Drawdown Regular Income

Dyesie

I am in the process of transferring my Aviva & Barclays pensions into the AJ Bell SIPP with a view to taking the full TFLS and then a regular monthly income.  The AJ Bell transfer team tell me if I am 100% invested in funds I will need to sell assets every month to ensure there is cleared funds in my cash account to pay the monthly income.  I guess thats okay but am a bit surprised at the need for manual intervention every month in order to take a regular level income.  Is this typical or a individual feature of the AJ Bell SIPP ? 
Appreciate any views..
    

Sunnylifeover50plan

We accepted this and keep adequate cash within the AJ Bell SIPP. They pay us the agreed amount we want on the 10th of each month. I suppose if holdings within the SIPP need to be sold to provide the cash to pay out it's only really up-to the SIPP owner to decide what should be sold. Works for us.

Thrugelmir

AJ Bell aren't going to make investment decisions on your behalf. Onus will be on you to liquidate investments as neccessary to fund the drawdown payments. Alternatively ensure that there's sufficient income generated ( and cash float maintained) to fund. 

dunstonh

The AJ Bell transfer team tell me if I am 100% invested in funds I will need to sell assets every month to ensure there is cleared funds in my cash account to pay the monthly income.  I guess thats okay but am a bit surprised at the need for manual intervention every month in order to take a regular level income.

They are not telling you that you need manual intervention.   They are telling you that your choices are non-standard and that requires extra work.

i.e. 100% invested in funds is not a normal way.    What investment strategy are you following for your income provision?  total return?  yield? etc

Is this typical or a individual feature of the AJ Bell SIPP ? 

It is a typical feature of most SIPPs.  i.e. you need cash in the pension before they can pay it out.

coyrls

Or just make one annual withdrawal.

sheslookinhot

Or sell a years worth of funds to meet your income requirements but drawdown monthly.

Bravepants

General investing advice is to not invest money that you need within the next 5 years or so, particulary if you are using total return.

If you are staying invested on a month by month basis, this is completely contrary to that advice. If you are determined to stay invested in the very short term (i.e. a year) I would do as others suggest and sell a year's worth of funds, thus pre-funding a year's worth of automatic monthly drawdowns in cash each year. 

dunstonh

Or maintain a cash float for x number of years (discussions vary on this but 24-48 months is the sort of range usually covered).  Then use income units to pay the distributions to cash.   Depending on the yield, you may or may not need as much held in cash.

Sea_Shell

dunstonh said:

Or maintain a cash float for x number of years (discussions vary on this but 24-48 months is the sort of range usually covered).  Then use income units to pay the distributions to cash.   Depending on the yield, you may or may not need as much held in cash.

This is what DH is doing.  Staying invested but with monthly drawdown, but with large cash float outside the pension.

Still a bit confused over the benefits of INC v ACC funds.  Surely they just have to sell more but cheaper INC units (net of paid out yield), rather than fewer but higher value ACC units to end up at the same £££ withdrawn.

Albermarle

Also be careful with A j Bell monthly fees . If there is no cash available to pay them , they will sell part of one of your investments to pay them . This is not unusual for many pensions but what is unusual is that A J Bell charge £10 each time to do this .

dunstonh

This is what DH is doing.  Staying invested but with monthly drawdown, but with large cash float outside the pension.

If you have the cash float outside of the pension (to allow use during negative periods and to reduce the income draw) then you need less in the pension.    Its swings and roundabouts.

 Still a bit confused over the benefits of INC v ACC funds.  Surely they just have to sell more but cheaper INC units (net of paid out yield), rather than fewer but higher value ACC units to end up at the same £££ withdrawn.

Acc funds will not replenish the cash.  Inc funds will.   So, you will need to sell the ACC funds more frequently than you would the INC funds.    And in some cases, the yield may be enough that you never need to sell any units.

Again, it can be swings and roundabouts as to the method.