Process of moving into HL.

beetlewoman67

Would anyone with knowledge of this (fortunate) situation kindly advise please?  It’s more process related in nature rather than investing strategy and I have had my Pensionwise call.

I have a SIPP with Hargreaves Lansdown containing a mix of equities, funds etc [no cash] with a value exceeding the previously important LTA figure of £1,073m.   I am now over 55 and intend to take the max permitted TFLS of c£268k given the potential for the next government to change track.

I know I need to move part of my SIPP into flexi drawdown with HL to enable the TFLS.  What’s not clear is whether I have to sell any holdings in the SIPP into the cash pot, and then move that cash into the crystallised drawdown pot - leaving any amount > £1,073m uncrystallised?    

Can/should I sell £268k of funds/equities into cash, and then move the £1,073m into drawdown which would be 25% cash and 75% in invested assets?    Is it actually possible to move currently invested assets into flexi drawdown, selling them only prior to withdrawals?

thanks in advance.

beetlewoman67

Sorry - title should be “moving into drawdown”.

SVaz

Yes, you only need to sell enough to cover the tfls.  You will then see 2 ‘pots’ within your account,  SIPP + Income Drawdown , although one will be empty if you crystalise it all in one go.  The drawdown pot will contain your investments.
My wife crystalised her HL Sipp a couple of years ago and is now building up more uncrystalised funds alongside her crystalised drawdown pot.  

Albermarle

 I am now over 55 and intend to take the max permitted TFLS of c£268k given the potential for the next government to change track.

It is usually inadvisable to make decisions based on hypothetical future scenarios.

What do you intend to do with the £268K? Whether invested or in savings you are likely to incur a significant annual tax bill. Also investing outside a pension or ISA, brings a certain amount of administration work so you can fill in your tax return correctly.

SVaz

It will be taxed eventually anyway, however it comes out.
Only the savings interest will be taxed,  most people, including me, would love to have that 1st world ‘problem’ 😉
 It will only take 10 years to get most of it in an ISA,  5 years if a married couple. 

DavidT67

I know I need to move part of my SIPP into flexi drawdown with HL to enable the TFLS.  What’s not clear is whether I have to sell any holdings in the SIPP into the cash pot, and then move that cash into the crystallised drawdown pot - leaving any amount > £1,073m uncrystallised?    

HL makes flexi-access drawdown really easy, it can all be completed online, no need to phone to answer the twenty questions.  Typically takes less than five working days to complete, although they say up to ten.

You can choose partial drawdown of any amount, provided you have the TFLS 25% in Cash in your SIPP at that point, you then select the holdings you want transferred to the drawdown account for the other 75%.  The holdings just magically move, there's no transaction history.

Note that HL charge separate fees for the SIPP and SIPP drawdown accounts, so £200 times two if using ETFs rather than OEICs.  Also the interest paid on drawdown cash is higher than the SIPP account. 

You receive a statement on completion showing the amount of TFLS utilised now and in total.

Albermarle

SVaz said:

It will be taxed eventually anyway, however it comes out.
Only the savings interest will be taxed,  most people, including me, would love to have that 1st world ‘problem’ 😉
 It will only take 10 years to get most of it in an ISA,  5 years if a married couple. 

Why would the 25% tax free be taxed if it was withdrawn in stages, and maybe £20K each year in an ISA and £20K a year spent?

Also if most of the £286K was reinvested rather than saved it would attract CGT and dividend tax ( as well as savings interest being taxed probably )

Also as soon as the £268K comes out of the pension it is potentially liable for Inheritance tax .

beetlewoman67

Thanks everyone- OP here.  Much appreciated.  To the kind people commenting on my tax liabilities after the TFLS - I have mortgage and unsecured borrowings that will be fully paid off with it, allowing me to either retire or certainly do something I enjoy.   Even if future drawdown is crystallised at actual returns or 4% I will be comfortable bar major disasters.