How difficult is it to perform your own Drawdown

Skinnydad

Thanks Dazed and confused my personal allow is used up by other pensions 

Skinnydad

Thanks to all that's replied so far. Please allow me to digest a the replies and I'll get back to you this evening. I can't say thanks enough 

dunstonh

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?

Crystallising occurs when you take the 25% element of the pension.        So, if you haven't accessed the 25% then the fund will be uncrystallised.    If you access the 25%, then the 75% left in the pension becomes crystallised.

Its a way of earmarking the funds so providers know how to treat it for tax purposes.  For example, the 25% can only be paid on uncrystallised funds.   And, crystallised funds go through a payroll system when paid out.

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.

So, in your case, the action of 25% up front would crystallise the pension.   The method you are using is flexi-access drawdown.

How you invest crystallised or uncrystallised funds doesn't matter.

Albermarle

Skinnydad said:

Thanks to all that's replied so far. Please allow me to digest a the replies and I'll get back to you this evening. I can't say thanks enough 

To repeat to you and any other posters , you must speak to your pension provider to see exactly how their systems work, if it is not totally clear .
What is allowed legally and what some providers can do can be different . Older pensions in particular can be inflexible and you may well have to transfer out to another provider to get what you want .

squirrelpie

I'll second Albemarle's comment. The details of how each option works and how much they cost and how much paperwork you need to do depend entirely on your particular pension provider, so you need to ask them.

If you post specific information about a specific provider we may be able to help you understand details or suggest other options.

Dansmam

CloesUnc said:

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!

If you keep it in cash with Hargreave Lansdown there's no charge. Or at least there wasn't this tax year when I did exactly that 

Albermarle

Dansmam said:

CloesUnc said:

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!

If you keep it in cash with Hargreave Lansdown there's no charge. Or at least there wasn't this tax year when I did exactly that 

That is because HL have a higher charge in the first place . Fidelity is the same , not the cheapest but no additional charges .

Skinnydad

Thanks very much everyone. take Albermarle's point on board I need to go to Aegon and find out what they provide.  Is there any specific way to ask this question to get all the information in the one go?

Thanks..

Audaxer

Albermarle said:

Dansmam said:

CloesUnc said:

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!

If you keep it in cash with Hargreave Lansdown there's no charge. Or at least there wasn't this tax year when I did exactly that 

That is because HL have a higher charge in the first place . 

I'm not sure what you mean by a higher charge in the first place? If you open a SIPP with HL, say in retirement, and keep it in cash, drawing it out by UFPLS each year after tax relief is added, there is no charge at all, unless things have recently changed? 

gm0

@Skinnydad - don't sweat it too much. You can likely create a similar enough (for most people) income profile with either FAD or UFPLS over a tax year.  So this need not necessarily drive platform select but can if you want it to.

The closest idea to what you ask about in your post is monthly UFPLS, 25% tax free each time and then up to the start of the basic rate band with the 75% as the regular payment. 

But slightly larger slices of the pot with FAD once each 12 months or so and then varying the income start and pace can generate broadly similar cashflows albeit with some small lumps of cash to consume or invest. 
Entirely up to you as to managing what is buffered outside the pension. And yes if you die innappropriately there could be some small additional IHT on cash which could have been still inside the wrapper with UFPLS (if you have filled your IHT nil rate band).

Example:

An annual 16k FAD "phase".  
Mark 16k for drawdown - deal with compliance interactions with provider
4k out as tfc.

Then

3 quarterly payments of 4
or 9 monthly payments from month 4-12 of 1.3 (delay the income start of a fixed amount to drain the TFC first)
Or 12 income payments of 1000 - So it's 5 month 1 then all 1s
All of those income options post TFC are taxable but within nil rate band and add up to the same

Or you do the "optimised" UFPLS 16k via actual "monthly" UFPLS slices. 12x 1333 crystallising as you go along.  If the provider happily supports that - great.  If they don't then I think you can get close enough by other means as shown

FCA crystallisation compliance and LTA reporting drives provider behaviour to make a UFPLS or a FAD slice a modest or more significant pain to do paperwork for DIY.  FAD income within a crystallised slice doesn't create taking benefits paperwork.  If you do the slice and the setup at the same frequency as rebalancing it may not be that big a deal anyway.

In the end it's only one aspect of DIY platform selection - reputation, platform and fund costs, insured/uninsured funds aka (protection), the fund and other product range, digital facilities which suit you etc.

Provided you have phased FAD support (more than one slice of the whole pot) or ad hoc lump sum UFPLS then you can do something workable - it may be easier to do it annually if your DIY provider isn't monthly UFPLS "friendly" which they may well not be due to the mandatory FCA reporting they need to do for consumer crystallisations aka the taking of pension benefits. 
No corporate risk team is going to skip the mandated reportable steps.  The robos may do some self service web form filling and a lighter weight approach to review and outbound calling than the old life companies.  But the way the regs (COP) are written by the FCA are in a mindset of proactive customer contact, prompting and audited interaction - not just a questionaire click - an opt out - one and done.  Hence the difference with advised platforms who have the IFA in the middle responsible for that.

Something else to ask:

If you want to DIY the investments in a way which requires income to come from wrapped (in the SIPP) cash fed from inc fund unit types or at rebalancing i.e. you want to restrict fund sales to rebalancing so it doesn't just "happen" during volatility - then you will need to ask about how the platform takes income.  Is it cash first, largest first, smeared across all and what options (if any) do you have for how this works and what happens when wrapped cash is exhausted and income (or platform fees) are due.  Not all players do it exactly the same way.  There was a thread the other day about Vanguard being different so something else to clarify.