not the case?

    That's one way to do it and even then with that simple case there can be complications,to do with tax

    Without going into detail on all the options and permutations, what exactly are you looking to achieve ? For example will you have predictable withdrawal of money, or do you want to make ad hoc withdrawals, and how much money would you be withdrawing and will you be earning money and contributing to this pension or another at the same time ?
  • zagfles
    zagfles Posts: 20,279
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    Audaxer wrote: »
    I'm over 55 and have just started looking at investing in a SIPP. I was under the impression it was fairly straightforward in that you could withdraw as much cash as you like when over 55, but for every withdrawl 25% would be tax free and the rest would be taxed at 20% (for a standard rate tax payer). Is that not the case?
    The taxable part is paid like employment income, PAYE, the provider needs a tax code etc. It's not paid like bank interest used to be where they just deduct basic rate tax.
  • Audaxer
    Audaxer Posts: 3,506
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    AnotherJoe wrote: »
    That's one way to do it and even then with that simple case there can be complications,to do with tax

    Without going into detail on all the options and permutations, what exactly are you looking to achieve ? For example will you have predictable withdrawal of money, or do you want to make ad hoc withdrawals, and how much money would you be withdrawing and will you be earning money and contributing to this pension or another at the same time ?
    As I've recently learned more about investing I've moved some lump sums into S&S ISAs and plan to transfer more as Fixed Rate Cash ISAs mature. Since reading about SIPPs I thought it may be a good idea to transfer £2880 annually into a SIPP (to the same fund(s) as investing in ISA) and benefit from the government contribution to make it up to £3600 annually. I understand I would be limited to pay in £2880 annually as I have retired and only in receipt of pension income.

    I wouldn't need immediate access to the SIPP any more than I would my S&S ISAs, but I thought that if I did need to sell investments and draw cash, as I'm over 55 it would be as accessible in the SIPP as in the ISA, apart from the fact that I would be paying tax on 75% of the cash withdrawn?

    I would select a platform with no charges for withdrawing cash from a SIPP - I understand HL does not charge for that.

    Is it that straightforward or am I missing something?
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