Pension drawdown - have I missed anything?

houndluff

Hello,

So, I'm 55 next year, and was planning on moving some of my pension funds (which are in SIPPS) into a drawdown pension (probably with HL) and take 25% tax free.  I just wanted to check I've not missed any potential pitfalls.

I plan to move one of my SIPPS into the drawdown pension, invest it, and take 25% tax free (to use to pay off a chunk of my mortgage).  I don't intend to take any taxable income from the pension as I'm still employed.

I still plan to keep contributing to my other SIPP (via salary sacrifice), as I understand as long as I don't take any taxable income from the drawdown pension I can contribute up to the maximum allowance.

Thanks

Albermarle

Only that there is no real distinction between a SIPP and a drawdown pension.
For example if you have an uncrystallised SIPP with HL, and then take the 25% tax free, you still have the same SIPP, except the funds are now crystallised.

Dazed_and_C0nfused

houndluff said:

Hello,

So, I'm 55 next year, and was planning on moving some of my pension funds (which are in SIPPS) into a drawdown pension (probably with HL) and take 25% tax free.  I just wanted to check I've not missed any potential pitfalls.

I plan to move one of my SIPPS into the drawdown pension, invest it, and take 25% tax free (to use to pay off a chunk of my mortgage).  I don't intend to take any taxable income from the pension as I'm still employed.

I still plan to keep contributing to my other SIPP (via salary sacrifice), as I understand as long as I don't take any taxable income from the drawdown pension I can contribute up to the maximum allowance.

Thanks

I presume you realise that by taking this approach everything left in the crystallised pension, including any investment gains is taxable when taken out of the pension.

So if your have £200k and take £50k TFLS the remaining £150k would all be taxable.  And if that £150k grew back to say £225k that £225k would all be taxable as you had taken the 25% TFLS upfront.

And you wouldn't actually be contributing anything in the future, salary sacrifice is you giving up salary in return for employer contributions, which is why no pension tax relief is added to your pension fund.

zagfles

Albermarle said:

Only that there is no real distinction between a SIPP and a drawdown pension.
For example if you have an uncrystallised SIPP with HL, and then take the 25% tax free, you still have the same SIPP, except the funds are now crystallised.

You don't have the same SIPP you have a "Drawdown SIPP" (or a "SIPP Drawdown", can't remember exactly what they call it). But it's a different account which works differently. Eg you can't contribute to it, but you can withdraw from it. Unlike the SIPP which you can contribute to, but can't withdraw from. They have different charges and interest rates IIRC. 

Cobbler_tone

If it is a workplace scheme, my employer won’t let you contribute to the same scheme once accessing the tax free amount.
I’d check carefully if this is the case and that you can get a new plan including continued employer contributions.

Albermarle

zagfles said:

Albermarle said:

Only that there is no real distinction between a SIPP and a drawdown pension.
For example if you have an uncrystallised SIPP with HL, and then take the 25% tax free, you still have the same SIPP, except the funds are now crystallised.

You don't have the same SIPP you have a "Drawdown SIPP" (or a "SIPP Drawdown", can't remember exactly what they call it). But it's a different account which works differently. Eg you can't contribute to it, but you can withdraw from it. Unlike the SIPP which you can contribute to, but can't withdraw from. They have different charges and interest rates IIRC. 

OK but I assume if you have the same with a provider that does not split uncrystallised and crystallised funds ( like II) then it does not have two different names . So it is 'provider dependent'?