Flexi Drawdown Queries

Sue58

I am 60 and want to go into drawdown with my SIPP before 5 April . At the moment I don't actually need the 25% TFLS but as I have no income and do not work I would like to take out my personal allowance for this year of £11,850 before 5 April.

My question is can I just take out my personal allowance of £11,850 which would be tax free as I have no other income or do I have to take out £11,850 plus the 25% tax free amount?

My second query is at a later date sometime in the next year can I then take out the 25% TFLS on the balance?

My SIPP value is approx £150K so I'm trying to take out as much as possible over the next 6/7 years tax free until I receive state pension. The money will mainly be used to re-invest in the same funds in my husbands and my ISA accounts.

OldMusicGuy

You can do what is called "UFPLS" (Uncrystallised funds pension lump sum) withdrawals where you take the personal allowance + 25% on top, all will be tax free. You can continue to UFPLS or you can crystallise some or all of the remaining pot, at which point you can take 25% as a lump sum. You will use up some of your total 25% allowance with each UFPLS withdrawal.

I am using UFPLS from age 60 to 66 when I get my SP because it is tax efficient for me.

PS provided your SIPP allows flexible drawdown.

dunstonh

My question is can I just take out my personal allowance of £11,850 which would be tax free as I have no other income or do I have to take out £11,850 plus the 25% tax free amount?

You dont have to take out the 25% technically but you would be daft not to. Usual scenario here is to get the 75% taxable bit to match the personal allowance and then the linked 25% on top. Then stick the excess you dont need into an S&S ISA. Or even feed £2880 back into the pension (if not working) or into your spouses pension if they are short on individual planning.

squirrelpie

My question is can I just take out my personal allowance of £11,850 which would be tax free as I have no other income or do I have to take out £11,850 plus the 25% tax free amount?

It is usual to take the combind sum as a UFPLS as OMG says.


If this is the first time you have used drawdown with your SIPP be careful of emergency tax. Your £11,850 will be taxed at additional tax rate as if you were going to have income of 12*11,850 in the tax year. You would then have to reclaim the tax or wait a long time for it to be repaid. So take a small payment of £1 or £100 now, which will cause HMRC to issue a tax code to your SIPP provider. Then take the rest of the money once the tax code is issued.

Linton

You cannot take out taxable money from a pension unless you also take out the corresponding tax free 25% either at the same time, or have done it previously. So the closest you can get to what you want is, as OMG explains, UFPLS.


If you want it in this tax year you need to find out from your provider their deadline for accepting payment requests. In general the providers just run one "payroll" a month and may require 2 weeks notice. My provider, BestInvest, requires that any request be made by post with a handwritten signature - no email or online forms etc.

Linton

squirrelpie wrote: »

It is usual to take the combind sum as a UFPLS as OMG says.


If this is the first time you have used drawdown with your SIPP be careful of emergency tax. Your £11,850 will be taxed at additional tax rate as if you were going to have income of 12*11,850 in the tax year. You would then have to reclaim the tax or wait a long time for it to be repaid. So take a small payment of £1 or £100 now, which will cause HMRC to issue a tax code to your SIPP provider. Then take the rest of the money once the tax code is issued.

It may be a good idea but unfortunately there almost certainly is not enough time left in this tax year.

mgdavid

You need to request a UFPLS drawdown of £15800; 25% of that is TFLS leaving 11850 to use your PA.
But as Linton said it's probably too late to meet standard process times before April 5th. No harm in asking.....

Sue58

OldMusicGuy wrote: »

You can do what is called "UFPLS" (Uncrystallised funds pension lump sum) withdrawals where you take the personal allowance + 25% on top, all will be tax free. You can continue to UFPLS or you can crystallise some or all of the remaining pot, at which point you can take 25% as a lump sum. You will use up some of your total 25% allowance with each UFPLS withdrawal.

I am using UFPLS from age 60 to 66 when I get my SP because it is tax efficient for me.

PS provided your SIPP allows flexible drawdown.

Thanks for this information which is very helpful. My provider does allow flexible drawdown and they have informed me that I must have a completed drawdown form returned to them by 31 March at the very latest.

So in theory, I could use UFPLS to claim my personal allowance for this year £11,850 plus the 25% tax free sum of £3950 making a total drawdown of £15,800? Then at a later date if I need to crystallise the rest of my pot I could then take the remaining 25% TFLS?

I know you mentioned that you are only using UFPLS from 60 to 66 until SP age, but will you still be able to access the rest of your 25% TFLS after this? Sorry for all the questions but I'm new to drawdown and the options.

Mnd

That looks right

MPN

Would the OP not be better off taking the full 25% TFLS from her £150K pot? If she takes the full £37,500 she can invest this into her and her spouse's S&S ISA's? I suppose she could also then take her personal allowance for this year as well if the idea is to take as much out of her total pot before state pension kicks in?

Linton

Sue58 wrote: »

Thanks for this information which is very helpful. My provider does allow flexible drawdown and they have informed me that I must have a completed drawdown form returned to them by 31 March at the very latest.

.......

That is very good, much less notice than Bestinvest. It only gives gives them 5 days to input the data, run the PAYE and send out the money. I would be interested to know who the provider is, and when they run their payroll.