III charges etc...

madeinireland_2

Hi,


I've just been enquiring about crystallising my SIPP with III in order to get it done before the end of the tax year while the LTA is £1.25m


1. As my birthday is close to the end of March they would be unable to process it in time. Normally 10 working days!!!


I have offered to go to their office or get things couriered around but all to no avail.


Anyone got any ideas? Can I say to HMRC that I have started the process - will that be enough?


2. III charge a normal admin fee of £96 per year plus VAT. When I take the lump sum they will charge be £40 plus VAT and as I will then be in flexi drawdown (as they call it) a yearly charge of £170 plus VAT - even if I don't draw any more out for a long time (as I only want to crystallise and take the 25% lump sum initially). Seems a bit steep to be pay over £300 per year for nothing?


3. Does going into this Flexi drawdown affect my annual allowance. I was told as long as I only take the 25% then no affect.


Is there a better way of doing this or another pension scheme provided I should transfer to that provides difference options that would be better? I know I am probably too late now sorting out the LTA bit with a transfer to another provider - but perhaps they can be better longer term with regard to the charges. If I have to stick with III I will be crystallising later and then drawing it all out within 3 years to minimise their impact.


Any other thoughts folks?


Thanks...

Linton

3. You were told correctly - there is no effect on annual allowance if you just take the tax free 25%.

PensionTech

1. As my birthday is close to the end of March they would be unable to process it in time. Normally 10 working days!!! I have offered to go to their office or get things couriered around but all to no avail. Anyone got any ideas? Can I say to HMRC that I have started the process - will that be enough?

You don't need them to be able to make the payment - just to "designate the funds" to be available for drawdown before 6 April. What constitutes designating the funds, sadly I don't know.

To illustrate what kind of nuances may be relevant here, I'll give an example of a different situation:

With a scheme pension, you would be tested against the Lifetime Allowance at the time that you gained an "actual entitlement" (rather than a prospective entitlement) to the pension that was about to come into payment. The date on which you gain that actual entitlement doesn't depend on how long it takes the scheme administrator to sort everything out: it is just when you have done everything you need to get the pension paid, and reached the age/date from which the pension is to become payable. In practice, this tends to mean that the date used is the date on which the scheme administrator received whatever option forms were required to get your benefits paid. They might then faff around for another month getting your pension and lump sum sent out, but that wouldn't make a difference to the date on which your benefits were tested against the LTA.

So how does this apply to the "designating funds" question? It might be that you will be deemed to have designated your drawdown funds as soon as you've done everything needed from your side to get the process started (and reached the age at which you can start drawdown; I'm assuming that the birthday you refer to is your 55th). In which case, you could ask for all the forms now and send them back, and then you would have designated your funds as soon as you hit age 55, in time for the 6 April changes.

Alternatively, it might be the case that the date on which you are deemed to have designated your funds is when your scheme administrator has finished making whatever arrangements they need to make in order to allow you to start drawing money out. (Having never worked in such a scheme, I have no idea what this actually entails.) If so, you might be stuck - if they can't do it fast enough on their end then your benefits may not be tested against the LTA until after 6 April.

It's both a technical question - what constitutes designation? - and a procedural question - are they saying that they can't designate funds before 6 April, or just that the PCLS won't hit your account before 6 April? - and one that your provider should be able to answer more specifically if you explain to them your exact concerns. If they can't, think about asking another provider. You might still just about have time to transfer (since you can do that before 55) and get it into drawdown before 6 April with a company that can work a little faster.

coyrls

PensionTech wrote: »

With a scheme pension, you would be tested against the Lifetime Allowance at the time that you gained an "actual entitlement" (rather than a prospective entitlement) to the pension that was about to come into payment. The date on which you gain that actual entitlement doesn't depend on how long it takes the scheme administrator to sort everything out: it is just when you have done everything you need to get the pension paid, and reached the age/date from which the pension is to become payable. In practice, this tends to mean that the date used is the date on which the scheme administrator received whatever option forms were required to get your benefits paid. They might then faff around for another month getting your pension and lump sum sent out, but that wouldn't make a difference to the date on which your benefits were tested against the LTA.

That was my experience with an AJ Bell SIPP. I've just checked the "Schedule of Benefits" they sent me on completion of the process. They give the "Date of Benefit Crystallisation Event" as 27th January, which would have been around the date they received the forms from me. The "Date Paid" for the PCLS (which is all I took) is 15th February. As it was paid by BACS it arrived in my account a couple of days later.

I think things will take longer with III because they don't run their own SIPP, it is provided by The Lifetime SIPP Company Ltd. and so the forms you send to them will be forwarded to the SIPP company and my guess is that the Crystallisation date will be the date that the SIPP company starts to process the forms.

coyrls

madeinireland wrote: »

2. III charge a normal admin fee of £96 per year plus VAT. When I take the lump sum they will charge be £40 plus VAT and as I will then be in flexi drawdown (as they call it) a yearly charge of £170 plus VAT - even if I don't draw any more out for a long time (as I only want to crystallise and take the 25% lump sum initially). Seems a bit steep to be pay over £300 per year for nothing?

On this point AJ Bell have two different annual charges for funds in Flexi-Drawdown: £50 plus VAT if you're not taking an income or £100 plus VAT if you are taking an income, which seems a bit fairer. They won't necessarily be cheaper than III though because you'll need to add the custody charge (another £100 pa if the value of your SIPP is over £20,000) and if you hold funds, a 0.2% charge per annum capped at £200.

Personally, having experienced III's service via Trustnet Direct, I moved my SIPP to AJ Bell and wouldn't ever consider moving to III to save money.

PensionTech

They give the "Date of Benefit Crystallisation Event" as 27th January, which would have been around the date they received the forms from me. The "Date Paid" for the PCLS (which is all I took) is 15th February. As it was paid by BACS it arrived in my account a couple of days later.

I think things will take longer with III because they don't run their own SIPP, it is provided by The Lifetime SIPP Company Ltd. and so the forms you send to them will be forwarded to the SIPP company and my guess is that the Crystallisation date will be the date that the SIPP company starts to process the forms.

If they did use the date they received your forms, then it might indicate that the principle is to take it from when the member has completed their steps. If that is the case, a further transaction to be made between III and the actual SIPP provider shouldn't have an impact - they should still use the date on which the member completed all the necessary steps, i.e. the date on which the forms were first received after being sent by the member.

This is of course very theoretical. It's not at all outside the bounds of possibility that even if this is the correct way to do it, III and/or the SIPP provider could still mangle it and use the wrong date. It is, after all, the administrator who informs HMRC of your benefit crystallisation - not the other way around.

coyrls

PensionTech wrote: »

If they did use the date they received your forms, then it might indicate that the principle is to take it from when the member has completed their steps. If that is the case, a further transaction to be made between III and the actual SIPP provider shouldn't have an impact - they should still use the date on which the member completed all the necessary steps, i.e. the date on which the forms were first received after being sent by the member.

I think it will depend if III do any of the administration (in which case they could use the date they receive the forms) or if they just pass the whole lot on to the SIPP company without doing anything. I suspect (but don't know) that it will be the latter.

madeinireland_2

Guys - thanks for your replies but I'm giving up on this.

iii said they couldn't even send me the forms till my 55th birthday which seems a bit crazy to me. They then have to do their processing and would only have 3 days when that bit normally takes 10 days. I even offered to travel to their office on my Birthday but they said even with that they could not be sure they could get it all done in time.

It has made me think that I need to review my relationship with this company. To be fair I contacted HL and they said it would be possible within their processes to get it done but they thought the transfer would probably take too long - but at least they were willing to send the forms in advance of my Birthday so it was all ready to go. I suspect the problem is that as someone says they don't run their own pension.

On some of my other points I do note that HL have no charge for a crystallisation event and no charge for when you are in drawdown - so that seems like a much better arrangement for me - so I will be transferring to them at some point in the next few months with only a £100 exit fee to pay to iii. Have I understood this correctly?

Thanks again for your replies...

coyrls

madeinireland wrote: »

On some of my other points I do note that HL have no charge for a crystallisation event and no charge for when you are in drawdown - so that seems like a much better arrangement for me - so I will be transferring to them at some point in the next few months with only a £100 exit fee to pay to iii. Have I understood this correctly?

You need to check the total charge that you will pay with HL. A lot of activites that other providers charge for are "free" but the reason is that their charges for holding funds are so high (0.45% on first £250,000 and it doesn't stop there). If you don't have funds, their charges are capped at £45, so they are pretty cheap if you don't hold funds.

madeinireland_2

Thanks - my SIPP is currently in cash so no charge there.

I know that's not sensible long term but I expect to have most of it out quite quickly went I do start to take it and I'm holding out of shares and funds for a while with this in case we have a sudden crash and I want to use this to fund me till I take my DB scheme.

I have enough n shares elsewhere so just staying safe with this part.

PensionTech

To be fair I contacted HL and they said it would be possible within their processes to get it done but they thought the transfer would probably take too long - but at least they were willing to send the forms in advance of my Birthday so it was all ready to go.

A DC to DC transfer shouldn't take too long. The "best practice" standard used by every company I've ever worked for is 5 days once the member has done the paperwork, and indeed I believe the Ombudsman has backed this too. If you do want to transfer to HL, you may as well try to do it before your birthday and see if you can get it crystallised before 6 April. Even if it fails, you're in no worse a position than you would have been otherwise.

Not to push you if you're happy waiting, of course - just an idea!