Taking My First TFLS from Fidelity SIPP

jim8888

I'm about to take my first TFLS from a SIPP I have with Fidelity. Browsing their website, I don't want to incur any "advice" fees and all I want to do is take a proportion of my 25% lump sum (not all of it). I don't want to drawdown any further income at the moment. 
I just wondered if anyone else has done this and if it's relatively simple. Also, will tax automatically be deducted on this payment, which I then have to claim back? My SIPP is all sitting in a Vanguard 80/20 account, so there is only one fund to sell to realise cash.
Any advice gratefully received.

Dazed_and_C0nfused

Why would tax be deducted from a tax free lump sum?

Albermarle

You do not have to pay for any advice , but you will have to book a telephone appointment to speak to a retirement guidance person at Fidelity . ( in the personal finance world - guidance is free and general - advice is personal , regulated and you have to pay for it )
The reason is twofold. They want to know that you fully understand what you are doing and the options available. Your question about tax on  a tax free lump sum is typical of the sort of misunderstandings that can occur, and that a chat with them will probably be helpful anyway .
Also it covers Fidelity in case you later say you made a mistake and want to reverse the decision or claim compensation or whatever.

jim8888

I think I read somewhere that the pension companies automatically deduct tax at source from a pension payment at the basic rate before paying it out, and you then have to claim it back - happy to be totally wrong on this though!

Albermarle

jim8888 said:

I think I read somewhere that the pension companies automatically deduct tax at source from a pension payment at the basic rate before paying it out, and you then have to claim it back - happy to be totally wrong on this though!

Yes you are wrong . The issue is that when you first take taxable income the tax can be more than expected, and you need to claim some back. 

Dazed_and_C0nfused

And they don't deduct basic rate tax.

They use the emergency tax code (1257L) on a non cumulative basis which, depending on the amounts involved, means tax is deducted at some or all of the following rates, 0%, 20%, 40% and 45%.

jim8888

Albermarle said:

jim8888 said:

I think I read somewhere that the pension companies automatically deduct tax at source from a pension payment at the basic rate before paying it out, and you then have to claim it back - happy to be totally wrong on this though!

Yes you are wrong . The issue is that when you first take taxable income the tax can be more than expected, and you need to claim some back. 

Okay, so I assume Fidelity manage that in declaring that taxable income is being taken from a pension? As advised, I will give them a call 

Albermarle

jim8888 said:

Albermarle said:

jim8888 said:

I think I read somewhere that the pension companies automatically deduct tax at source from a pension payment at the basic rate before paying it out, and you then have to claim it back - happy to be totally wrong on this though!

Yes you are wrong . The issue is that when you first take taxable income the tax can be more than expected, and you need to claim some back. 

Okay, so I assume Fidelity manage that in declaring that taxable income is being taken from a pension? As advised, I will give them a call 

Taking taxable pension income is the same as getting a taxable wage from work.
Fidelity will take tax off on behalf of HMRC just like your employer did/does.

Dazed_and_C0nfused

jim8888 said:

Albermarle said:

jim8888 said:

I think I read somewhere that the pension companies automatically deduct tax at source from a pension payment at the basic rate before paying it out, and you then have to claim it back - happy to be totally wrong on this though!

Yes you are wrong . The issue is that when you first take taxable income the tax can be more than expected, and you need to claim some back. 

Okay, so I assume Fidelity manage that in declaring that taxable income is being taken from a pension? As advised, I will give them a call 

Yes, once you start taking taxable income they will report the details to HMRC.

Essentially you will be on the pension companies payroll with a tax code, P60 each year etc.  Just they are paying you a pension not wages.