Hargreaves Lansdown SIPP drawdown - how does it work?

itm2

In the next 2 years I plan to start drawing down on my SIPP with Hargreaves Lansdown. I was curious to know how the mechanics of the drawdown process worked, as I would like to make ad hoc sales of funds based on monitoring of fund performance. For example, on any given day I may check the value of my SIPP holdings and if I notice that any have accrued significant gains since the last drawdown I would like to sell some of the holding at that time and transfer the proceeds to a deposit account.
I'm aware that my annual drawdown is limited by GAD rules, agreed at each review, but I don't know what constraints are imposed on the timing, frequency and amount of each individual drawdown. Does anyone know what the constraints are?

kidmugsy

itm2 wrote: »

In the next 2 years I plan to start drawing down on my SIPP with Hargreaves Lansdown. ... I don't know what constraints are imposed on the timing, frequency and amount of each individual drawdown. Does anyone know what the constraints are?

I don't know how wide the choice is: so far I've done mine once per drawdown-year. But here's a tip - I might not draw any income in one tax-year and then draw double in the next. Depending on your other income, this can be a handy way of reducing income tax.

In my next drawdown-year I expect to draw some of my income in tax-year 13-14 and some in 14-15.

itm2

Thanks – I also plan to watch tax liabilities very closely while I'm drawing down. I was just hoping to make the drawdowns at optimal times, rather then having it dictated and being at the mercy of the markets from a timing perspective. I would perhaps draw down up to 2 years' living expenses if there was exceptional profit to be taken at various times, and leave well alone when prices were falling.

BLB53

I'm aware that my annual drawdown is limited by GAD rules, agreed at each review, but I don't know what constraints are imposed on the timing, frequency and amount of each individual drawdown. Does anyone know what the constraints are?

As you say, you are limited to a maximum drawdown which will shortly be increased to 120% GAD. At the time you decide to take benefits, HL will advise you of the maximum based on your age and the size of your pension pot - you are then free to decide what level of income you wish to drawdown.
You may wish to get hold of DIY Pensions which covers a diy approach to moving to drawdown and things to consider
http://www.amazon.co.uk/D-I-Y-Pensions-ebook/dp/B00B7QN8XM/ref=sr_1_1?s=digital-text&ie=UTF8&qid=1361535244&sr=1-1

itm2

Thanks - I was aware of the overall annual drawdown limit. It was constraints around the timing of individual drawdowns that I was asking about? e.g. Can I make an unlimited number of small drawdowns throughout the year, provided that the overall amount does not exceed the annual limit?

jamesd

You can make as many drawdowns as you like during the year but there's a charge for each that makes it uneconomic to do it very frequently.

A better option is likely to be to take out the maximum possible amount using regular payments. Don't spend above the amount needed, instead reinvest that within a S&S ISA. Now you're accumulating a pot outside the pension that is available for use without the GAD limit preventing you from accessing it. That in turn gets you protection from income variation caused by future pot value changes.

It's important not to spend money at such a high rate that you run out but it's fine to take the money and leave it invested, just in a different tax wrapper.

not-so-civil

I started Drawdown with HL in June last. I chose to take monthly withdrawals representing 4% return. This has proved satisfactory and no charge was made by HL. However, if you make additional withdrawals or change they will charge. I know that reviews take place initially after 3 years but I do not know what is the situation between reviews if you wish to change your withdrawal pattern

itm2

Does the amount of the monthly withdrawal need to remain fixed in order to avoid HL charges, or simply the frequency? For example, would a £3k withdrawal in month 1, followed by 2 £1k withdrawals in months 2 and 3, attract HL charges?

not-so-civil

I think if you set it up like that from the beginning it might be ok. Direct Debits can vary month to month so why not the reverse? But you are then very limited. If you want to change they will, rightfully, charge. Better to take out a fixed amount that you can live with and do monthly/monthly adjustment yourself.

jamesd

Here are the HL SIPP charges, click on the drawdown tab. £25 for each ad hoc payment, £10 to change regular payment, both plus VAT. So compare charges to alternatives.

itm2

jamesd wrote: »

Here are the HL SIPP charges, click on the drawdown tab. £25 for each ad hoc payment, £10 to change regular payment, both plus VAT. So compare charges to alternatives.

Thanks - that's exactly what I was looking for. I don't know how HL's "ad hoc" charges stack up against the competition (i.e. charges for variations and one-off payments). Since the process of transferring funds is automated the charges seem a little cheeky. Does anyone know if HL represents good value for money compared to similar online facilities in this respect?