No such thing as a silly question.

Thrugelmir

Mick-H wrote: »

It's a yearly fee of around £680 with pension bee.

Ouch. Might as well suffer some tax and draw the money out quicker.

Mick-H

Thrugelmir wrote: »

Ouch. Might as well suffer some tax and draw the money out quicker.

I've a pot of around £98000 that has to last me just short of 9 years.
I'm currently taking £1000 per month but will be putting £2880 of that back in every year to get the tax relief, which in effect pays my yearly fee.
I did some looking round and while that fee £680 is not the cheapest there's not a lot in it and to date everything has been worry and hassle free which is worth a few quid in itself.

Ganga

MaxiRobriguez wrote: »

If it were me and I was using the money to live off then I would take it in one go at the start of the year, perhaps even two years worth.

You wouldn't invest money if you wanted to access that money within three years because of volatility risk. The same theory applies on money already invested if you're drawing down a proportion of it.

The person drawing the money is a non tax payer and is staying under the tax threshhold with one years money,two years would lead to them paying tax.

Audaxer

Mick-H wrote: »

I've a pot of around £98000 that has to last me just short of 9 years.

Is the £98,000 invested or held as cash in the SIPP? Either way, I think there is a risk it won't last for 9 years at £12k per year, i.e. a total of £108k drawn down.

Mick-H

Audaxer wrote: »

Is the £98,000 invested or held as cash in the SIPP? Either way, I think there is a risk it won't last for 9 years at £12k per year, i.e. a total of £108k drawn down.

It's invested.
Don't forget £2880 of that is going back in so I'm only actually taking £9120
£82000 for the 9 year so got it covered with a bit to spare unless things go belly up.

mark1959

I've used drawdown for the last 3 years since I retired. I draw the maximum out each year at the beginning of the tax year, this year being £16500, that won't incur tax. [25% off = £12375, just below the £12500 p.a.]. Up until this year I did pay a lot of tax, claimed back online took about 3 weeks. They [either the pension provider or HMRC, who knows] now have provided me with an almost correct tax code and I didn't pay tax to start with this tax year. :beer:

Dazed_and_confused

A few wrong assumptions here. A single withdrawal of 12K will be taxed as if it were 144K (so losing personal allowance, savings allowance etc). It won't matter whether it is the first month of the tax year or the last. It is a brain dead system.

You are totally wrong.

A withdrawal of £12k taxed using the emergency tax code will not be taxed with loss of personal allowance, savings allowance etc

The pension payer will be using the emergency tax code of 1250L on a non cumulative basis so the payment will be taxed allowing one month's worth of Personal Allowance and one month's worth of the basic rate band.

There is no "savings allowance". There are two 0% savings tax bands (savings starter rate and savings nil rate) however neither of these are used by employers and pension payers when calculating PAYE tax deductions.

TBC15

Mick-H wrote: »

It's a yearly fee of around £680 with pension bee.

You are being fleeced. I’m drawing down £1145 a month on around £140000 (Unit trusts) with AJ Bell and it costs me in the 300s .

Edit probably in the 400s I’ll dust of the abacus and get back.

Mick-H

TBC15 wrote: »

You are being fleeced. I’m drawing down £1145 a month on around £140000 (Unit trusts) with AJ Bell and it costs me in the 300s .

Edit probably in the 400s I’ll dust of the abacus and get back.

I'll be getting in touch on Monday to double check.

Audaxer

Mick-H wrote: »

It's invested.
Don't forget £2880 of that is going back in so I'm only actually taking £9120
£82000 for the 9 year so got it covered with a bit to spare unless things go belly up.

Okay, but if you have a medium risk portfolio and there is an equity crash in the next year or two your portfolio could drop 30%, and you would be drawing out £9,120 throughout the year as prices are falling. I hope it doesn't happen, but I think there is a risk of you not being able to keep up that level of drawdown in a bear market.