Drawdown strategy and charges

Pat38493

Hi - can you help me understand technically how people tend to draw down from their pension if it's in flexible drawdown?

- Do they draw out a monthly amount, or generally the amount needed for a whole year?
- Is there typically a charge per withdrawal and if so is it large?
- Is it easy to drawdown money from there, just like making a bank transfer on your online banking or are there forms to fill which has to be physically sent?

xylophone

how people tend to draw down from their pension if it's in flexible drawdown?

I imagine that they choose the method best suited to their circumstances?

Is there typically a charge per withdrawal and if so is it large?
- Is it easy to drawdown money from there, just like making a bank transfer on your online banking or are there forms to fill which has to be physically sent?

This depends entirely on the pension provider's processes.

https://www.which.co.uk/money/pensions-and-retirement/options-for-cashing-in-your-pensions/income-drawdown/compare-pension-drawdown-plans-and-charges-ax1628r13rdk

dunstonh

- Do they draw out a monthly amount, or generally the amount needed for a whole year?

They draw out using the method that is most suitable for their objectives and circumstances.

I find most people used monthly phased drawdown (phased UFPLS).  

- Is there typically a charge per withdrawal and if so is it large?

Most providers no longer charge for drawdown.

- Is it easy to drawdown money from there, just like making a bank transfer on your online banking or are there forms to fill which has to be physically sent?

No. it is not as easy.    If you use an adviser, they will do it for you and is the least work.   However, an adviser costs money.   If you DIY, then you will need to go through the provider's process each time.   Some providers will require you to book a phone call in advance and take 30-90 minutes to handle the work.   Others have an online process.   Some will follow up with paper forms posted for signature that need returning.   Often, where the provider is heavy on work, the person will be more inclined to do it annually (or find a better provider)

Albermarle

Some of the very low cost platforms do have a charge for drawdown/withdrawals ( not that high though) but most providers do  not.
Probably easier if you talk to your provider what is and what is not possible for them and the processes involved .
In general it is a lot simpler adding money than withdrawing it !

coyrls

dunstonh said:

If you DIY, then you will need to go through the provider's process each time.   Some providers will require you to book a phone call in advance and take 30-90 minutes to handle the work.   Others have an online process.   Some will follow up with paper forms posted for signature that need returning.   Often, where the provider is heavy on work, the person will be more inclined to do it annually (or find a better provider)

This is the aspect that seems to vary wildly across different providers.  I use II and make annual withdrawals from a fully crystallised pot and that can be done by filling in a form and submitting it online.  I think the process is a bit more complicated when the withdrawal creates a crystallisation event (e.g. with UFPLS).

k6chris

dunstonh said:

- Is it easy to drawdown money from there, just like making a bank transfer on your online banking or are there forms to fill which has to be physically sent?

No. it is not as easy.    If you use an adviser, they will do it for you and is the least work.   However, an adviser costs money.   If you DIY, then you will need to go through the provider's process each time.   Some providers will require you to book a phone call in advance and take 30-90 minutes to handle the work.   Others have an online process.   Some will follow up with paper forms posted for signature that need returning.   Often, where the provider is heavy on work, the person will be more inclined to do it annually (or find a better provider)

Oh that's interesting.  I had assumed (always dangerous) that I could just set up a recouuring monthly withdrawal of less than a given threshold and then sit back and see regular drawdown coming into my current account, without the need for recurring admin. 

Notepad_Phil

k6chris said:

dunstonh said:

- Is it easy to drawdown money from there, just like making a bank transfer on your online banking or are there forms to fill which has to be physically sent?

No. it is not as easy.    If you use an adviser, they will do it for you and is the least work.   However, an adviser costs money.   If you DIY, then you will need to go through the provider's process each time.   Some providers will require you to book a phone call in advance and take 30-90 minutes to handle the work.   Others have an online process.   Some will follow up with paper forms posted for signature that need returning.   Often, where the provider is heavy on work, the person will be more inclined to do it annually (or find a better provider)

Oh that's interesting.  I had assumed (always dangerous) that I could just set up a recouuring monthly withdrawal of less than a given threshold and then sit back and see regular drawdown coming into my current account, without the need for recurring admin. 

If you are DIY then it depends on what method you want to use. UFPLS usually/always requires you to go through a bit of a rigmarole for each drawdown, but if you simply crystallise everything and then start to drawdown the remaining 75% e.g. by monthly payment then it's usually a bit of a rigmarole the first time but that's it then unless you want to change the monthly drawdown in which case it may be a bit of a rigmarole to get that changed.

dunstonh

k6chris said:

dunstonh said:

- Is it easy to drawdown money from there, just like making a bank transfer on your online banking or are there forms to fill which has to be physically sent?

No. it is not as easy.    If you use an adviser, they will do it for you and is the least work.   However, an adviser costs money.   If you DIY, then you will need to go through the provider's process each time.   Some providers will require you to book a phone call in advance and take 30-90 minutes to handle the work.   Others have an online process.   Some will follow up with paper forms posted for signature that need returning.   Often, where the provider is heavy on work, the person will be more inclined to do it annually (or find a better provider)

Oh that's interesting.  I had assumed (always dangerous) that I could just set up a recouuring monthly withdrawal of less than a given threshold and then sit back and see regular drawdown coming into my current account, without the need for recurring admin. 

On the DIY side, the platforms/providers nearly all (if not all) do not seem to facilitate monthly phased drawdown (monthly UFPLS).   On the advised side they do

If you are setting up monthly flexi-access drawdown (75% element only) then they will do that with just a single setup.

zagfles

Notepad_Phil said:

k6chris said:

dunstonh said:

- Is it easy to drawdown money from there, just like making a bank transfer on your online banking or are there forms to fill which has to be physically sent?

No. it is not as easy.    If you use an adviser, they will do it for you and is the least work.   However, an adviser costs money.   If you DIY, then you will need to go through the provider's process each time.   Some providers will require you to book a phone call in advance and take 30-90 minutes to handle the work.   Others have an online process.   Some will follow up with paper forms posted for signature that need returning.   Often, where the provider is heavy on work, the person will be more inclined to do it annually (or find a better provider)

Oh that's interesting.  I had assumed (always dangerous) that I could just set up a recouuring monthly withdrawal of less than a given threshold and then sit back and see regular drawdown coming into my current account, without the need for recurring admin. 

If you are DIY then it depends on what method you want to use. UFPLS usually/always requires you to go through a bit of a rigmarole for each drawdown, but if you simply crystallise everything and then start to drawdown the remaining 75% e.g. by monthly payment then it's usually a bit of a rigmarole the first time but that's it then unless you want to change the monthly drawdown in which case it may be a bit of a rigmarole to get that changed.

With HL you can either set up regular payments or decide each month how much you want that month. They pay on the 28th and if you want a one off payment or a top up to your regular payment you just need to request it on their website by around the 17th of the month. See https://www.hl.co.uk/retirement/drawdown/payment-calendar

They pay via PAYE as I think all providers do. No extra charges. I imagine other providers are similar.
Very easy to do. I've not bothered setting up regular payments, i just decide how much I want each month and request it mid-month on the website, and I get paid on the 28th. Probably far easier than going via a middleman/IFA.

If you understand how PAYE works you can work out how you'll be taxed, once you've had your first payment you should get a tax code, if you think this is wrong contact HMRC.

zagfles

Pat38493 said:

Hi - can you help me understand technically how people tend to draw down from their pension if it's in flexible drawdown?

- Do they draw out a monthly amount, or generally the amount needed for a whole year?
- Is there typically a charge per withdrawal and if so is it large?
- Is it easy to drawdown money from there, just like making a bank transfer on your online banking or are there forms to fill which has to be physically sent?

It's usually the crystallisation process that is bureaucratic. Once crystallised it should be straighforwards to withdraw what you want when you want, either setting up a regular payment or taking ad-hoc payments. As they pay via PAYE your provider will likely have a date in the month they run their "payroll" so you'll have a "payday" like when you were at work - but you decide how much you're getting paid! Usually need to tell them a week or 2 before how much you want or if you want to change your regular payment.

If you want to "phase" drawdown, some providers will let you set up a "monthly UFPLS" where you get 25% tax free and 75% taxable with each payment (this is usually workplace providers), others you can phase by crystallising in chunks eg crystallise a year or 2's worth at a time, take the tax free cash and drawdown as above. Then when you run out you can crystallise another chunk.

Barry_Bear

It will depend on the providers but as a general idea with Hargreaves Lansdown if you apply for drawdown online and are taking 25% tax free cash they aim for 1-2 weeks. If you are doing something less standard, for example not taking tax free element then they would handle it manually with paper forms, again taking 1-2 weeks to process. With crystallised funds in drawdown you can set it up to receive taxable income monthly, quarterly or once a year. Every crystallisation and moving funds to drawdown is the same process. 

I can't say how this compares to other providers. I have read Hargreaves Lansdown are well rated for customer support and overall service but do your own research.