Withdraw 25% cash from from a cash SIPP each year?

Reluctantpensioner

JohnB47 wrote: »

Thanks everyone. The replies confirm what I thought. Just one further clarification please- Reluctantpensioner, can you explain the above?

I'm not sure what you mean by "25% of future growth in uncrystallised funds can be withdrawn tax free".

It might not be relevant to my wife's cash SIPP. There won't be any growth, unless that includes a tiny amount of interest or additional payments into the SIPP.

Sorry for the late reply.
As you say, if no growth is expected, then this doesn't matter: but if it is invested...

I'll work it through anyway, in case things change for you:
Fund now: 100K. Take max TFLS: 25K. Remaining 75K grows to 100K, but no more TFLS possible as the 100K is crystallized.
Fund now: 100K. Take smaller TFLS: 10K. Remaining 90K (30K crystallized 60K uncrystallized) grows to 120K (40K crystallized 80K uncrystallized).
Because you still have uncrystallized funds you can take another TFLS, but now it's 25% of the bigger : 20K. You have taken 30K tax free.

Linton

Reluctantpensioner wrote: »

Sorry for the late reply.
As you say, if no growth is expected, then this doesn't matter: but if it is invested...

I'll work it through anyway, in case things change for you:
Fund now: 100K. Take max TFLS: 25K. Remaining 75K grows to 100K, but no more TFLS possible as the 100K is crystallized.
Fund now: 100K. Take smaller TFLS: 10K. Remaining 90K (30K crystallized 60K uncrystallized) grows to 120K (40K crystallized 80K uncrystallized).
Because you still have uncrystallized funds you can take another TFLS, but now it's 25% of the bigger : 20K. You have taken 30K tax free.

Assuming one is always in the same tax band taking the 25% later doesnt make any difference.

Say one has £100K and crystalises £40K now, invests the TFLS in an S&S ISA leaving £30K crystalised and £60K uncrystalised in the pension. One then holds for 10 years during which prices double and takes the money out of the pension at a rate to stay within the 20% tax band:
Net Pension: 80%X £60K crystallised + £ 30K TFLS + 80%X£90K= £150K
ISA: £20K
Total: £170K

If one doesnt crystalise at all until the 10 years are up:
Net pension: £50K+80%X£150K=£170K