BestInvest Drawdown charges

Cottage_Economy

My DH has a SIPP with BestInvest for approx £20,500 invested in a Vanguard fund. It was always intended take a fixed amount each year, once a year, between the ages of 60 and 65, running it down, until his NRA65 benefits with Royal Mail can be taken. He intends to retire at the end of this month. His income will be well under his personal allowance so no tax will be payable. Going forward we intend to put £2880 into the SIPP every year.

I'm aware that charges have to be taken into account. The charges for BestInvest SIPP in drawdown for pots under £100k are listed as £100+VAT for the initial calculation and an £100+VAT annual charge for income payments. However, there is also a charge for ad-hoc income payments of £25+VAT.  

1) Would the fixed amount we intend to take once a year (which will change in amount each year) be classed as an ad-hoc or normal income (so £25+VAT or £100+VAT)?
2) What is involved in the initial calculation of such a small pot and is this literally just a one-off payment, or will there be a chargeable calculation fee every year?


At the moment we have a lot of stress with family and friends, which will continue for much of this year, so ideally we don't want to initiate a transfer to a cheaper platform and have to deal with any stress that generates chasing if things don't work out. This may change in the future once this stressful period has passed.

dunstonh

1) Would the fixed amount we intend to take once a year (which will change in amount each year) be classed as an ad-hoc or normal income (so £25+VAT or £100+VAT)?

It depends on whether you set it up on an ad-hoc or annual basis.

2) What is involved in the initial calculation of such a small pot and is this literally just a one-off payment, or will there be a chargeable calculation fee every year?

Most providers have dropped any drawdown charges.   However, different pricing models exist.  So, you need to look at the total costs over the period to see whether it is viable to use them or a different provider.

Drawdown charges, when they exist, are usually made at the point of a decision.  Not the payment frequency.  An ad-hoc payment is a single event.  A regular payment is a single event.  A chain of ad-hoc payments is multiple events (each ad-hoc decision).

squirrelpie

Bestinvest seems to be quite an expensive place just to keep a small SIPP - £120/year + 0.3% - even before you begin to think about drawdown charges. And as dunstonh says, most other providers don't make drawdown charges. So I would suggest reconsidering your decision not to move the SIPP to a different provider.

Linton

Cottage_Economy said:

......
2) What is involved in the initial calculation of such a small pot and is this literally just a one-off payment, or will there be a chargeable calculation fee every year?


....

The "initial calculation" refers to pre-April 2015 drawdown when the amount that could be withdrawn was capped unless one could prove that one had substantial other income.  It is not relevent for drawdown accounts set up post April 2015.

jamesd

The £100 charge is equivalent to 0.49%, more than the 0.45% on investment value charged by an expensive place like Hargreaves Lansdown which makes no charge for regular or ad hoc drawdown payments. And it'll get worse as the amount drops.

I suggest that he transfers to somewhere similar to HL. Maybe do one UFPLS withdrawal first but it'll be taxed as if he will get it every month and he'll need to reclaim.

HL wants changes notified by the middle of the month for the 28th of the month payroll run.

Cottage_Economy

dunstonh - BestInvest have a list of charges on their website and the costs I've posted have been taken from that so I am assuming that's what they will be for 2021. I want to take one payment a year, probably June, and the amount will depend on the total in the pot, however, I won't be scheduling that payment as such so I guess it would be classed as ad-hoc. I intend to look at the pot every April/May and make a decision.

Squirrelpie - I do not have the mental and physical energy right now to adding more responsibility to my plate by initiating a transfer to another provider, waiting weeks/months, checking it and chasing it through, especially if I do an in-specie transfer. By Christmas things will have improved greatly in my life and I can make a different, more moneysaving, decision. Right now I'm operating in health protection mode to get through the next few months, and that means making things as simple as possible.

Linton - the initial calculation cost is listed in BestInvest's Key Facts About Our Services and Costs document on its website. It is supposed to be an up-to-date list but perhaps that slipped through the net. I'll mention it when I ring to them later this week. 

James - it was in my mind to just get this year's withdrawal and then move the pension later. Regarding tax codes, obviously as he is retiring this month HMRC has to change his tax code, and BestInvest will take tax at the emergency rate until HMRC has sent them his new tax code. Is there any way of simplifying/speeding this part up? For example, if I have a document from HMRC that shows his new tax code would a provider accept that or is it a case that it must come directly from HMRC to them? Again, just thinking getting the tax reclaimed is one more thing for me to sort out. 

Cottage_Economy

I have another couple of questions someone might be able to answer. 

When DH retires at the end of the month he will have worked two months of the new tax year. Generally, how much he can put into a SIPP this year? I was thinking it will be the maximum of his earned income in the last two months minus his and RM's contributions, and then in the next tax year he can put he straight £2880 into a SIPP.
Royal Mail now operates a Cash Balance fund but we're still not 100% clear about what it puts in as it is not on his payslip. Presumably I have to make a separate enquiry to the Pensions Scheme. 

Linton

Yes, your husband's SIPP pension contributions are limited to his total earned income this tax year minus his RM pension contributions.  Then he actually pays in 80% of the contribution with the extra 20% coming from HMRC.  With no earned income it's £2880 net/£3600 gross.

It is odd that his employer scheme pension contrbutions are not on his payslip - how else can net pay be reconciled with gross?

TVAS

The amount of detail provided here I don't know you simply did not ask Best invest what you intend to do and how much will they charge you. 
I was confused as you said "Would the fixed amount we intend to take once a year (which will change in amount each year)" so is it a fixed amount or a variable amount?