Anyone in drawdown with interactive investor, how does it work?

eyeonretirement

My question is when you choose to crystallize part of your sipp with UFPLS or flexible drawdown how do you do it? If you have a mix of funds, IT's and cash from dividends do you have to sell some of the funds and IT's to provide the lump sum in cash that you wish to crystallize and once it is does it move to a separate account? If I only wished to take the 25% tax free part do I then have to repurchase the funds and IT's ( with the stamp duty) or can it be done in specie?


Thanks

EdSwippet

eyeonretirement wrote: »

My question is when you choose to crystallize part of your sipp with UFPLS or flexible drawdown how do you do it? If you have a mix of funds, IT's and cash from dividends do you have to sell some of the funds and IT's to provide the lump sum in cash that you wish to crystallize and once it is does it move to a separate account? If I only wished to take the 25% tax free part do I then have to repurchase the funds and IT's ( with the stamp duty) or can it be done in specie?

In my (recent) experience with Interactive Investor and flexi-access drawdown:

• You have to sell enough assets to provide sufficient cash balance for the 25% tax free lump sum.
• They do not maintain a separate account, but rather just a ratio of how much of your account is crystallised and how much not. This is a nuisance if you plan to hold different assets in your crystallised and as-yet uncrystallised pension elements, because with Interactive Investor, and others that behave this way, you cannot.
• There is no facility for in specie extraction of the 25% tax free portion from the crystallisation event. At least, none that I could uncover, and I asked specifically about it, albeit some time ago.

That said, the process was a bit heavy on paperwork -- three separate forms handled sequentially, as I recall, and so rather lengthy end-to-end -- but overall straightforward enough. Because I hold only OEICs, I did not have to pay stamp duty again on repurchasing outside the SIPP the assets sold inside it for the 25% lump sum.

eyeonretirement

EdSwippet wrote: »

In my (recent) experience with Interactive Investor and flexi-access drawdown:

• You have to sell enough assets to provide sufficient cash balance for the 25% tax free lump sum.

.

So are you saying that if I crystallize 40,000 using FAD only 10,000 must be in cash, the rest remain in funds. How would I specify which funds? If I only wanted to withdraw £5000 could I withdraw the remaining £5000 tax free later?

EdSwippet

eyeonretirement wrote: »

So are you saying that if I crystallize 40,000 using FAD only 10,000 must be in cash, the rest remain in funds. How would I specify which funds?

Yes. You don't specify the funds to sell exactly, you just sell manually the ones that you want to form the 25% PCLS cash before Interactive Investor actions the crystallisation. This does mean that this chunk will be out of the markets for a while.

eyeonretirement wrote: »

If I only wanted to withdraw £5000 could I withdraw the remaining £5000 tax free later?

Not from one £40,000 crystallisation. To achieve that you would want to crystallise £20,000 to obtain the first £5,000, and then another £20,000 later on when you want the second £5,000. This is general and sort-of built into the pension crystallisation rules set by the government, not specific to Interactive Investor.

eyeonretirement

So if the funds in my SIPP produced dividends over the year of say £10,000 and this was sitting in my SIPP as cash I would tell Interactive Investor I wanted to crystallize £10,000. 25% of this ( £2500) would be tax free and the remaining £7500 would be treated as taxable depending on if I had exceeded my £12500 annual allowance? This way I'm not getting involved what funds or parts of funds have been crystallized or not?

Jerben

So if the funds in my SIPP produced dividends over the year of say £10,000 and this was sitting in my SIPP as cash I would tell Interactive Investor I wanted to crystallize £10,000. 25% of this ( £2500) would be tax free and the remaining £7500 would be treated as taxable depending on if I had exceeded my £12500 annual allowance? This way I'm not getting involved what funds or parts of funds have been crystallized or not?


To do what you have described you would just request 'a UFPLS of £10k'.
It's not crystalisation. Its a withdrawal where 25% is tax-free and 75% is taxable (if above your PA).

eyeonretirement

EdSwippet wrote: »

In my (recent) experience with Interactive Investor and flexi-access drawdown:

• .
• They do not maintain a separate account, but rather just a ratio of how much of your account is crystallised and how much not. This is a nuisance if you plan to hold different assets in your crystallised and as-yet uncrystallised pension elements, because with Interactive Investor, and others that behave this way, you cannot.

So how do you tell the value of the crystallized / uncrystallized portions as they continue to stay invested and hopefully grow? II must surely have some way of showing you.

NoMore

From the way Edswippet describes, its just a percentage of the whole pot (including all assets) is defined as crystallised.


so you have 100k. you crystallise 25k (we'll ignore taking PCLS to keep the numbers simple). You have 75k uncrystallised. So 25% of the whole pot is crystallised.


The investments grow 10%. You now have 110k, 25% of 110k is 27.5k crystallised. You don't choose what investments goes into which part.

EdSwippet

eyeonretirement wrote: »

So how do you tell the value of the crystallized / uncrystallized portions as they continue to stay invested and hopefully grow? II must surely have some way of showing you.

None that I've found. Again, when I asked some time ago, they claimed it would be visible on the platform soon, but I've never seen it. You ask them, then. As this is a ratio, it won't change unless you make any new contributions or crystallise a further part of the pension. So if the entire pot grows by 10%, both parts of it, crystallised and uncrystallised, are both 10% larger.

It's a pretty user-unfriendly system where the SIPP is neither fully uncrystallised nor fully crystallised. Alliance Trust Savings do this too, so Interactive Investor are not alone. Even so, a potential annoyance, and definitely something done for the convenience of the platform rather than for the customer experience.

In my case, I crystallised my entire Interactive Investor SIPP so I don't see any complications with it. I will be crystallising a part of my Alliance Trust SIPP shortly though, so at that point I will run into it. Hopefully only for a temporary period. I track my SIPPs closely with a spreadsheet, and that should make up for most platform deficiencies of this type.

Albermarle

So if the funds in my SIPP produced dividends over the year of say £10,000 and this was sitting in my SIPP as cash I would tell Interactive Investor I wanted to crystallize £10,000. 25% of this ( £2500) would be tax free and the remaining £7500 would be treated as taxable depending on if I had exceeded my £12500 annual allowance?

As already said this is a UFPLS withdrawal :25% tax free and 75% taxable ( and triggers MPPA)
For Flexi access drawdown, if you had £10 K sitting in cash you wanted to take tax free . Then you need to crystallise £40K . The £10K would be paid to you as tax free cash and £30K would go into a crystallised drawdown . This will be taxable whenever you decide to take it .

Some pension providers will clearly split crystallised and uncrystallised pots . I think HL and Fidelity do this and probably others as well

shinytop

Albermarle wrote: »

As already said this is a UFPLS withdrawal :25% tax free and 75% taxable ( and triggers MPPA)
For Flexi access drawdown, if you had £10 K sitting in cash you wanted to take tax free . Then you need to crystallise £40K . The £10K would be paid to you as tax free cash and £30K would go into a crystallised drawdown . This will be taxable whenever you decide to take it .

Some pension providers will clearly split crystallised and uncrystallised pots . I think HL and Fidelity do this and probably others as well

HL definitely do. I'm looking at my two HL pots as I type this.