Hargreaves Lansdown SIPP help please.

ColdIron

Audaxer wrote: »

I assumed you were planning to just leave the SIPP as cash rather than invest it? If you are leaving it in the SIPP as cash so you can benefit from the full amount of tax relief each year, surely the best way is to take out a UFPLS each year for all the cash (instead of putting it into drawdown) apart from £1,000 left in to keep the SIPP open, and then do the same in subsequent years?

Six of one and half a dozen of the other. If you move £3,600 into drawdown you can take the whole £900 tax free now and then the remainder from the drawdown SIPP regularly or as and when it suits you (£1,700 leaving £1,000). With UFPLS you would take £650 tax free and £1,950 taxable all in one go leaving £1,000 in the existing SIPP. The drawdown option might help with emergency tax as your monthly income payments wouldn't exceed £11,850/12

Audaxer

sparkiemalarkie wrote: »

Why is it better to take out a UFPLS ?

The following details how I understand the process can work and is allowable by taking out UFPLS withdrawals each year:
Year 1 - pay in £2,880. Tax relief added £720 - Cash Balance £3,600. Take out UFPLS £2,600 leaving cash balance £1,000. You will be taxed initially on 75% of £2,600, but you can get that refunded as you are under the personal tax allowance.
Year 2 - pay in the £2,600 you took out plus an additional £280. Tax relief £720 added so that £3,600 plus the £1,000 left in takes balance up to £4,600. Take out UFPLS £3,600 leaving cash balance of £1,000. After the tax is refunded you will have made a gain of £720.
Year 3 onwards - repeat process each year and you get the full tax relief back. You just need to leave the initial £1,000 in to keep the SIPP open.

jamesd

Both ways you have to do the HL form filling. Use monthly drawdown and contributions and:

1. the tax is taken care of automatically
2. the regular monthly income mostly covers the monthly contribution so budgeting is easier and the monthly contributions can't be forgotten or just missed when busy.

It's an easier life that costs you the interest rate difference between HL and wherever else you'd put the money.

If money is really tight, go with UFPLS else, you're retired, the cost is low, so go with easy life.