Lump at 50, what about the 75%

dunstonh

My confusion, I meant is the drawdown process so straightforward that the current provider can handle it easily and does need to add in consultation/3rd party fees.

It should be straightfoward enough. Obviously you will have no consumer protection with DIY and the provider will not be able to answer anything that could be considered advice or opinion but if you can form fill, you should be fine.

Are there any major problems that are to be monitored during this process, or are most providers efficient and decent?

No problems should be encountered. Most issues nowadays tend to be on legacy contracts (where insurers have bought other companies or contracts are old and may have obscure or unusual rules that are not mainstream) and not modern contracts like SIPPs.

EdInvestor

MollyCoddle wrote: »

My confusion, I meant is the drawdown process so straightforward that the current provider can handle it easily and does need to add in consultation/3rd party fees.

Yes.But just because it is simple does not mean the transfer process is necessarily cheap. You also need to take into account the ongoing charges of the SIPP provider for drawdown.

Are there any major problems that are to be monitored during this process, or are most providers efficient and decent?

See above, major variations exist in fees and charges.

EdInvestor, Sorry if my posts have mislead, I'm looking for an educational discussion not advice, thats what IFA's are for, thanks anyway.

None of us offers advice on here.What you need to know is whether your existing SIPP provider (and IFA if you have one) offer a competitively charged drawdown service.

Many IFAs for instance will charge you 3% of your total fund to move it into drawdown.This involves filling in a couple of forms and can easily be done yourself at no cost.

It's possible your existing SIPP provider (if it is an insurance company) will require you to get "advice" to move into drawdown.Paying high (but avoidable) charges for drawdown considerably increases the long- term risk.You may thus prefer to regard this requirement to get "advice" as one you would prefer to avoid by transferring your pot to a more competitive provider without such requirements, especially if your existing provider's charges for drawdown are high.

Since you already have an investment profile that you are happy with, simply take a note of how the money is deployed before you move and then reinvest the funds in the same way after you move to the new provider and go into drawdown. No need for additional "advice".

Note that if you are moving "SIPP to SIPP" you can transfer the investments over "in specie" , that is you don't have to convert them to cash before moving and then buy again in the market later, thus incurring extra charges and reinvestment risk.

The following low cost SIPP and drawdown provider is the cheapest for your style of investment and has a very helpful email customer service department where staff are used to dealing with enquiries from people who are new to this area.

www.sippdeal.co.uk

This one may also be helpful with info, though it is more competitive for those wanting to invest in unit trusts:

www.h-l.co.uk

The main impact of going into drawdown now to get the TFC out will be on death benefits - right now they would be paid out tax free, while if in drawdown, 35% will be deducted from the remaining 75%.

dunstonh

Many IFAs for instance will charge you 3% of your total fund to move it into drawdown.This involves filling in a couple of forms and can easily be done yourself at no cost.

Just to counter that, many IFAs will not charge. Having the portfolio on their agency can be enough if the portfolio is large enough. Or, if the portfolio is already on their agency then filling in a few forms is a nil charge event. Like anything, you get expensive and you get cheap and you get value for money (which may or may not necessarily be the cheapest). A £200k fund will earn an IFA £1000 a year in trail. Doing it yourself by using say HL, will earn HL £1000 a year in trail. If the IFA values that £1000 a year then they will do the work for you. If the IFA is greedy and shortsighted then they may not. However, it is not fair to assume that IFAs work to the maximums possible. Especially as it is fact that the majority do not.

EdInvestor

dunstonh wrote: »

A £200k fund will earn an IFA £1000 a year in trail. Doing it yourself by using say HL, will earn HL £1000 a year in trail. If the IFA values that £1000 a year then they will do the work for you. If the IFA is greedy and shortsighted then they may not. However, it is not fair to assume that IFAs work to the maximums possible. Especially as it is fact that the majority do not.

Just to point out that with a portfolio like mollycoddle's, an IFA would not be regulated to offer advice.However if she is using a stockbroker at present, it may charge the same - or more.

Just as you might compare prices at a supermarket or when buying a car or a house, you should do the same with your financial investments to make sure you are getting value for money.

MollyCoddle_2

Thanks again to you both,

A very helpfull discsussion

EdInvestor wrote: »

The main impact of going into drawdown now to get the TFC out will be on death benefits - right now they would be paid out tax free, while if in drawdown, 35% will be deducted from the remaining 75%.

This brings in a question in relation to the definition of the term retirement.

The wording I have seen during my research is something like:-
"....death before retirement yields a death benefit lumpsum payment of the full pension value, tax free.
Post retirement death benefit is payed lump sum after 30% taxation..."

Am I right in considering that the HMRC and the pension industry define the tax free, 25% lump sum payment (at 50) as retirement, even when income is deferred?

EdInvestor

MollyCoddle wrote: »

Am I right in considering that the HMRC and the pension industry define the tax free, 25% lump sum payment (at 50) as retirement, even when income is deferred?

The change to death benefit kicks in when you "vest" or "take benefits" from the pension.This means when you take the TFC and no income, or the TFC and an income, or just an income.This can happen at any time between 50 and 75. The term "retirement" doesn't really have a meaning.