Flexi draw down

ian16527

Albermarle said:

ian16527 said:

gm0 said:

UFPLS

You can take slices of 25% tax free and 75% taxable with UFPLS - adhoc one offs or monthly though many retail providers don't (yet) offer the last of these (which means they do compliance tasks for each crystallisation - dull).  So with those you could do it once a year with 1x rather than 12x sets of compliance forms or just use another method.

FAD

You can do much the same income stream with Flexible Access Drawdown (FAD) i.e. to a "slice" of a pension fund or the whole fund.  Crystallise a chunk. Take 25% tax free.  Take no income.  Then at any time you can then setup a monthly, quarterly or annual income on the matching 75% which remains invested inside the pension wrapper meanwhile - marked as crystallised.

In fact both of these routes can be used to generate very similar cashflows to suit your needs preserving investment inside the pension until needed.  In both cases you get 25% tax free of the crystallised amount over time unless you actively chose not to take it. 

I understand with what you have said above,  but looking at the first post, they are putting all of it in flexi drawdown, but leaving the Tax free part untouched in there to take piecemeal whenever.

I thought you could not do this, and had to take the Tax Free cash immediately. This is the part that's confusing me

"She went on to explain about a flexi draw down pension that has the whole pot in it and when not earning enough to pay tax draw from the taxable portion. Only take from the tax free part when over the threshold and paying tax"

I noticed this and replied already as follows:
The only comment I would make that is not clear from your description;  is that you can not draw taxable income just on its own without first ( or at the same time ) taking  some tax free cash. The two are linked.

I suspect either the advisor has not explained it clearly enough, or the OP has misunderstood a little what they have been told.
It is 100% the case that to take any taxable income, you have to take some tax free cash first/at the same time.

Yes I saw that and agreed, but DunstonH then muddied the waters after your post.

Beaneymcs

Thanks for the replies. The information confirms what I had already seen on line i.e. she does not know what she is talking about.
She is an ex bank manager working at a financial advisors doing the first call to gather information on retirement requirements etc before passing it onto the main man. They will be getting an e mail today and I shall not be using them to sort my pension out. Thanks to all for the help.

Albermarle

Beaneymcs said:

Thanks for the replies. The information confirms what I had already seen on line i.e. she does not know what she is talking about.
She is an ex bank manager working at a financial advisors doing the first call to gather information on retirement requirements etc before passing it onto the main man. They will be getting an e mail today and I shall not be using them to sort my pension out. Thanks to all for the help.

Suggest you keep reading this forum. You can learn a lot, like I have !

dunstonh

If you crystalise, say £10k into drawdown, £2.5k is paid out as tax free straight away, so how do you stop this to only take the taxable income.
Or have I misunderstood which is quite possible 

You would take the tax free cash and place it in an S&S ISA in most cases.  Its then invested the same as the pension but hasn't lost tax-free status or wasted by sitting in a bank account.   You can delay taking it for a while but in reality, its usually easier to use the S&S ISA.

Or you take less lump sum so the net amount (after 75%/25%) matches your need.

It should be noted that what you have said here is different to what you suggested by the OP in the first post.   The OP was talking about taking the whole TFC up front.  You are talking about doing partial UFPLS.

ian16527

dunstonh said:

If you crystalise, say £10k into drawdown, £2.5k is paid out as tax free straight away, so how do you stop this to only take the taxable income.
Or have I misunderstood which is quite possible 

You would take the tax free cash and place it in an S&S ISA in most cases.  Its then invested the same as the pension but hasn't lost tax-free status or wasted by sitting in a bank account.   You can delay taking it for a while but in reality, its usually easier to use the S&S ISA.

Or you take less lump sum so the net amount (after 75%/25%) matches your need.

It should be noted that what you have said here is different to what you suggested by the OP in the first post.   The OP was talking about taking the whole TFC up front.  You are talking about doing partial UFPLS.

I don't understand as what you have quoted above is my first post and I have not suggested anything, just asked a question.

Its the statement by the OP that I didn't understand so thanks for explaining how to do this by using an S&S ISA although I don't want to do this myself.
I have misunderstood as I thought it was implied that the TFLS was still inside the SIPP. 

I am doing FAD currently, although from a cash management view, I would have liked to have had the TFLS paid monthly as well as my taxable income, which would then be a UFPLS but its too much hassle to sort this out currently.

dunstonh

I don't understand as what you have quoted above is my first post and I have not suggested anything, just asked a question.

What you were referring to and what the OP was referring to are two different things.  I notice a typo in my response where the word "you" was included incorrectly.

I am doing FAD currently, although from a cash management view, I would have liked to have had the TFLS paid monthly as well as my taxable income, which would then be a UFPLS but its too much hassle to sort this out currently.

Monthly UFPLS works well on advised cases but it seems no DIY provider supports that option.  It may come in time to the DIY market.

ian16527

dunstonh said:

I don't understand as what you have quoted above is my first post and I have not suggested anything, just asked a question.

What you were referring to and what the OP was referring to are two different things.  I notice a typo in my response where the word "you" was included incorrectly.

I am doing FAD currently, although from a cash management view, I would have liked to have had the TFLS paid monthly as well as my taxable income, which would then be a UFPLS but its too much hassle to sort this out currently.

Monthly UFPLS works well on advised cases but it seems no DIY provider supports that option.  It may come in time to the DIY market.

Thanks for the clarification

Scrudgy

dunstonh said:

Monthly UFPLS works well on advised cases but it seems no DIY provider supports that option.  It may come in time to the DIY market.

Why is this please? Is it to do with UFPLS payments being tested against the LTA each time, therefore too much admin?

Albermarle

Scrudgy said:

dunstonh said:

Monthly UFPLS works well on advised cases but it seems no DIY provider supports that option.  It may come in time to the DIY market.

Why is this please? Is it to do with UFPLS payments being tested against the LTA each time, therefore too much admin?

I think the main issue is that each payment is seen as a new withdrawal ( normally UFPLS is used for one off lump sum payments)  and therefore the provider has to go all through the 'nanny state' compliance procedure with the client each time .
At least one main SIPP provider, Fidelity, is looking at offering regular monthly UFPLS in future. Maybe be will be others as well.

dunstonh

Scrudgy said:

dunstonh said:

Monthly UFPLS works well on advised cases but it seems no DIY provider supports that option.  It may come in time to the DIY market.

Why is this please? Is it to do with UFPLS payments being tested against the LTA each time, therefore too much admin?

I dont know why.    I have heard stories of some platforms having to do phased UFPLS manually and that doesn't go well with the DIY model.   However, we know that FNZ based platforms support it on an automated basis and there are FNZ platforms on the DIY side and they don't do it.

Some have suggested compliance but on the advised side, there is no issue doing these on a transactional basis (i.e. ad hoc off set ups and then left to do what it needs to do).