IFA Withdrawal Request Timing?

GSP

In drawdown, from your request to your IFA to take x amount from your fund, how long does it take before your fund is debited and your bank account credited. My experience is tax free money and taxable take different times usually anything from a week to 2 to 3 weeks.
This is all leading to timing. Say if you request £25,000 from your fund, but between the time of your request to actually receiving the money in your account your fund suffered a large fall. If you were managing your account and withdrawing depending on the ‘health’ of your fund, would a big fall rip up your calculations in one go?

LHW99

Depends whether you have the money as cash in the account, or if you have to sell investments when the market is in freefall.

dunstonh

In drawdown, from your request to your IFA to take x amount from your fund, how long does it take before your fund is debited and your bank account credited.

Anything from 20 minutes to 3 weeks depending on the provider/platform.   Also, if funds need to be sold to fund the withdrawal, that will add some days.

GSP

LHW99 said:

Depends whether you have the money as cash in the account, or if you have to sell investments when the market is in freefall.

Not sure if I am thinking this right. If everything was in cash, there would be ‘no problem’ as balances would remain relatively unchanged. Say if you had 5%-10% as cash and 90%-95% still invested, wouldn’t this invested portion still be open for swings in the market?

GSP

dunstonh said:

In drawdown, from your request to your IFA to take x amount from your fund, how long does it take before your fund is debited and your bank account credited.

Anything from 20 minutes to 3 weeks depending on the provider/platform.   Also, if funds need to be sold to fund the withdrawal, that will add some days.

Thanks dunstonh. Does this mean then between that period, the fund is still open to large movements as the majority will still be invested and not cash? If true, I suppose the only way to stop that risk is to turn everything into cash to provide stability, then once the withdrawal requested amount has left the fund and credited to someone’s bank account, the fund can be reinvested again? I suppose if that’s true, there’s also the chance of missing out on a large increase in those investments during that period, or it could work the other way and you bypass a large fall?

dunstonh

Does this mean then between that period, the fund is still open to large movements as the majority will still be invested and not cash?

It depends on what your strategy is.   If you know you are making a lump sum withdrawal, you would normally de risk in the years leading up to it.   

You only need to sell the funds that to cover the withdrawal.  Not the whole value of the pension.

Thrugelmir

GSP said:

LHW99 said:

Depends whether you have the money as cash in the account, or if you have to sell investments when the market is in freefall.

Not sure if I am thinking this right. If everything was in cash, there would be ‘no problem’ as balances would remain relatively unchanged. Say if you had 5%-10% as cash and 90%-95% still invested, wouldn’t this invested portion still be open for swings in the market?

If you withdraw large sums with no prior planning, i.e. liquidation of holdings. Then you'd be exposed to the daily whims of the markets.

GSP

Thrugelmir said:

GSP said:

LHW99 said:

Depends whether you have the money as cash in the account, or if you have to sell investments when the market is in freefall.

Not sure if I am thinking this right. If everything was in cash, there would be ‘no problem’ as balances would remain relatively unchanged. Say if you had 5%-10% as cash and 90%-95% still invested, wouldn’t this invested portion still be open for swings in the market?

If you withdraw large sums with no prior planning, i.e. liquidation of holdings. Then you'd be exposed to the daily whims of the markets.

Thanks Thrugelmir. Rather than ‘liquidation of holdings’, my thinking is trying to protect the fund. Timing for withdrawal appears to be crucial. As regards to planning, I would say this is planning on a daily basis so certainly most thought would have gone into it. And for being exposed, my inquiry of turning the holdings into cash briefly while the transaction goes through takes out any risk of moves in the market. 

GSP

dunstonh said:

In drawdown, from your request to your IFA to take x amount from your fund, how long does it take before your fund is debited and your bank account credited.

Anything from 20 minutes to 3 weeks depending on the provider/platform.   Also, if funds need to be sold to fund the withdrawal, that will add some days.

That 20 minutes scenario. Is that one provider/platform that can turn this around so quickly? From my later posts, you can see my thought is turning everything into cash until the transaction goes through. Just 20 minutes wouldn’t need to do any of this.

dunstonh

That 20 minutes scenario. Is that one provider/platform that can turn this around so quickly? 

Several use CHAPs to pay the lump sum.  So, as long as there is cash in the investment wrapper, they can release it the same day.  If funds need to be sold to cash then you have to factor that delay in.    Although there are several on the advice side that prefund the withdrawal but use BACs.  I cannot immediately think of any that prefund and use CHAPs.

In reality, that sort of speed is unnecessary for the vast majority of people as they wouldn't let their savings get that low or have spending habits where they need large sums without notice.   You would have to be pretty poor at money management to find yourself in that position.

AlanP_2

Unless it is an unexpected requirement I would have thought most people would be planning their drawdown strategy for at least the next year if not the next 2 or 3 years?

What I would do is in the 12/24 months leading up to starting drawdown sell the next 12/24 months amounts and leave the pension in cash in the SIPP. At the start of drawdown carry on with the same approach so that you always have 12 to 24 months cash available and not subject to vagaries of market.

Holding an amount of cash outside the pension, say another 12 months worth, adds flexibility around halting sales whilst markets are falling and adjusting up again once markets have stabilised and (hopefully) gone back up.

If there are transaction fees per sale / per investment then quarterly or annual selling may be better.

In summary, I wouldn't want to be selling on a whim if I could avoid it.