SIPP growth after crystallisation and where it is applied

Sine_Nomine

My question is about how the growth (or shrinkage) of one's SIPP is treated after partial crystallisation.

Let's say I have a SIPP valued at £100k when I crystallise £25k.  Let's assume for simplicity I don't drawdown any of that £25k.  Now spool forward 6 months and the whole SIPP is valued at £120k,  is it considered that the crystallised trenche has grown from £25k to £30k, and the untouched portion has grown from £75k to £90k?  Or is it considered that the crystallised trenche is still £25k and the untouched portion has grown to £95k?

I ask this question because I have two SIPPs, one with AJ Bell and one with James Hay:  Prima facie it looks like AJB apply the former approach, whilst JH appear to do the latter.  Before contacting them to understand this better, I am curious to understand what the 'rules' are, or is this simply at the discretion of the SIPP provider?

Taking another extreme to ask the question in a somewhat different way - if my SIPP was worth £1.2M and I crystallise £1.1M (ie 100% of the LTA), if the fund now grows to £1.5M is that 25% growth applied to both amounts, or is all the £300k growth considered growth in the uncrystallised £100k remainder (thus 300% growth!)?

Grateful for any insight I can get before contacting AJB and JH to find out more from them.  It's always better to know the answer to a question before you ask it 

Thanks in anticipation

  

marlot

They should be tracking the crystallised and uncrystallised separately.

I like the HL way of doing it - I have two pots.   'SIPP' and 'SIPP Income Drawdown'.  When I crystallise £100k from the SIPP account, £25k will be paid as cash to my bank account, and £75k appears in my SIPP Income drawdown.

I can leave funds in my 'SIPP Income Drawdown' account for as long as I like.

I can make different investment decisions for the  'SIPP' and 'SIPP Income Drawdown' pots and I can see what's happening to both.

Malthusian

It depends entirely on the provider. Some will keep the uncrystallised and crystallised parts in separate accounts, with separate holdings, others will hold the same underlying assets across the uncrystallised and crystallised parts.

The latter approach is more common with true SIPPs, where people may want to hold a single asset (e.g. a commercial property) across crystallised and uncrystallised funds. Personal pensions / SIPPs-in-name-only which only hold unitised assets don't have any need for that complication.

If the uncrystallised and crystallised segments hold the same assets, growth will be allocated in due proportion to their shares.

EdSwippet

HL -- and Fidelity, I believe -- split things visibly into two 'pots', one uncrystallised and the other crystallised (in drawdown). By contrast, AJ Bell, Interactive Investor, and iWeb instead keep everything in one single 'pot', and keep a note of its crystallised/uncrystallised ratio, usually shown as a percentage. I don't know which of these two methods James Hay SIPPs use.

Previously discussed in this thread: Partially Crystallised SIPP Growth Monitoring

Albermarle

Taking another extreme to ask the question in a somewhat different way - if my SIPP was worth £1.2M and I crystallise £1.1M (ie 100% of the LTA), if the fund now grows to £1.5M is that 25% growth applied to both amounts, or is all the £300k growth considered growth in the uncrystallised £100k remainder (thus 300% growth!)?

You seem to be missing the tax free cash part. If you crystallise £1.1 Million , then it would generate £275K tax free cash , leaving £825K still in the pension as crystallised funds . If this grew by 25% it would be growth of £206K, not £300K .

Sine_Nomine

Albermarle said:

Taking another extreme to ask the question in a somewhat different way - if my SIPP was worth £1.2M and I crystallise £1.1M (ie 100% of the LTA), if the fund now grows to £1.5M is that 25% growth applied to both amounts, or is all the £300k growth considered growth in the uncrystallised £100k remainder (thus 300% growth!)?

You seem to be missing the tax free cash part. If you crystallise £1.1 Million , then it would generate £275K tax free cash , leaving £825K still in the pension as crystallised funds . If this grew by 25% it would be growth of £206K, not £300K .

I wasn't "missing" it, I was simply avoiding adding it to the complication of the question at hand.  It just alters the figures we're looking at, but not the underlying question.  And it isn't a requirement that one takes the PCLS, one can chose to leave it all in the pot for (taxable) drawdown.

Which at the risk of hijacking my own thread - poses another question: 

The funds in my SIPP are essentially held in trust and on my death would be distributed based on my expression of wish, and not subjected to IHT.  What is the status of crystallised funds, as these are still within the SIPP, do they still have the same trust status as uncrystallised funds within the SIPP?  I understand that if one takes a 25% PCLS then that has clearly become a personal asset and would become part of my estate and subject to IHT.  This latter point might be one reason why one might not automatically take a PCLS at crystallisation - although I am then not sure I can see why anyone would crystallise funds if not intending to draw any down or take a PCLS at all. 

Albermarle

 What is the status of crystallised funds, as these are still within the SIPP, do they still have the same trust status as uncrystallised funds within the SIPP? 
Yes
 I understand that if one takes a 25% PCLS then that has clearly become a personal asset and would become part of my estate and subject to IHT.  This latter point might be one reason why one might not automatically take a PCLS at crystallisation - although I am then not sure I can see why anyone would crystallise funds if not intending to draw any down or take a PCLS at all. 
There are very few instances where it makes sense not to take the tax free cash, even with the potential IHT liability . In fact not even sure that many providers have the ability to crystallise your pension and not pay out the PCLS, as it all happens automatically in their systems.

Sine_Nomine

EdSwippet said:

HL -- and Fidelity, I believe -- split things visibly into two 'pots', one uncrystallised and the other crystallised (in drawdown). By contrast, AJ Bell, Interactive Investor, and iWeb instead keep everything in one single 'pot', and keep a note of its crystallised/uncrystallised ratio, usually shown as a percentage. I don't know which of these two methods James Hay SIPPs use.

Previously discussed in this thread: Partially Crystallised SIPP Growth Monitoring

Hi EdSwippet,

Thanks for the pointer to that other thread - very helpful reading there.

Until a couple of days ago I hadn't appreciated the complexities of tracking growth within a SIPP that's partially crystallised.  I assume that in the case of the "one potters" that percentage ratio has to be recalculated every time a pension income payment is made, or when a contribution is added to the SIPP   

Following all the helpful responses to my thread I rang James Hay to ask the question.  It seems they fall into the "one pot" camp, but disappointingly do not make the figures available on their web portal.  If you 'make a request' they will calculate it for you.

Beginning to feel a move from James Hay may be overdue. 

Thrugelmir

Sine_Nomine said:

My question is about how the growth (or shrinkage) of one's SIPP is treated after partial crystallisation.

Let's say I have a SIPP valued at £100k when I crystallise £25k.  Let's assume for simplicity I don't drawdown any of that £25k.  
  

That's not a crystalisation event. You need to withdraw benefits to create one. Not just nominate. 

NannaH

Charles Stanley (DH’s Sipp) annoyingly don’t differentiate either and they charge £150 for both crystalisation and transfers out.  In fairness I imagine most people only crystalise once though,  he still has 10% uncrystalised so will just have to swallow the charge when he takes it. 

He will have to open a new Sipp at 60 to hold a yearly £3600 input and will transfer his work Aegon pension which has high charges of .75% + fund charges, I’m thinking AJ Bell or ii as it won’t be touched till SPA then will most likely be quarterly UFPLS withdrawals. 

I’m with Hargreaves and am pleased to know that it will show separate pots as I will also continue to add £3600 yearly when in drawdown and will keep £2k of it in cash to draw.

Albermarle

Sine_Nomine said:

EdSwippet said:

HL -- and Fidelity, I believe -- split things visibly into two 'pots', one uncrystallised and the other crystallised (in drawdown). By contrast, AJ Bell, Interactive Investor, and iWeb instead keep everything in one single 'pot', and keep a note of its crystallised/uncrystallised ratio, usually shown as a percentage. I don't know which of these two methods James Hay SIPPs use.

Previously discussed in this thread: Partially Crystallised SIPP Growth Monitoring

Hi EdSwippet,

Thanks for the pointer to that other thread - very helpful reading there.

Until a couple of days ago I hadn't appreciated the complexities of tracking growth within a SIPP that's partially crystallised.  I assume that in the case of the "one potters" that percentage ratio has to be recalculated every time a pension income payment is made, or when a contribution is added to the SIPP   

Following all the helpful responses to my thread I rang James Hay to ask the question.  It seems they fall into the "one pot" camp, but disappointingly do not make the figures available on their web portal.  If you 'make a request' they will calculate it for you.

Beginning to feel a move from James Hay may be overdue. 

The two SIPP's that hold separate ones are not the cheapest for large pots , especially compared to a fixed fee provider.
HL charge 0.45% on the first £250K and then 0.25% ( I think ) on anything above that .
Fidelity charge 0.35% on the first £250K but if you go over that the charge is 0.2% for all of it.

Both offer capped charges for exchange traded products ( anything other than OEIC funds ) of £200 and £45 ( yes very low ) pa, although there is a charge to buy these ( shares , ETF;s IT;s etc )

Both do not charge for things like crystallisation events , withdrawals etc 

Fidelity currently have a pension transfer cashback offer.