Income from a SIPP

Linton

dj240779 said:

Hi, thanks for all the replies. 

So is there actually any way of getting my 7 pension pots into 1 vehicle and I can then select where the investment goes myself?
I don't want to hand it over to a system that just says it invests in a mixture of safe stocks and cash. Any shortfall and it then pays out of the capital which I want to avoid. I want to select the actual shares and just take dividends.

The only way I can see of doing that is to take the money out and put it into ISAs.
This of course would mean a massive tax hit.

I can do it over years to reduce the tax, but it would take about a decade to get all of the money out.
Any other ways of doing this?
Thanks again.

With the SIPP platforms I have used this cannot be done easily.  The problem is that regular SIPP drawdown operates like a wages department and normally pays a fixed amount monthly. Changing the amount from month to month is a hassle and could well incur extra charges.  Also the money has to be available as cash perhaps 2 weeks before the monthly payroll run.  II do support dividend payouts in their ISA, whether their SIPP allows it I do not know.

One possible way of achieving what you want is to build up a cash buffer within your SIPP and then have a monthly steady payout.   Of course you would need to monitor the cash to ensure you arent withadrwing too much.

The approach I use is to take out a large single lump sum from the SIPP each year keeping within the basic rate tax band and transfer it to an II ISA to generate dividends.

Freecall

dunstonh said:

Think of it more like a cashpoint machine.  

Blimey, haven't seen that analogy for a while.  George Osborne would be proud!

  

saver_ali

Linton said:

The approach I use is to take out a large single lump sum from the SIPP each year keeping within the basic rate tax band and transfer it to an II ISA to generate dividends.

How do you get taxed on this single lump sum? My husband is taking out a regular monthly sum because we think it makes life easier for tax deductions. Whenever we’ve taken out large lump sums we have had to pay extra tax and reclaim it, which has sometimes been painful. (And we quite like the regular monthly sums because it feels a bit like getting a salary!)

Linton

saver_ali said:

Linton said:

The approach I use is to take out a large single lump sum from the SIPP each year keeping within the basic rate tax band and transfer it to an II ISA to generate dividends.

How do you get taxed on this single lump sum? My husband is taking out a regular monthly sum because we think it makes life easier for tax deductions. Whenever we’ve taken out large lump sums we have had to pay extra tax and reclaim it, which has sometimes been painful. (And we quite like the regular monthly sums because it feels a bit like getting a salary!)

When you take out your first ever payment the tax will probably be wrong but with care you can get it right for subsequent lump sums.  If you take a lump sum but continue to take out monthly sums as well then the tax overpayment will be sorted out in the following monthly payments.  If you purely take out annual lump sums, then I am only aware of two options.....
1) Unless you have an M1 or X taxcode taking the lump sum towards the end of the tax year should work.  If HMRC have assigned an M1 or X taxcode ask them to change it.
2) If you have other taxed income that can use up all your tax allowance and will not be going into higher rate tax you can get HMRC to assign a "BR" tax code which means that the lump sum is always taxed at 20% with no allowances.  This is easier once you start taking your SP as tax on SP is recovered by reducing the tax allowance.  Using a BR taxcode also makes life easier if your lump sum drawdown is very variable - you dont want to have more of your tax allowance assigned to an income stream than you can use.

I use the BR tax code method.

dunstonh

So is there actually any way of getting my 7 pension pots into 1 vehicle and I can then select where the investment goes myself?

Most pensions since the mid 90s have had some degree of self selection.   Sometimes only 10-20 funds. Sometimes 300 funds.  Nowadays, modern platforms are whole of market and offer around 30,000 investment options.

I don't want to hand it over to a system that just says it invests in a mixture of safe stocks and cash. Any shortfall and it then pays out of the capital which I want to avoid. I want to select the actual shares and just take dividends.

A SIPP will do that.  However, dividends is a less common method nowadays than it used to be.  Total return is more popular.  Dividends tends to promote higher risk and home bias.

Linton

dunstonh said:

So is there actually any way of getting my 7 pension pots into 1 vehicle and I can then select where the investment goes myself?

Most pensions since the mid 90s have had some degree of self selection.   Sometimes only 10-20 funds. Sometimes 300 funds.  Nowadays, modern platforms are whole of market and offer around 30,000 investment options.

I don't want to hand it over to a system that just says it invests in a mixture of safe stocks and cash. Any shortfall and it then pays out of the capital which I want to avoid. I want to select the actual shares and just take dividends.

A SIPP will do that.  However, dividends is a less common method nowadays than it used to be.  Total return is more popular.  Dividends tends to promote higher risk and home bias.

Sadly it wont do it automatically, at least the SIPPs I use dont.

dj240779

Thanks for the answers. Much appreciated.

I understand that when I first transfer my pensions into a SIPP, I can choose the shares I buy.
However, when I then want an income, the ii website says:

• If you want to take your full tax-free lump sum (25%) in one go, you can move your full SIPP into Flexi-Access Drawdown (FAD), where it will remain invested. 

This is the point where I will take an income. It says the money will be in a FAD. From what I read, I cannot buy individual shares when the money is in the FAD. It's their own fund, maybe a choice of 3 (cautious, moderate and higher risk I think they were referred to).


It seems the only way to get control is to take a chunk each year and then put into an ISA.

dunstonh

This is the point where I will take an income. It says the money will be in a FAD

It is not something you are in.  It is a process.   You would be using FAD with your SIPP.   (you could be using UFPLS, drawdown of phased drawdown - all variations of process).

From what I read, I cannot buy individual shares when the money is in the FAD. 

Where have you read that? (its wrong)

It's their own fund, maybe a choice of 3 (cautious, moderate and higher risk I think they were referred to).

If you use a provider with a limited selection, then you get what they offer.  You need to use a whole of market provider if you want whole of market access.

It seems the only way to get control is to take a chunk each year and then put into an ISA.

That is incorrect and potentially expensive to do that.

Albermarle

This is the point where I will take an income. It says the money will be in a FAD. From what I read, I cannot buy individual shares when the money is in the FAD. It's their own fund, maybe a choice of 3 (cautious, moderate and higher risk I think they were referred to).

I think you must be misreading something . Maybe they are just promoting their own (3) funds as an easy way to invest, but it does not mean you have to invest in them .

Most SIPP providers have some inhouse ( expensive ) funds they promote to new investors but you do not have to invest in them ( and you shouldn't as they are usually expensive ). With II and similar SIPPs you will have a huge choice of funds; ETF's; investment trusts and individual shares , whether you are in drawdown or not. 

AnotherJoe

dj240779 said:

Hi, thanks for all the replies. 

So is there actually any way of getting my 7 pension pots into 1 vehicle and I can then select where the investment goes myself?
I don't want to hand it over to a system that just says it invests in a mixture of safe stocks and cash. Any shortfall and it then pays out of the capital which I want to avoid. I want to select the actual shares and just take dividends.

By aiming only for dividend investments you are restricting yourself to a small section of industries and companies and miss out on a lot of growth which overall gives more income. 

Being focussed on not selling shares even though they can drop just as much as shares bought for growth and income, in order to get less money seems like a wrong way to order your priorities.