Pension Drawdown from a SIPP 14 February at 5:39PM in Pensions, annuities & retirement planning 10 replies 704 views

tabath

I have a ii SIPP and am considering Income Drawdown in a couple of years- I'm not clear exactly on how the drawdown works,  from the little I have read I ask my SIPP provider to convert the SIPP? When that happens can I keep my investments in the companies as they are  after I have taken 25% out? 

I also have a defined benefits pension

Marcon

tabath said:

I have a ii SIPP and am considering Income Drawdown in a couple of years- I'm not clear exactly on how the drawdown works,  from the little I have read I ask my SIPP provider to convert the SIPP? When that happens can I keep my investments in the companies as they are  after I have taken 25% out? 

I also have a defined benefits pension

Have you read the explanation on ii's website: https://www.ii.co.uk/ii-accounts/sipp/income-drawdown

dunstonh

 I'm not clear exactly on how the drawdown works,  f

The term "drawdown" is a catchall for a range of different methods.

 from the little I have read I ask my SIPP provider to convert the SIPP?

No. The pension doesnt need converting.  The transactions you make will do the converting relative to the amounts and type of transaction you use under drawdown.

When that happens can I keep my investments in the companies as they are  after I have taken 25% out? 

If that is the particular method of drawdown you use, then yes.   However, its the least popular method of drawdown we use.

Albermarle

dunstonh said:

 I'm not clear exactly on how the drawdown works,  f

The term "drawdown" is a catchall for a range of different methods.

 from the little I have read I ask my SIPP provider to convert the SIPP?

No. The pension doesnt need converting.  The transactions you make will do the converting relative to the amounts and type of transaction you use under drawdown.

When that happens can I keep my investments in the companies as they are  after I have taken 25% out? 

If that is the particular method of drawdown you use, then yes.   However, its the least popular method of drawdown we use.

Dunstonh- can you elaborate on your last sentence? I though it was commonplace to not change your investment portfolio very much, just because you start drawdown? Maybe that is more of a DIY rather than advisor thing?
 In fact some DIY platforms do not even split uncrystallised and crystallised pots.
I guess you are talking about keeping more cash/having more income producing funds ?

dunstonh

Dunstonh- can you elaborate on your last sentence? I though it was commonplace to not change your investment portfolio very much, just because you start drawdown? Maybe that is more of a DIY rather than advisor thing?

I focused on the 25% upfront part of the sentence, not the investment.  i.e.  "after I have taken 25% out? " -  we don't get many people taking the 25% upfront with the on drip method being most common.

However, whilst on investments, it is usual to make tweaks.   e.g. the cash float covering the withdrawals.  or whether the drawdown investment strategy is moving to yield or bucketing.    And often, people reduce risk in retirement (or in the build-up to retirement).

 In fact some DIY platforms do not even split uncrystallised and crystallised pots.

They do as they are required to do so.   However, its just how they show it that differs (or whether they show it). i.e. the software.    I don't have much experience with DIY platforms but I do with intermediary platforms.   The degree of information they show varies enormously with platforms.  Even when you get platforms running the same backend software, the front ends can hide or display information in different ways.

Some will give the crystallised and uncrystallised different account numbers, show them individually, and run independently of each other.  Some will show a combined value but have a split account number behind the scenes or when doing transactions. (i.e the valuation will show combined but you can put different holdings with your un/crystallised funds).  Some will hide as much as the split as possible and make it impossible to split the investments.

Often on this site, we get focused on costs.  However, the software functionality of platforms should be considered by the investor.  If the software is preventing you from running your portfolio as you like it then you should look for an alternative.  Even if it costs a bit more.

In some cases, we have people that have part crystallised and part uncrystallised and their retirement plan wont see the crystallised chunk accessed again for 20+ years.  Whereas the uncrystallised chunk may have a regular draw.   So, the crystallised chunk will have a long term weighted portfolio but the uncrystallised chunk will have some bucketing/cash float to reflect the draw and reduced timescale.      So, in that scenario, you would need a platform that allows you to invest your uncrystallised and crystallised funds differently.

Pat38493

dunstonh said:

In some cases, we have people that have part crystallised and part uncrystallised and their retirement plan wont see the crystallised chunk accessed again for 20+ years.  Whereas the uncrystallised chunk may have a regular draw.   So, the crystallised chunk will have a long term weighted portfolio but the uncrystallised chunk will have some bucketing/cash float to reflect the draw and reduced timescale.      So, in that scenario, you would need a platform that allows you to invest your uncrystallised and crystallised funds differently.

Curious - why would you crystallize a chunk of your pension, leave it there for a long time and then continue to crystallise further withdrawals from the uncrystallised part?  Is this about tax management?

dunstonh

Pat38493 said:

dunstonh said:

In some cases, we have people that have part crystallised and part uncrystallised and their retirement plan wont see the crystallised chunk accessed again for 20+ years.  Whereas the uncrystallised chunk may have a regular draw.   So, the crystallised chunk will have a long term weighted portfolio but the uncrystallised chunk will have some bucketing/cash float to reflect the draw and reduced timescale.      So, in that scenario, you would need a platform that allows you to invest your uncrystallised and crystallised funds differently.

Curious - why would you crystallize a chunk of your pension, leave it there for a long time and then continue to crystallise further withdrawals from the uncrystallised part?  Is this about tax management?

some early year access to the tax free cash without not as much needed from the crystallised.  Then later year, sufficient income to generate from UFPLS without needing to access the crystallised funds.   in other words tax management.

tabath

Thanks, I've had a read through the ii advice on Drawdown but am still unclear on a few things.

If I have stocks x,y,z etc in my fund and I want to take the full 25% tax free value of all these stocks am I correct that I then have to drawdwn or crystallise all of the stocks? 

In that case can I just sell enough of the stocks to get the 25% and leave the rest of the funds invested in those stocks?

I'm asking this because I am still working and intend to work till I'm at least 65 but as I'm over 55 I can take the tax free lump sum now but do not need any extra income from the pension yet.

NoMore

Just because you can take the 25% tax free lump sum doesn't mean you should.

Have you a actual need for the lump sum ? If not then probably best to just leave it in the pension at the moment.

zagfles

tabath said:

Thanks, I've had a read through the ii advice on Drawdown but am still unclear on a few things.

If I have stocks x,y,z etc in my fund and I want to take the full 25% tax free value of all these stocks am I correct that I then have to drawdwn or crystallise all of the stocks? 

In that case can I just sell enough of the stocks to get the 25% and leave the rest of the funds invested in those stocks?

I'm asking this because I am still working and intend to work till I'm at least 65 but as I'm over 55 I can take the tax free lump sum now but do not need any extra income from the pension yet.

Check with II but yes almost certainly. Some older clunkier platforms will require you to sell the lot and rebuy in a separate drawdown/spending account, but think they're usually platforms used by workplace schemes or IFAs.

Linton

tabath said:

I have a ii SIPP and am considering Income Drawdown in a couple of years- I'm not clear exactly on how the drawdown works,  from the little I have read I ask my SIPP provider to convert the SIPP? When that happens can I keep my investments in the companies as they are  after I have taken 25% out? 

I also have a defined benefits pension

I believe ii simply  hold the % "crystalised" as a number.  If you take 25% of the whole pot tax free then the % crystalised is 100%.  The investments are not affected in any way.  It is up to you to make the 25% available as cash in your account by selling whatever investments you wish.