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  • FIRST POST
    • EdSwippet
    • By EdSwippet 16th Jun 17, 5:32 PM
    • 595Posts
    • 565Thanks
    EdSwippet
    Best (and worst?) SIPP providers for flexible drawdown?
    • #1
    • 16th Jun 17, 5:32 PM
    Best (and worst?) SIPP providers for flexible drawdown? 16th Jun 17 at 5:32 PM
    The time for me to crystallise my full DC pension and duck under the LTA is fast approaching. Before I do, I need to investigate which SIPP providers offer user-friendly and cost-effective flexible drawdown, and then coalesce my three pensions into one before crystallising the lot.

    So... I'm looking for any first-hand "reviews" of how flexible drawdown operates on the main SIPP platforms widely discussed here. Most SIPP providers seem oddly cagey, if not downright opaque, about exactly how they manage flexible drawdown on their platforms, so feedback that will help steer me towards -- or perhaps away from -- a provider would be very useful.

    For background, I don't expect to actually draw on the pension for a year or three after crystallising. For now this is purely to defuse LTA issues, so actual withdrawal efficiency (monthly payments and so on) is less important than avoiding erosion by fees. I hold passive tracker funds, meaning platforms like HL that charge egregiously for funds would be less attractive than others, though at the extreme a move to ETFs is not out of the question.

    Any recommendations for candidates? Or anti-recommendations? Particular issues or traps I should watch out for before diving headlong into a possible rest-of-life relationship with a single SIPP provider? Thanks.
Page 1
    • dunstonh
    • By dunstonh 16th Jun 17, 5:40 PM
    • 89,561 Posts
    • 56,017 Thanks
    dunstonh
    • #2
    • 16th Jun 17, 5:40 PM
    • #2
    • 16th Jun 17, 5:40 PM
    Most SIPP providers seem oddly cagey, if not downright opaque, about exactly how they manage flexible drawdown on their platforms
    If you are talking about DIY providers, then they do not manage it. You do that. That is the point of DIY.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Linton
    • By Linton 16th Jun 17, 6:07 PM
    • 8,493 Posts
    • 8,436 Thanks
    Linton
    • #3
    • 16th Jun 17, 6:07 PM
    • #3
    • 16th Jun 17, 6:07 PM
    Surely all online SIPP drawdown providers must operate their drawdown in much the same way. It's just a matter of once a month/year picking up the predefined cash amount from the customer account at the predefined time and running it through a payroll system. It should all be automated.

    We have never had any problems with AJBell and BestInvest.
    • EdSwippet
    • By EdSwippet 16th Jun 17, 7:48 PM
    • 595 Posts
    • 565 Thanks
    EdSwippet
    • #4
    • 16th Jun 17, 7:48 PM
    • #4
    • 16th Jun 17, 7:48 PM
    If you are talking about DIY providers, then they do not manage it. You do that. That is the point of DIY.
    Originally posted by dunstonh
    Thanks. By 'manage' I meant the mechanics of how they effect drawdown on their platform, not the investment management itself.

    For example, one account or multiple for drawdown and so-far-uncrystallised elements? If multiple, is each charged separately or covered by one single fee? Is in specie crystallisation possible, or is sale and later purchase required? If the latter, with/without associated trading charges? How about in specie transfer of the 25% PCLS into a parallel trading account? That sort of detail.
    • Potboiler
    • By Potboiler 17th Jun 17, 10:37 AM
    • 4 Posts
    • 2 Thanks
    Potboiler
    • #5
    • 17th Jun 17, 10:37 AM
    • #5
    • 17th Jun 17, 10:37 AM
    I am in exactly the same position, crystallising a DC pension before needed to avoided LTA charge problems. iWeb (Lloyds/Halifax) have been very straightforward, and low cost too. Their website continues to improve. Managed by AJ Bell.
    • TBC15
    • By TBC15 17th Jun 17, 6:30 PM
    • 226 Posts
    • 79 Thanks
    TBC15
    • #6
    • 17th Jun 17, 6:30 PM
    • #6
    • 17th Jun 17, 6:30 PM
    I’m going with AJ Bell with a transferred DB scheme. Their Web site gives comparisons of costs compared to other providers and their communication to date has been very good.
    Last edited by TBC15; 17-06-2017 at 6:33 PM.
    • EdSwippet
    • By EdSwippet 17th Jun 17, 8:41 PM
    • 595 Posts
    • 565 Thanks
    EdSwippet
    • #7
    • 17th Jun 17, 8:41 PM
    • #7
    • 17th Jun 17, 8:41 PM
    Thanks for the responses so far.

    Bestinvest and Youinvest both have percentage based charges for funds that would add some £2k/year in charges relative to flat fee providers such as Interactive Investor, Alliance Trust, and Halifax, so overall the latter have more appeal than the former. Unless I want to shift from funds to a pure ETF portfolio.

    (Yeah, I know charges aren't everything, but for now all I want is a quiescent parking place for holdings, so that extra charge won't get me much of anything that I can identify, but it equates to a very nice annual holiday if I can save it.)

    My ideal would be a platform that would crystallise my pension pot in a single go for me as just one action. Today, an uncrystallised SIPP with some fund units in it; tomorrow, a crystallised (deferred drawdown) SIPP with 75% of those fund units in it, and a parallel trading account in which the other 25% live, designated as PCLS. Seamless, trading fee free, and no time out of the markets. I'm becoming convinced that this is waaaay too much to ask, but it's what I would like.

    So far I've identified that my lifeco GPP from my ex-employer, while in itself a very good and cost effective plan for pension saving, offers no drawdown options at all. They seem to have any number of tweaks and levers you can twiddle in accumulation, but once you hit decumulation you seem to fall off the end of every offering they have. Their only option is to transfer into a different plan. That seems weird to me, but maybe it's normal.

    My current SIPPs are with Interactive Investor and Alliance Trust. I'm sure both can do some form acceptable flexible drawdown for me, and their charges look comparable (around £360/year or so, so about double non-crystallised SIPPs). As mentioned, though, while both say they do flexible drawdown, neither says in detail how they do them. It seems that plans in drawdown can't be combined easily, though -- perhaps not at all -- and if true then I probably want to combine everything into one SIPP before crystallising into drawdown to avoid a lifetime of double sets of charges.

    Gosh. Who knew that simply treading investment water would turn out to be so complicated. The biggest irony is that I don't actually want to do any of this. It's being forced by the LTA. Stupid. On stilts.
    • caveman8006
    • By caveman8006 17th Jun 17, 9:22 PM
    • 49 Posts
    • 6 Thanks
    caveman8006
    • #8
    • 17th Jun 17, 9:22 PM
    • #8
    • 17th Jun 17, 9:22 PM
    Out of interest, how do you expect that crystalizing your pension pot early is going to "defuse" your LTA issues? Investment growth post crystallization still counts against your LTA in much the same way as pre crystallisation ie. you will still have to remove all accumulated returns that exceed the LTA as taxable income before you hit 75 to avoid tax then won't you? Many still seem to rest under the illusion that if their fund is under the LTA when it is crystallized, they are somehow exempt from future tax, which unfortunately is just not true as many threads on this forum attest to.
    • Potboiler
    • By Potboiler 17th Jun 17, 10:05 PM
    • 4 Posts
    • 2 Thanks
    Potboiler
    • #9
    • 17th Jun 17, 10:05 PM
    • #9
    • 17th Jun 17, 10:05 PM
    Absolutely happy to take any annual income over crystallised value pre 75, keeping within the basic rate tax band annually. That's the purpose of a pension after all!
    • EdSwippet
    • By EdSwippet 17th Jun 17, 10:40 PM
    • 595 Posts
    • 565 Thanks
    EdSwippet
    Out of interest, how do you expect that crystalizing your pension pot early is going to "defuse" your LTA issues?
    Originally posted by caveman8006
    It removes the certainty of 25% excess LTA charges on future pension growth, for a period of up to 20 years.

    Consider a pension exactly at the LTA, and which grows by £1,000. If not crystallised, that £1,000 will face a a 25% LTA charge, with the remainder then taxed at marginal rate (20% or 40%) for a total 40% or 55% tax take on that growth, leaving £600 or £450. If crystallised, it can all be taken out at marginal rate, so 20% or 40% with no LTA charge, leaving £800 or £600.

    Once at the LTA, growth in a crystallised pension (and drawn before age 75) is worth more than growth in an uncrystallised one, because the latter is punished with a 25% excess LTA charge when it is eventually drawn down.

    ...you will still have to remove all accumulated returns that exceed the LTA as taxable income before you hit 75 to avoid tax then won't you?
    Originally posted by caveman8006
    Yes, but I have nearly 20 years in which to draw on it at normal marginal rates before the second LTA test. And if I draw enough over that period -- which I surely will because these normal marginal rates are lower without the punitive LTA charge than they are with it -- I can sidestep LTA charges entirely.
    Last edited by EdSwippet; 17-06-2017 at 10:47 PM.
  • jamesd
    It seems that plans in drawdown can't be combined easily, though -- perhaps not at all -- and if true then I probably want to combine everything into one SIPP before crystallising into drawdown to avoid a lifetime of double sets of charges.
    Originally posted by EdSwippet
    Unless I missed a change you can't split or combine crystallised pots.

    You can have an uncrystalised pot crystallised and combined with an existing one at the same provider if they chose that option, HL is one that has.

    Since there can be advantages to having pots at different places, say to get investments like P2P that aren't allowed by one, I'm considering arranging two have at least two crystallised pots by crystallising at two different places.

    Ultimately I intend to work around this by withdrawing money from the pension wrapper as fast as I can without tax inefficiency.

    So far as tax goes I'll just buy VCTs to effectively eliminate income tax by deferring some of the income. I might draw some at basic rate and some at higher rate so the combined income tax rate is the same as the initial 30% VCT relief, to help get money out faster and more surely stay ahead of growth inside the pension.
    Last edited by jamesd; 18-06-2017 at 1:58 PM.
    • maximumgardener
    • By maximumgardener 18th Jun 17, 3:09 PM
    • 256 Posts
    • 107 Thanks
    maximumgardener
    sipp or pp
    The time for me to crystallise my full DC pension and duck under the LTA is fast approaching. Before I do, I need to investigate which SIPP providers offer user-friendly and cost-effective flexible drawdown, and then coalesce my three pensions into one before crystallising the lot.

    So... I'm looking for any first-hand "reviews" of how flexible drawdown operates on the main SIPP platforms widely discussed here. Most SIPP providers seem oddly cagey, if not downright opaque, about exactly how they manage flexible drawdown on their platforms, so feedback that will help steer me towards -- or perhaps away from -- a provider would be very useful

    For background, I don't expect to actually draw on the pension for a year or three after crystallising. For now this is purely to defuse LTA issues, so actual withdrawal efficiency (monthly payments and so on) is less important than avoiding erosion by fees. I hold passive tracker funds, meaning platforms like HL that charge egregiously for funds would be less
    attractive than others, though at the extreme a move to ETFs is not out of the question.

    Any recommendations for candidates? Or anti-recommendations? Particular issues or traps I should watch out for before diving headlong into a possible rest-of-life relationship with a single SIPP provider? Thanks.
    Originally posted by EdSwippet
    so ....you pays your money and takes your choice!!
    you should easily be able to set up multiple suitable accounts and keep tax free cash invested in separate account plus separate pension accounts (crystallised & uncrystallised) plus s&S ISA's for you plus spouse (if you have a Mrs Ed).

    When you transfer .....dont think you can just transfer and not be out of the market for the sell/buy period but hey...roll with that one. should be max 2 weeks & poss 1 week that you are in cash plus you could phase it.

    get yourself some good advice from IFA . it should prove to be worth it with a sum approaching LTA. then again you may wish to DIY
    obvious important here is what you invest in and how you draw funds with time etc etc
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