How to pay multiple Lump Sums with 25% cash withrawal?

piketail

I was about to open a SIPP with a lump sum payment and immediately take the 25% cash withdrawal, leaving the remainder to be invested for another three years. I then enquired how this could be repeated in the next three years and was told that was not possible since I couldn't add to an Income Drawdown that was effectively in operation or take out a new SIPP with the same provider. Neither was it possible to consolidate the invested elements subsequently if taken from multiple sources.

So the question is - how does one invest multiple lump sums, with cash withdrawal each year over a period of years and have a single pension supplier for the retained investment at the end?

EdInvestor

piketail wrote: »

I was about to open a SIPP with a lump sum payment and immediately take the 25% cash withdrawal, leaving the remainder to be invested for another three years. I then enquired how this could be repeated in the next three years and was told that was not possible since I couldn't add to an Income Drawdown that was effectively in operation...

This is correct AFAIK

... or take out a new SIPP with the same provider.

This is not correct AFAIK.Multiple SIPPs are allowed.

Neither was it possible to consolidate the invested elements subsequently if taken from multiple sources.

This is correct if you try to consolidate them after vesting ( but not if you do it before): indeed you can't consolidate pre and post A- day vested drawdowns, because they are subject to different rules :rolleyes:

So the question is - how does one invest multiple lump sums, with cash withdrawal each year over a period of years and have a single pension supplier for the retained investment at the end?

Consolidated all the pensions in the SIPP first, before vesting, and then use "phased drawdown" to vest them on an annual basis.

piketail

The objective is to maximise the investment and tax relief at 40% by utilising the 25% cashback each year. EdInvestor appears to imply that the cash withdrawal be made without vesting. I did not think this was possible. Obviously I can see that unvested SIPPs could be consolidated at a later date, with the cash withdrawn at that point, but then there are cash flow problems beforehand.

All the investments would be post A-Day.

EdInvestor

If you are planning to recycle the tax free cash into another pension scheme, this is no longer allowed.

piketail

I am not specifically trying to recycle the cash element. I want to place the same or larger amount each year. I thought I read somewhere that the ban on recycling was only above £15K.

EdInvestor

piketail wrote: »

I thought I read somewhere that the ban on recycling was only above £15K.

That's true. But I imagine a provider would shy away from any really obvious recyclying such as what you suggest, just in case.

Try opening SIPP no 2 with another provider.There are plenty of low cost online SIPPs around.

It should be possible to transfer each drawdown to one single provider eventually, but you will still end up with 4 separate drawdown accounts at the one company and you'll have to pay four separate lots of fees for transfer in, establishment, and 5 year valuations.

piketail

EdInvestor wrote: »

It should be possible to transfer each drawdown to one single provider eventually, but you will still end up with 4 separate drawdown accounts at the one company and you'll have to pay four separate lots of fees for transfer in, establishment, and 5 year valuations.

That is the scenario and bad news I am trying to avoid. All I am trying to do is to soak up my residual 40% band not covered by a GPP. The PCLS does not enable me to increase my contributions and I don't see myself breaking the four anti-recycling rules, let alone all of them.

I have a previous company pension in payment which is also taxed at 40% but not allowable as Net relevant Earnings I assume. So funding is not the direct issue.

Thanks for the comments.