Interactive Investor Drawdown

Soad

I am about the retire in March 2023

I have a small pension pot and my pension company does not offer a drawdown only the 25% tax free payment then an annuity with the balance

They sent me this link if I want a drawdown

https://www.ii.co.uk/ii-accounts/sipp/income-drawdown

Anyone had any experience with these?

Not to sure what to do go for the draw down so it keeps me just at the £12570 tax limit or take the lot out and pay the 20% tax on the balance after the 25% tax free payment  

Albermarle

Not sure why they specifically sent you a link to Interactive Investor, as there are many drawdown providers as well as them. Which one would be best for you , depends on the size of the fund involved, your knowledge of investing/how hands on you want to be etc
Presume you are aware that normally you invest the money in a drawdown pot, so some choices will have to be made.
You can keep it in cash if you intend to draw it down quickly, but not advisable if you want the drawdown to last you a long time. 

Not to sure what to do go for the draw down so it keeps me just at the £12570 tax limit or take the lot out and pay the 20% tax on the balance after the 25% tax free payment  

Well go for the latter option if you like paying tax unnecessarily !

There is usually an option to take the 25% tax free in stages. So you can take some tax free cash and £12570 taxable, each year and pay no tax. 

handful

I've got a SIPP with Interactive Investor but not drawing down yet. All I can tell you is that their customer service is excellent and charges for me are very reasonable for the type of investments that I hold in it. As Albemarle said, best to do some homework on who is best for your circumstances.

dunstonh

Bit risky of a provider to recommend a third party provider.  It may be taken as a professional recommendation (which it wont be).   

Not to sure what to do go for the draw down so it keeps me just at the £12570 tax limit or take the lot out and pay the 20% tax on the balance after the 25% tax free payment  

Before you pick a platform, you should decide your drawdown method to suit your objectives and the investment method to support the drawdown method.    Picking the provider first may result in you having to change again if you find out that provider doesnt offer what you want.

Pat38493

I understood from something I was reading yesterday that interactive investor has flat fees so they are quite good for large pots as long as they have the investments you are looking for.

Albermarle

Pat38493 said:

I understood from something I was reading yesterday that interactive investor has flat fees so they are quite good for large pots as long as they have the investments you are looking for.

In general 'flat fee' providers work out cheaper for large pots and, % chargers for smaller pots . The break even point seems to be somewhere around £75K to £100K.
However the % chargers tend to have less extra charges, and some have a cap on charges, so not a black and white issue.

Also some providers offer cashback for transferring to them which can pay the platform fees for a year or two. Fidelity often do this , II sometimes, and HL have a particularly generous cashback offer at the moment, especially for bigger pots.

jim8888

I'm drawing down £12570 a year from an Interactive Investor SIPP. This is paid to me by Direct Debit in 12 equal monthly instalments. I took the 25% lump sum out at the same time I started to draw down.
I have different investment funds in this SIPP. It's up to me which to sell and when, in order to have the cash available to withdraw on a monthly basis. This maybe sounds more complex than it is, and there may be simpler drawdown schemes available if, for example, you have only the one investment fund in the pension. You could maybe then instruct them to sell the equivalent funds ongoing each month to provide the monthly income?
Overall, with a little bit of work it's pretty painless and Interactive Investor's customer service are always available for help.
I'm assuming your pension is a Defined Contribution scheme and therefore the "pension pot" is yours to transfer to a provider of your choice? If it's a Defined Benefit pension, that may be a bit (or a lot!) more complicated......

Pat38493

jim8888 said:

I'm drawing down £12570 a year from an Interactive Investor SIPP. This is paid to me by Direct Debit in 12 equal monthly instalments. I took the 25% lump sum out at the same time I started to draw down.
I have different investment funds in this SIPP. It's up to me which to sell and when, in order to have the cash available to withdraw on a monthly basis. This maybe sounds more complex than it is, and there may be simpler drawdown schemes available if, for example, you have only the one investment fund in the pension. You could maybe then instruct them to sell the equivalent funds ongoing each month to provide the monthly income?
Overall, with a little bit of work it's pretty painless and Interactive Investor's customer service are always available for help.
I'm assuming your pension is a Defined Contribution scheme and therefore the "pension pot" is yours to transfer to a provider of your choice? If it's a Defined Benefit pension, that may be a bit (or a lot!) more complicated......

So with ii you are personally responsible for making sure there is enough cash in your SIPP to withdraw - you cannot just tell them to automatically sell enough of investment x to provide cash, or whatever?

jim8888

Pat38493 said:

jim8888 said:

I'm drawing down £12570 a year from an Interactive Investor SIPP. This is paid to me by Direct Debit in 12 equal monthly instalments. I took the 25% lump sum out at the same time I started to draw down.
I have different investment funds in this SIPP. It's up to me which to sell and when, in order to have the cash available to withdraw on a monthly basis. This maybe sounds more complex than it is, and there may be simpler drawdown schemes available if, for example, you have only the one investment fund in the pension. You could maybe then instruct them to sell the equivalent funds ongoing each month to provide the monthly income?
Overall, with a little bit of work it's pretty painless and Interactive Investor's customer service are always available for help.
I'm assuming your pension is a Defined Contribution scheme and therefore the "pension pot" is yours to transfer to a provider of your choice? If it's a Defined Benefit pension, that may be a bit (or a lot!) more complicated......

So with ii you are personally responsible for making sure there is enough cash in your SIPP to withdraw - you cannot just tell them to automatically sell enough of investment x to provide cash, or whatever?

Yes, I think that's the case because I have a variety of funds in the SIPP - I have to tell them which to sell. With Fidelity, where my wife is drawing down her SIPP, she is invested in only one fund, so automatically Fidelity sell the equivalent of £1047 every month and pay into our bank. I'm sure Interactive would do the same. 

Mutton_Geoff

Presumably if you have a selection of investments in your SIPP, there is a need to rebalance from time to time?

I would use this opportunity to sell off investments and keep cash in the account ready for drawdown. It's also worth considering quarterly or less frequent drawdown sums then move that into an instant access account for subsequent transfer to normal bank account for monthly use.

It's difficult for someone who has been paid monthly all their life to think about quarterly or annual drawdown but I plan to do this for simplicity and to save trading costs.