PCLS and various SIPP questions

[Deleted User]

Apologies for what seems a blindingly obvious questions
When I reach 55 I intend to retire (later this year). Currently my pensions are in DC pots across various employers, non of these offer drawdown
I have been looking at SIPP options for the past few months.
I intend to move abroad in the next 2-3 years so I plan to live on some of the TFLS and Flexi drawdown for £12,500 in the new take year (unless that is a blindly stupid thing to do) - the TFLS is used as some of the countries we are going down treat that as income and is taxed accordingly

1. I thought I got "flexibly" access the TFLS by taking some of it over time and then leaving it there however according to Interactive Investor "Please note, in order to take income from your SIPP account you do not need to take the 25% PCLS however, you won’t be able to access it later. Should you choose to crystallise your full fund but take less than the full 25% entitlement as a PCLS payment, you will not be able to take a further PCLS payment at a later date.".
That sort of states I cannot access the TFLS in stages - or is this a quirk of Interactive Investor

2. If I take my TFLS and then transfer another pension in do I get another 25% 

3. Can I take my TFLS on my 55th birthday or do I tend to have to fill in forms (and as such a delay)

Or have I totally confused myself by using the terms PCLS and TFLS interchangeably 

Dazed_and_C0nfused

1).  Depends what you mean by "in stages".  Google UFPLS.

2).   No

3).  In theory yes but you would have to check with your provider how long their process takes and when can you start the ball rolling.

SonOf

1. I thought I got "flexibly" access the TFLS by taking some of it over time and then leaving it there however according to Interactive Investor "Please note, in order to take income from your SIPP account you do not need to take the 25% PCLS however, you won’t be able to access it later. Should you choose to crystallise your full fund but take less than the full 25% entitlement as a PCLS payment, you will not be able to take a further PCLS payment at a later date.".
That sort of states I cannot access the TFLS in stages - or is this a quirk of Interactive Investor
Do not mistake what they are saying for not supporting phased drawdown. They do.    They are just saying that if you crystallise some or all of your fund and do not take the 25% allocated to that drawdown event, you will lose it on that part.
Some providers/platforms prevent you from doing this but some do not.

2. If I take my TFLS and then transfer another pension in do I get another 25% 
No.  your fund moves from being uncrystallised to crystallised once you take the 25%.   It remains crystallised forever more, regardless of who you transfer it to.

3. Can I take my TFLS on my 55th birthday or do I tend to have to fill in forms (and as such a delay)
You can submit the request on your 55th birthday.  Money will then arrive in your bank account at a later point. Some platforms will release it via CHAPS the same day it is keyed (by a certain time). Others will have a work queue you have to wait for. Some will use BACs.   If you are still invested, some will not prefund the tax free cash payment and you will need to wait for settlement on the investments.

Or have I totally confused myself by using the terms PCLS and TFLS interchangeably 
They are exactly the same thing.  Gordon Brown referred to it as PCLS whereas everyone else called it TFC previously.   It started rumours that he planned to remove the tax free element as PCLS makes no reference to tax free.   However, that never happened.

[Deleted User]

SonOf said:

2. If I take my TFLS and then transfer another pension in do I get another 25% 
No.  your fund moves from being uncrystallised to crystallised once you take the 25%.   It remains crystallised forever more, regardless of who you transfer it to.

Thank you both
With reference to number 2 I meant transferring INTO my SIPP. I can set up a SIPP and transfer all my old pensions in however in the last month of working it takes some days for the last pension payment to go into my current work DC pension. Then I can then transfer that into the SIPP. However I would have taken a TFLS from the SIPP before the last Pension transfer is complete

Thrugelmir

Deleted_User said:

That sort of states I cannot access the TFLS in stages - or is this a quirk of Interactive Investor

Your investments remain in one single pot. The individual holdings are not apportioned into separate accounts on crystallisation. Hence the subsequent treatment. 

[Deleted User]

Thrugelmir said:

Deleted_User said:

That sort of states I cannot access the TFLS in stages - or is this a quirk of Interactive Investor

Your investments remain in one single pot. The individual holdings are not apportioned into separate accounts on crystallisation. Hence the subsequent treatment. 

Thank you - it now seems to make sense
If I go into drawdown that's a crystallisation event and as such I lose the TFLS
However if I draw the TFLS over time and not go into drawdown until I need to - that is what I am planning - that seems okay as no crystallisation event has occurred (have I got that right)

EdSwippet

Deleted_User said:

If I go into drawdown that's a crystallisation event and as such I lose the TFLS
However if I draw the TFLS over time and not go into drawdown until I need to - that is what I am planning - that seems okay as no crystallisation event has occurred (have I got that right)

Not quite. Once over age 55, you can crystallise any proportion of your pension, from just a small chunk up to all of it, and you can do it on any timescale and as regularly or irregularly as you like. For each chunk you crystallise, you can (and should, otherwise you lose it!) take 25% tax free(*), and then either take the remaining 75% then as taxable income (this is UFLPLS(**)), or leave that 75% invested until you wish to take it later as taxable income (this is flexi-drawdown). Interactive Investor supports both of these.

If you have an immediate need for a lump sum, perhaps to pay down a mortgage, you might crystallise 100% of your pension, using the lump sum to pay the mortgage and keeping the 75% invested until you need income. Or if you have an immediate need for income, you might take regular smaller chunks of your pension under UFPLS and paying income tax on 75% of the withdrawal, so that leaving the remainder invested means your tax-free element can increase over time.

Your fly in the ointment is the potential for moving to a country where the tax-free lump sum is not locally tax-free. You should check any tax treaty between that country and the UK carefully, in case it is locally tax-free, but often it is not. In that case, even if you do not need the lump sum, you will probably (depending on the tax rates where you are headed) be better off taking the tax-free lump sum before moving there. International moves and pensions often come together in very complex ways though, so be very careful to make sure you know what you are doing before you act.


(*) Each crystallisation uses up a percentage of your Lifetime Allowance. Once you reach 100% allowance used, you no longer get this 25% tax free, but the government takes it instead as a Lifetime Allowance tax penalty. You'd need to have more than £1.055k in pensions (inflation uplifted annually) to achieve this.

(**)  In practice, UFPLS is nothing special at all, just one particular configuration of more general flexible drawdown. Also, probably the least catchy acronym in pensions terminology.

Albermarle

AS soon as you take some TFLS you are effectively in a drawdown process , even if you take no taxable income at that point.
It is easier if you think in terms of uncrystallised and crystallised parts of your pot .For example if you have four uncrystallised DC pots of £100K each , which you want to transfer in to a SIPP . Lets say you transfer three to begin with so you have £300K uncrystallised. You take £50K TFLS - which means you have to crystallise £200K . So left in the SIPP is £150K crystallised and £100K uncrystallised . Then if you transfer in the final DC pot , you have £200K uncrystallised. If you crystallise this and take £50K TFLS then it leaves £300K crystallised and nothing uncrystallised . If you took less than £50K TFLS ( or no further TFLS at all ) then obviously some would stay uncrystallised and you could take the remaining TFLS later.