Application for Income Drawdown

theGrinch

from the Vantage SIPP.

One of my parents is looking to enter Income Drawdown this September.

One of the questions (question 5) is how often should your income be paid? Monthly, quarterly, half yearly or annually.

If annually, please state the month and year in which you would like payments to start.

Could it be September 2013; i.e can the maximum annual income be paid in the same month that you enter Income Drawdown?

SeniorSam

Not sure of the answer, so forgive my input if not appropriate. Just that I am also with HL Vantage SIPP and just looking at starting drawdown myself. I was recently told that it can take few weeks to process the crystalisation and drawdown, so perhaps the following month would be more appropriate.

Presumably your parent's have considered the income tax position if they already receive state pension.

I have looked at the maximun GAD rate, but will be opting for a lower than maximum to give the remaining 'pot' more chance of continued growth in the invested funds, which have been doing very well for me.

Hope your parents enjoy their retirement.

Sam

atush

The one problem I see with an immediate DD is that you don't allow your fund to grow/produce dividends first. So for instance if you start with 100K and decide to take 3.6% income, you'd have a fund left of 96,400 to grow in the next 12 months which if we say the fund would grow by 5% overall, would mean a fund size of 101,200 next time instead of a fund of 105,000.

So ideally, you'd look at setting up your DD 6-12 months before actually needing the money (ie while still working etc) or you could live the first year off savings.

I would think Quarterly DD would be better to spread out both taking the income and budgeting? People used to weekly or monthly income could find budgeting difficult if they receive a year's worth in advance?

mania112

theGrinch wrote: »

Could it be September 2013; i.e can the maximum annual income be paid in the same month that you enter Income Drawdown?

Yes, of course. It may take them a day or two to get their ducks in a row, but essentially your income is available on the day the funds have settled in the account.

kidmugsy

theGrinch wrote: »

Could it be September 2013; i.e can the maximum annual income be paid in the same month that you enter Income Drawdown?

Yes, as long as you give them sufficient notice to get the admin done before the payout day (normally the 28th of the month). Just phone and ask how much notice they need.

The papers this weekend have been carrying the story that the GAD limit will increase in September. You might want to check with them that your parent can take advantage of that - even by delaying for a month if necessary. It may well not be necessary.

ManAtHome

Shouldn't be a problem - I returned the application the same month I wanted payments to start.

I did send a covering letter with more detail about the 'risks involved' bit (apparently on page 5 of the application at the time) - dunno if they contact you for further confirmation if any of the answers are 'not as expected'...

lvader

What is the difference in costs between 1 annual payment vs 12 monthly?

theGrinch

lvader wrote: »

What is the difference in costs between 1 annual payment vs 12 monthly?

as far as I can see, none.

atush

A lot of that will depend on strategy. Ie do you want to live on the income from your investments (perhaps mostly dividends) and not have to sell units each month.

Case 1, and you'd need to choose investments that staggered their payouts ie picked different funds that paid out different months.