Best (and worst?) SIPP providers for flexible drawdown?

EdSwippet

The time for me to crystallise my full DC pension and duck under the LTA is fast approaching. Before I do, I need to investigate which SIPP providers offer user-friendly and cost-effective flexible drawdown, and then coalesce my three pensions into one before crystallising the lot.

So... I'm looking for any first-hand "reviews" of how flexible drawdown operates on the main SIPP platforms widely discussed here. Most SIPP providers seem oddly cagey, if not downright opaque, about exactly how they manage flexible drawdown on their platforms, so feedback that will help steer me towards -- or perhaps away from -- a provider would be very useful.

For background, I don't expect to actually draw on the pension for a year or three after crystallising. For now this is purely to defuse LTA issues, so actual withdrawal efficiency (monthly payments and so on) is less important than avoiding erosion by fees. I hold passive tracker funds, meaning platforms like HL that charge egregiously for funds would be less attractive than others, though at the extreme a move to ETFs is not out of the question.

Any recommendations for candidates? Or anti-recommendations? Particular issues or traps I should watch out for before diving headlong into a possible rest-of-life relationship with a single SIPP provider? Thanks.

dunstonh

Most SIPP providers seem oddly cagey, if not downright opaque, about exactly how they manage flexible drawdown on their platforms

If you are talking about DIY providers, then they do not manage it. You do that. That is the point of DIY.

Linton

Surely all online SIPP drawdown providers must operate their drawdown in much the same way. It's just a matter of once a month/year picking up the predefined cash amount from the customer account at the predefined time and running it through a payroll system. It should all be automated.

We have never had any problems with AJBell and BestInvest.

EdSwippet

dunstonh wrote: »

If you are talking about DIY providers, then they do not manage it. You do that. That is the point of DIY.

Thanks. By 'manage' I meant the mechanics of how they effect drawdown on their platform, not the investment management itself.

For example, one account or multiple for drawdown and so-far-uncrystallised elements? If multiple, is each charged separately or covered by one single fee? Is in specie crystallisation possible, or is sale and later purchase required? If the latter, with/without associated trading charges? How about in specie transfer of the 25% PCLS into a parallel trading account? That sort of detail.

Potboiler

I am in exactly the same position, crystallising a DC pension before needed to avoided LTA charge problems. iWeb (Lloyds/Halifax) have been very straightforward, and low cost too. Their website continues to improve. Managed by AJ Bell.

TBC15

I’m going with AJ Bell with a transferred DB scheme. Their Web site gives comparisons of costs compared to other providers and their communication to date has been very good.

EdSwippet

Thanks for the responses so far.

Bestinvest and Youinvest both have percentage based charges for funds that would add some £2k/year in charges relative to flat fee providers such as Interactive Investor, Alliance Trust, and Halifax, so overall the latter have more appeal than the former. Unless I want to shift from funds to a pure ETF portfolio.

(Yeah, I know charges aren't everything, but for now all I want is a quiescent parking place for holdings, so that extra charge won't get me much of anything that I can identify, but it equates to a very nice annual holiday if I can save it.)

My ideal would be a platform that would crystallise my pension pot in a single go for me as just one action. Today, an uncrystallised SIPP with some fund units in it; tomorrow, a crystallised (deferred drawdown) SIPP with 75% of those fund units in it, and a parallel trading account in which the other 25% live, designated as PCLS. Seamless, trading fee free, and no time out of the markets. I'm becoming convinced that this is waaaay too much to ask, but it's what I would like.

So far I've identified that my lifeco GPP from my ex-employer, while in itself a very good and cost effective plan for pension saving, offers no drawdown options at all. They seem to have any number of tweaks and levers you can twiddle in accumulation, but once you hit decumulation you seem to fall off the end of every offering they have. Their only option is to transfer into a different plan. That seems weird to me, but maybe it's normal.

My current SIPPs are with Interactive Investor and Alliance Trust. I'm sure both can do some form acceptable flexible drawdown for me, and their charges look comparable (around £360/year or so, so about double non-crystallised SIPPs). As mentioned, though, while both say they do flexible drawdown, neither says in detail how they do them. It seems that plans in drawdown can't be combined easily, though -- perhaps not at all -- and if true then I probably want to combine everything into one SIPP before crystallising into drawdown to avoid a lifetime of double sets of charges.

Gosh. Who knew that simply treading investment water would turn out to be so complicated. The biggest irony is that I don't actually want to do any of this. It's being forced by the LTA. Stupid. On stilts.

caveman8006

Out of interest, how do you expect that crystalizing your pension pot early is going to "defuse" your LTA issues? Investment growth post crystallization still counts against your LTA in much the same way as pre crystallisation ie. you will still have to remove all accumulated returns that exceed the LTA as taxable income before you hit 75 to avoid tax then won't you? Many still seem to rest under the illusion that if their fund is under the LTA when it is crystallized, they are somehow exempt from future tax, which unfortunately is just not true as many threads on this forum attest to.

Potboiler

Absolutely happy to take any annual income over crystallised value pre 75, keeping within the basic rate tax band annually. That's the purpose of a pension after all!

EdSwippet

caveman8006 wrote: »

Out of interest, how do you expect that crystalizing your pension pot early is going to "defuse" your LTA issues?

It removes the certainty of 25% excess LTA charges on future pension growth, for a period of up to 20 years.

Consider a pension exactly at the LTA, and which grows by £1,000. If not crystallised, that £1,000 will face a a 25% LTA charge, with the remainder then taxed at marginal rate (20% or 40%) for a total 40% or 55% tax take on that growth, leaving £600 or £450. If crystallised, it can all be taken out at marginal rate, so 20% or 40% with no LTA charge, leaving £800 or £600.

Once at the LTA, growth in a crystallised pension (and drawn before age 75) is worth more than growth in an uncrystallised one, because the latter is punished with a 25% excess LTA charge when it is eventually drawn down.

caveman8006 wrote: »

...you will still have to remove all accumulated returns that exceed the LTA as taxable income before you hit 75 to avoid tax then won't you?

Yes, but I have nearly 20 years in which to draw on it at normal marginal rates before the second LTA test. And if I draw enough over that period -- which I surely will because these normal marginal rates are lower without the punitive LTA charge than they are with it -- I can sidestep LTA charges entirely.

jamesd

EdSwippet wrote: »

It seems that plans in drawdown can't be combined easily, though -- perhaps not at all -- and if true then I probably want to combine everything into one SIPP before crystallising into drawdown to avoid a lifetime of double sets of charges.

Unless I missed a change you can't split or combine crystallised pots.

You can have an uncrystalised pot crystallised and combined with an existing one at the same provider if they chose that option, HL is one that has.

Since there can be advantages to having pots at different places, say to get investments like P2P that aren't allowed by one, I'm considering arranging two have at least two crystallised pots by crystallising at two different places.

Ultimately I intend to work around this by withdrawing money from the pension wrapper as fast as I can without tax inefficiency.

So far as tax goes I'll just buy VCTs to effectively eliminate income tax by deferring some of the income. I might draw some at basic rate and some at higher rate so the combined income tax rate is the same as the initial 30% VCT relief, to help get money out faster and more surely stay ahead of growth inside the pension.