Income or accumulation units for drawdown

gterr

Just checking:

Is there any advantage to income units over accumulation units when anticipating drawdown from a S&S ISA (or regular S&S account for that matter)? I'm not needing to take money out monthly - annually would be fine - and I'd sell units once a year to provide the drawdown amount and rebalance at the same time. So, other than the joy of seeing money come into the cash account when dividends are paid, is there any reason why I should go for income units rather than accumulation units?

Thanks.

Totton

The only benefit I find is the pleasure of seeing those dividends arriving.

oldfella

using fundsnetwork you can set inc funds to be reinvested, then when you need the income its easy to change back

Chickereeeee

If the fund is down in price when you want to take out money, and it is acc, you will have to sell more to get the same income.

If you have income over the year, you are not forced to sell at what may be a bad time

Ark_Welder

Are there any transaction charges for making a sale? Will there be any transaction charges applied in the future, post platform-RDR world? Is the income from the income units likely to provide enough of an income, or would selling units provide a higher - but required - level of income?

Just a few questions to think on rather than requiring an answer on here!

gterr

Ark_Welder wrote: »

Are there any transaction charges for making a sale? Will there be any transaction charges applied in the future, post platform-RDR world? Is the income from the income units likely to provide enough of an income, or would selling units provide a higher - but required - level of income?

I had already considered all of these, but might easily not have done, so thanks for the checklist.

Just a few questions to think on rather than requiring an answer on here!

Thanks. I didn't come here requiring an answer, but to be reminded of anything I might have overlooked before I make the decision myself. I am sorry if I appeared to be asking to be spoon-fed!

clippings

Depends.

If you are invested in a trust which has a difference between the buying and selling price (and/or you get charged for buying and selling), then income units may be best if you want to withdraw the income. Avoids the spread (or charges).

If it's a unit trust with no bid/offer spread and no charges for dealing it probably makes no difference which you opt for.

dunstonh

Are you using a cash fund to feed the income? Are you using natural income or capital or a combination? Which is best for your provider? (some contracts are better with acc, others income)

gterr

dunstonh wrote: »

Are you using a cash fund to feed the income? Are you using natural income or capital or a combination? Which is best for your provider? (some contracts are better with acc, others income)

Thanks all. The dividend income will be insufficient on its own and some capital sales will be required. The investments will be in a Fund and Share account with HL, and in two S&S ISAs for self and husband also with HL. We'll be gradually moving the funds over to just the ISAs using the annual ISA allowance. We will have a large cash buffer outside the investment (in a savings account or a series of bonds maturing yearly) to ride out any rough times.

jamesd

A few priorities to consider:

1. Draw any capital from the money outside the ISAs and prioritise holding growth and non-interest paying investments there. Can use the CGT allowance for growth and lower potential divididend taxation (no more to pay at basic rate for distributions that are mostly dividends) to minimise tax liability. Accumulation or income units don't change the tax position, accumulation just do automatic reinvestment.
2. Put interest-paying investments into the ISA first to maximise the benefit of the ISA tax relief.
3. Don't take the interest income out of the ISA until the money is all in the ISA, draw capital from outside the ISA instead. This is effectively moving more money into the ISA.

If you have pension income available also, take the maximum possible pension income, except at a higher tax rate, to maximise the amount of money outside the pension and available for unlimited capital drawing in case that's needed. The money in the ISA is also better protected against potential future income tax increases, while the pension gets their full effect.

gterr

Thanks all,

Jamesd: Great checklist, thanks. I was on track to do all these but it's good to have your confirmation.