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    • A_T
    • By A_T 7th Sep 17, 12:27 PM
    • 184Posts
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    A_T
    SIPP withdrawal/drawdown
    • #1
    • 7th Sep 17, 12:27 PM
    SIPP withdrawal/drawdown 7th Sep 17 at 12:27 PM
    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?
Page 1
    • Malthusian
    • By Malthusian 7th Sep 17, 2:27 PM
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    Malthusian
    • #2
    • 7th Sep 17, 2:27 PM
    • #2
    • 7th Sep 17, 2:27 PM
    Is withdrawing money from your SIPP after 55 the same thing as "drawdown"?
    Originally posted by A_T
    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
    • By dunstonh 7th Sep 17, 3:15 PM
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    dunstonh
    • #3
    • 7th Sep 17, 3:15 PM
    • #3
    • 7th Sep 17, 3:15 PM
    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). 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 a Financial Adviser local to you.
    • A_T
    • By A_T 7th Sep 17, 3:29 PM
    • 184 Posts
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    A_T
    • #4
    • 7th Sep 17, 3:29 PM
    • #4
    • 7th Sep 17, 3:29 PM
    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?
    Originally posted by dunstonh
    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
    • By AnotherJoe 7th Sep 17, 3:53 PM
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    AnotherJoe
    • #5
    • 7th Sep 17, 3:53 PM
    • #5
    • 7th Sep 17, 3:53 PM
    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?
    Originally posted by A_T
    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
    • By zagfles 7th Sep 17, 5:56 PM
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    zagfles
    • #6
    • 7th Sep 17, 5:56 PM
    • #6
    • 7th Sep 17, 5:56 PM
    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?
    Originally posted by A_T
    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
    • By Audaxer 7th Sep 17, 8:54 PM
    • 415 Posts
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    Audaxer
    • #7
    • 7th Sep 17, 8:54 PM
    • #7
    • 7th Sep 17, 8:54 PM
    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.
    Originally posted by zagfles
    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
    • By dunstonh 7th Sep 17, 9:09 PM
    • 89,547 Posts
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    dunstonh
    • #8
    • 7th Sep 17, 9:09 PM
    • #8
    • 7th Sep 17, 9:09 PM
    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?
    Originally posted by Audaxer
    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). 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 a Financial Adviser local to you.
    • AnotherJoe
    • By AnotherJoe 7th Sep 17, 9:40 PM
    • 7,257 Posts
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    AnotherJoe
    • #9
    • 7th Sep 17, 9:40 PM
    • #9
    • 7th Sep 17, 9:40 PM
    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?
    Originally posted by Audaxer
    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
    • By zagfles 7th Sep 17, 11:08 PM
    • 12,266 Posts
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    zagfles
    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?
    Originally posted by Audaxer
    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
    • By Audaxer 7th Sep 17, 11:22 PM
    • 415 Posts
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    Audaxer
    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 ?
    Originally posted by AnotherJoe
    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?
    • A_T
    • By A_T 8th Sep 17, 8:15 AM
    • 184 Posts
    • 85 Thanks
    A_T
    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.
    Originally posted by zagfles
    I did not realise platforms would apply PAYE to pension withdrawals. That's going to make things quite complicated with the State Pension and any other pensions.
    • Linton
    • By Linton 8th Sep 17, 8:46 AM
    • 8,231 Posts
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    Linton
    I did not realise platforms would apply PAYE to pension withdrawals. That's going to make things quite complicated with the State Pension and any other pensions.
    Originally posted by A_T
    All other pensions except SP will use PAYE and each will be given a separate tax code. Yes it does add complication but HMRC will sort it all out and once set up it works fine. You can change the allcation of the tax allowance and tax on SP to the various pensions if yot wish.
    • AnotherJoe
    • By AnotherJoe 8th Sep 17, 9:45 AM
    • 7,257 Posts
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    AnotherJoe
    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?
    Originally posted by Audaxer
    It's nearly that straightforward. You need to get a tax code to give the SIPP provider.

    You may or may not pay tax on the 75% depends what your other tax position is. I'll be taking money out of my SIPP next tax year without paying any tax on it as I won't have any taxable income for a few years (until SP kicks in). So it depends on your exact tax position.
    • AnotherJoe
    • By AnotherJoe 8th Sep 17, 9:45 AM
    • 7,257 Posts
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    AnotherJoe
    I did not realise platforms would apply PAYE to pension withdrawals. That's going to make things quite complicated with the State Pension and any other pensions.
    Originally posted by A_T
    Not really once it's set up but it may need a little juggling initially.
    • Audaxer
    • By Audaxer 8th Sep 17, 1:57 PM
    • 415 Posts
    • 173 Thanks
    Audaxer
    It's nearly that straightforward. You need to get a tax code to give the SIPP provider.

    You may or may not pay tax on the 75% depends what your other tax position is. I'll be taking money out of my SIPP next tax year without paying any tax on it as I won't have any taxable income for a few years (until SP kicks in). So it depends on your exact tax position.
    Originally posted by AnotherJoe
    Thanks. I'll be on standard rate tax when/if I need to make withdrawls. So in time if I sold say £2k of my SIPP investments and withdrew that as a lump sum, I'd have 20% tax deducted from £1,500 of it through a new PAYE code on my SIPP, and my other pensions wouldn't be affected. Is that correct?
    • Dazed and confused
    • By Dazed and confused 8th Sep 17, 3:42 PM
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    Dazed and confused
    The provider may use the emergency tax code on the first withdrawl which would leave you owing tax but then a BR (basic rate) tax code should be issued by HMRC so any further withdraw are taxed correctly.
    • A_T
    • By A_T 8th Sep 17, 6:28 PM
    • 184 Posts
    • 85 Thanks
    A_T
    Thanks for all the input in this thread - SIPP platforms are none of them clear on the alternatives to accessing your pension when the time comes. They all talk about "drawdown" without mentioning the option of simply sell holdings and withdrawing cash whenever you feel like it

    One example is Cavendish

    https://www.cavendishonline.co.uk/pensions/faqs/

    "For the time being it is not possible for clients of the Cavendish Online FundSupermarket Pension to take withdrawals from their pension by going into drawdown. This is because we are not permitted to provide our clients with advice relating to drawdown.

    If you wish to drawdown from your pension you will need to transfer or re-register your pension away from the Cavendish Online FundSupermarket Pension to another provider who can provide drawdown. We do hope to be able to provide our clients with access to drawdown at some time in the future."

    So does this mean you cannot access your pension at all when the time comes and it will be necessary to transfer to another platform? Or does it simply mean the mysterious "drawdown" option is not available, but that ordinary withdrawal taxed as income is available? The website does not seem to say.
    • dunstonh
    • By dunstonh 8th Sep 17, 7:06 PM
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    dunstonh
    Remember that providers will only really talk about options they offer. They are also not allowed to steer or advise on the options available. That is no their job and most do not have the regulatory permissions. Some issue generic information though.

    So does this mean you cannot access your pension at all when the time comes and it will be necessary to transfer to another platform?
    yes.

    Or does it simply mean the mysterious "drawdown" option is not available, but that ordinary withdrawal taxed as income is available?
    Drawdown is not mysterious. It has been available for well over a decade. Drawdown is drawdown. Basically, any option that utilises an unsecured pension option is drawdown.
    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 a Financial Adviser local to you.
    • zagfles
    • By zagfles 8th Sep 17, 7:22 PM
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    zagfles
    Thanks for all the input in this thread - SIPP platforms are none of them clear on the alternatives to accessing your pension when the time comes. They all talk about "drawdown" without mentioning the option of simply sell holdings and withdrawing cash whenever you feel like it
    Originally posted by A_T
    You mean UFPLS? Any decent platform offers that, eg see http://www.hl.co.uk/pensions/drawdown/what-are-the-alternatives
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