How difficult is it to perform your own Drawdown

Skinnydad

Hi folks was wondering. I've retired and in 2 years when I reach 66 the state pension will kick in.  I also have a SIPP approx. 250k with Aegon and I wanted to draw this down. I'm not sure how much, but know what options are open to me.  Do I take the 25% TFLS and use this as an income for x years then drawdown or the option that appears attractive to me is to drawdown a set amount say I want £1,000 a month, 12K a year then I'd need to drawdown 15K so 3K would cover tax. or do I take a periodic lump sum?
I'm not sure how I factor in the 25% tax free portion. I don't want the lump sum but want to take the 25% TF over the life of my drawdown.  I'm just not sure how I'd work this out.
By taking this small amount I'm hoping that the remaining funds will grow, even if only a little that'll eck it out a bit longer. I'm not prepared to take massive risk as I'm on my twilight run in and want to play it safely. 

Is this a complicated process?
Armed with enough information and savvy can one do this themselves?
I don't see me wanting various amounts just a standard sum per month or Year.
Can you crystalize a small amount per year e.g 15K?

What I'm basically asking if someone could point me in the right direction on how I'd be able to manage this process annually ?
How much I'd need to drawdown to get 12K a year (I assume I'd be entitled to 25% TF, does this equate to 25% of the amount you crystalize?
even if someone would be able to give me a small Excel SS on how to extrapolate figures or point me in the right direction.

I'm basing my expectations on living till 90, I've other income, pensions and my good lady has similar.

Many thanks for anything that can be thrown my way.


  

Dazed_and_C0nfused

the option that appears attractive to me is to drawdown a set amount say I want £1,000 a month, 12K a year then I'd need to drawdown 15K so 3K would cover tax. 

Unless you have applied for Marriage Allowance your Personal Allowance will be £12,570 so no tax would be due on £1,000 of taxable pension income each month.

Or do you have another pension or taxable income which is already using your Personal Allowance?

Once you start to get your State Pension that will likely use the majority of your Personal Allowance leaving maybe £3-£4k available to set against your drawdown pension.

zagfles

Different providers do things differently, so ask Aegon what their options are. They might offer the "monthly UFPLS" option where you get paid the 25% TFLS with each payment and 75% is taxable. Otherwise they might offer phased drawdown where you crystallise in chunks eg crystallise a year's worth, take 25% TFLS up front and drawdown the 75% monthly over the rest of the year.

Marcon

Skinnydad said:

I'm not sure how I factor in the 25% tax free portion. I don't want the lump sum but want to take the 25% TF over the life of my drawdown.  I'm just not sure how I'd work this out.


  

Not sure where the complication is arising. If you don't take any tax free cash as a one-off lump sum, then 25% of each withdrawal will be tax free. If you want to take a particular amount as taxable income, then start with that 'particular amount' and multiply it by 4/divide by 3 

Example: to take £7500 taxable income + 25% tax free cash:

£7500 x 4 = £30,000
then
£30,000/3 = £10,000

i.e. you withdraw £10,000

Dansmam

I really hate how pensions are made complicated. I think I understand it now but it's been the equivalent of a degree course reading up here and all over really. This site is full of knowledgeable people and I am grateful for all their help. I don't believe I'm particularly dim but it's really not easy to understand. All I can think is that there's an industry where people make money out of the rest of us needing help to understand how to get our hands on the money we've already earned 😆.
This is how I think it works if you want to have as much as you can without paying tax. Though I think 20% of anything over the personal income tax allowance is quite the bargain to have access to everything the uk gives us (once we get some principles back into politics, which will be nice) particularly the NHS compared to eg the freedom you get in the US to choose whether to pay or just suffer. I'm an unreconstructed socialist type so no need to pay any heed to me though I hope I can be helpful. Here goes...

Each month you can take out 1/12 of your 12570 (£1047.50/month) tax allowance plus as much of the 25% tax free lump sum (261.87/month) of what you take taxable as you need. Total of £1309/month plus pennies. It's a moving target so each time you take taxable income the 25% of it moves into what is called drawdown. You can decide to take all or some of what you've moved into drawdown or invest it or leave it be. The rest stays in your pension in whatever funds you have it in (can be cash) and can go up and down.
I think...

JoeCrystal

Dansmam said:

I really hate how pensions are made complicated.

Alas, a consequence of shifting the risks from the employers to the employees in the context of their workplace pension schemes (especially with such an overall pathetic contribution from their employers). An employee on an auto-enrolment pension scheme needs to understand their positions and plan appropriately. As you said, anyone who frequents this pension forum is likely to be much more educated and know what to do by bouncing from each other and looking at the answers that posters asked and answered. They are the lucky ones.

This makes me worried about an employee who only made the minimum contributions required by auto-enrolment regulations. Thankfully, we have a state pension provision in this country, which will help a little!

CloesUnc

I intend to drawdown £16,760 per year, from a SIPP containing 5 years' worth of cash. This is equivalent to the £12,570 tax allowance plus 25% tax free, which equates to £12,570 / 0.75.

My intention is to take an income of £16,760 / 12 = £1396 per month.

As I understand from reading yesterday:

If I do this by taking a UFPLS each month, my current provider would charge me £50 + VAT for each time!

But if I do it by phased drawdown, 25% tax free up front and the rest monthly income, I would not be charged for it.

It seems there is a price to pay for what is essentially the same result!

Thrugelmir

CloesUnc said:

It seems there is a price to pay for what is essentially the same result!

Time costs money. Every business has to cover their costs. 

dunstonh

If I do this by taking a UFPLS each month, my current provider would charge me £50 + VAT for each time!

But if I do it by phased drawdown, 25% tax free up front and the rest monthly income, I would not be charged for it.It seems there is a price to pay for what is essentially the same result!

From info on other threads, it appears that  DIY providers won't offer automated monthly UFPLS.   So, if you want it they need to key it manually each time.       Whereas on the intermediary providers, it is not an issue.

It is not the same result.    Taking the 25% up front crystallises the fund in one go and future income only goes through payroll.   Phased UFPLS uses payroll and external payments and crystallises money each month.    LTA reporting needs to be done monthly instead of one-off.

CloesUnc

dunstonh said:

If I do this by taking a UFPLS each month, my current provider would charge me £50 + VAT for each time!

But if I do it by phased drawdown, 25% tax free up front and the rest monthly income, I would not be charged for it.It seems there is a price to pay for what is essentially the same result!

From info on other threads, it appears that  DIY providers won't offer automated monthly UFPLS.   So, if you want it they need to key it manually each time.       Whereas on the intermediary providers, it is not an issue.

It is not the same result.    Taking the 25% up front crystallises the fund in one go and future income only goes through payroll.   Phased UFPLS uses payroll and external payments and crystallises money each month.    LTA reporting needs to be done monthly instead of one-off.

Sorry, I don't want to hijack the thread but in the case of an all cash SIPP is this already crystalised in its entirety?

I would then draw 25% upfront, and take the rest as monthly income over 5 years, which I would arrange to be upto my basic rate tax allowance each year.

Notepad_Phil

CloesUnc said:

dunstonh said:

If I do this by taking a UFPLS each month, my current provider would charge me £50 + VAT for each time!

But if I do it by phased drawdown, 25% tax free up front and the rest monthly income, I would not be charged for it.It seems there is a price to pay for what is essentially the same result!

From info on other threads, it appears that  DIY providers won't offer automated monthly UFPLS.   So, if you want it they need to key it manually each time.       Whereas on the intermediary providers, it is not an issue.

It is not the same result.    Taking the 25% up front crystallises the fund in one go and future income only goes through payroll.   Phased UFPLS uses payroll and external payments and crystallises money each month.    LTA reporting needs to be done monthly instead of one-off.

Sorry, I don't want to hijack the thread but in the case of an all cash SIPP is this already crystalised in its entirety?

I would then draw 25% upfront, and take the rest as monthly income over 5 years, which I would arrange to be upto my basic rate tax allowance each year.

No, it's not crystallised until you actually go into drawdown. What would normaly happen is that you'd contact your pension provider for the various forms, and on those forms it'll probably ask how much percentage you want to crystallise and the monthly income (most I think will automactically pay the 25% tax free lump sum, but you'd need to check that). Once they've acted on the request they'll pay you the 25% tax free lump sum and start paying your monthly income.