Drawdown Regular Income

Sea_Shell

dunstonh said:

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but cheaper INC units (net of paid out yield), rather than fewer but higher value ACC units to end up at the same £££ withdrawn.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.

Well ATM it's only one small pension in DD, (not the biggie), so pulling £1150 pm from a pot of £40,000 seems like it doesn't really matter what style of funds they are, as INC would never cover it.   We know it's going to get depleted.   How quickly will depend on overall performance.


Will bear that in mind though when the biggie is transferred in, in about 3 years time.

dunstonh

It is also worth nothing that personal pensions, stakeholder pensions and basic pensions usually don't have cash accounts.  So, they may not be able to offer any cash functionality and sale of units may be the only way.  These often only offer ACC units too.

coyrls

sheslookinhot said:

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

The advantage of an annual withdrawal is that you can keep your cash in a savings account and earn interest over the year.  There is typically no interest paid on cash in a SIPP.  It an easy monthly task to move cash from a savings account to a current account.

Sea_Shell

coyrls said:

sheslookinhot said:

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

The advantage of an annual withdrawal is that you can keep your cash in a savings account and earn interest over the year.  There is typically no interest paid on cash in a SIPP.  It an easy monthly task to move cash from a savings account to a current account.

One then does have to do battle with HMRC to get excess tax refunded!!

hyperhypo

My Fidelity drawdown SIPP as part of drawdown form, asks which investment you would wish to sell to maintain monthly. net regular payments in the event that there isn't sufficient cash to cover the transaction. I believe they will sell from the largest holding if no specific fund has been nominated. I Keep 2 years cash for drawing down inside the account to avoid them having to sell on my behalf

coyrls

Sea_Shell said:

coyrls said:

sheslookinhot said:

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

The advantage of an annual withdrawal is that you can keep your cash in a savings account and earn interest over the year.  There is typically no interest paid on cash in a SIPP.  It an easy monthly task to move cash from a savings account to a current account.

One then does have to do battle with HMRC to get excess tax refunded!!

Not in my experience.  I make one withdrawal in March each year and the correct tax is deducted and so there is no need for an excess tax refund.

Albermarle

hyperhypo said:

My Fidelity drawdown SIPP as part of drawdown form, asks which investment you would wish to sell to maintain monthly. net regular payments in the event that there isn't sufficient cash to cover the transaction. I believe they will sell from the largest holding if no specific fund has been nominated. I Keep 2 years cash for drawing down inside the account to avoid them having to sell on my behalf

Also Fidelity are happy to sell funds on your behalf to pay fees with no charge .
So it seems generally on this issue of selling funds for cash on your behalf , Fidelity are more flexible than A J Bell .

dunstonh

Some platforms will allow you to nominate a fund or process.  Often these are:
1 - chosen fund
2 - last in, first out
3 - target allocation (i.e. you set your target weightings, and it will draw to bring you as close back in line with that as possible)
4 - fund with highest value.

On the advice side, platforms/providers rarely charge for forced sales.

zagfles

Dyesie said:

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..
    

HL are similar, they won't pay the monthly drawdown if there's not enough cash, or won't pay it in full. You can keep cash in the pension but the interest rate is virtually zero, although you save on the platform fee.

What I'll probably do is drawdown a few times a year rather than monthly - once you've got a proper (cumulative) tax code the tax should sort itself correctly. For instance if you have the full PA available and a 1257L tax code, and want to draw £12570 over the year, as long as the total drawn isn't more than 1/12 of the PA times the months so far in the tax year you won't pay any tax. So could eg draw £6000 in Sept and £6570 in March and pay no tax.

And if you have equities in the pension and cash outside, and would rather draw from cash, you could sell the equities in the pension to cash, use your cash outside the pension to rebuy the same equities eg in an ISA, and draw the cash from the pension. So effectively you've drawn from the pension but used cash not equities.

Sea_Shell

coyrls said:

Sea_Shell said:

coyrls said:

sheslookinhot said:

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

The advantage of an annual withdrawal is that you can keep your cash in a savings account and earn interest over the year.  There is typically no interest paid on cash in a SIPP.  It an easy monthly task to move cash from a savings account to a current account.

One then does have to do battle with HMRC to get excess tax refunded!!

Not in my experience.  I make one withdrawal in March each year and the correct tax is deducted and so there is no need for an excess tax refund.

So at the end of a tax year, rather than the beginning, so not a "month1" calculation?   Is that the "trick"?

Having drawn out a taxable lump (within PA) sum in September, the rebate took until April to be refunded.