Multiple Drawdown Pensions

Albermarle

I am still in the accumulation phase and have four DC pots. There are good reasons to keep all four going for now, and the admin is not a problem.
However as I start thinking about drawdown strategy , I am assuming it will be simpler to have just one or two ( not all eggs in one basket ) Especially as I understand it, the admin in drawdown is more, and potentially more admin issues with HMRC .
I would be interested in peoples experience in operating more than one drawdown pot at the same time. Is it double the paperwork/admin, and does it potentially mean more complications with tax codes etc ?
Alternatively what about operating one drawdown account and then leave another pot alone, and then later top up the drawdown one from the other one ?
Or take an income from one, and one off irregular payments from another one ?
Thanks for any input from anybody with experience in this area .

greatkingrat

Trying to make small withdrawals from all four pots at the same time would make things unnecessarily complicated. If you don't merge the pots, the easiest thing to do is just make withdrawals from pot 1 until it runs out, then start withdrawing from pot 2, etc. Hopefully you don't get to the point of pot 4 running out!

You can't top up one pension scheme from another, and there is no reason why you would need to - the important figure is the total amount you have in all the pensions put together, it doesn't really matter how that total is split between the individual schemes.

Dazed_and_confused

I suspect the additional "admin" issues with HMRC are sometimes related to the very nature of the current pension flexibilities in as much as you can largely pick and choose how much and when you take taxable income.

In years gone by you would have bought an annuity which paid £x/month for ever, the only very minor complication is some annuities increase with an inflation link and others are static.

The advent of the Personal Tax Account makes it much easier to update your own tax details now though so the admin may not be too onerous.

If you know what should be happening and understand the tax system that is probably 95% of the battle won.

Albermarle

You can't top up one pension scheme from another

Perhaps 'top up' was not the right expression. You can of course transfer pensions or even partial transfers.
Could be drawdown from Pot 1 and then when it gets low , transfer in Pot 4 , which does not offer drawdown facilities as it is an old pension .
Of course might be easier just to transfer in Pot 4 in the first place but I was checking the possibilities/potential complications .

Linton

Depending on your platform, multiple drawdowns can mean multiple charges, typically £100/year, especially if you have less than £100k invested.

I do not see any good reason not to merge drawdowns. If you want multiple platforms in case of failure of a provider I suggest you do this with S&S ISAs and a different platform for one’s spouse.

A good reason for not having more platforms than necessary is that it makes rebalancing very messy. You could end up with the same investments on each platform.

green_man

Albermarle wrote: »

Perhaps 'top up' was not the right expression. You can of course transfer pensions or even partial transfers.
Could be drawdown from Pot 1 and then when it gets low , transfer in Pot 4 , which does not offer drawdown facilities as it is an old pension .
Of course might be easier just to transfer in Pot 4 in the first place but I was checking the possibilities/potential complications .

Yes the most sensible/simplest solution would seem to be to start the drawdown of one pot (whichever has the best drawdown facilities and costs) then as the pot runs down transfer another pension in. It makes no sense to have multiple pots in drawdown as far as I can see.

I have a similar/related issue. My work DC pot does not support drawdown. So I will transfer (initially my AVC chunk) to a SIPP drawdown provider then as this pot gets low I will transfer in the rest of my work pot or another pot held with Phoenix (old Standard Life pension) etc.

Thrugelmir

Easier to manage the overall portfolio once it's in one pot. How do the charges compare between the 4 providers? Both now and in drawdown.

green_man

Linton wrote: »

A good reason for not having more platforms than necessary is that it makes rebalancing very messy. You could end up with the same investments on each platform.

This is a good point that Might be an issue, especially as one pot is diminished. Of course the OP might just have say VL60 in each pot, in which case no problems.

Albermarle

How do the charges compare between the 4 providers? Both now and in drawdown.

One ( smaller one ) is an old WP pension , I keep as a kind of defensive option. This will have to be transferred at some point .
The other three are all quite similar in terms of charges and with no drawdown charges . One ( SW ( ex Zurich) is the current workplace pension, and has the lowest charges but the poorest website/customer service . Also there is another SL ex workplace ( better website and customer service ) and a Fidelity SIPP ( bigger choice ; reduced fees for IT's and good service )
So part of the reason for the initial question, is that I am not sure who I would go with if I narrowed it down.

A good reason for not having more platforms than necessary is that it makes rebalancing very messy. You could end up with the same investments on each platform.

Yes that is already an issue but I was wondering whether to aim to have one income orientated ; one growth orientated etc ( Stealing your strategy !)

Linton

Albermarle wrote: »

..... I was wondering whether to aim to have one income orientated ; one growth orientated etc ( Stealing your strategy !)

In my view income should be generated from S&S ISAs. The main problem with a SIPP is that payments out are normally only processed once a month and you would have to frequently change the amount paid out to match the income generated. You would also have to pay income tax on the full amount rather than be able to use a dividend allowance.


S&S ISA dividends/interest can be automatically paid directly into your current account within a few days with no effort or cost on your part.