Take out annually or Monthly from SIPP

Pat38493

If you only take out the full amount once in the year, you may end up paying too much (or too little) tax and have to jump through some hoops with HMRC to sort it out.

Sarahspangles

Pat38493 said:

If you only take out the full amount once in the year, you may end up paying too much (or too little) tax and have to jump through some hoops with HMRC to sort it out.

I assume that’s only true in the first year, as thereafter you have a tax code that rolls forward from year to year. Though you still need to take a payment in March to use all your allowance.

cloud_dog

I am thinking (have 6 months to go before drawing on the actual pension monies), that I will make an annual drawdown and pay it into our joint Ford Money savings account which has a useful regular / repeat (monthly) payment feature that would automatically pay £XXXX into the joint current account each month.  

TBH, I am unsure if I am under-complicating or over-complicating the process as a whole.  I know I don't want to have to liquidate investments in the SIPPs each month / multiple times a year, and holding cash in the SIPP (whilst obtaining some interest) is less efficient than simply putting it into a cash savings account.

So overall I am leaning towards simply drawing our income from the joint savings account and then simply topping that up once a year.

Pat38493

Sarahspangles said:

Pat38493 said:

If you only take out the full amount once in the year, you may end up paying too much (or too little) tax and have to jump through some hoops with HMRC to sort it out.

I assume that’s only true in the first year, as thereafter you have a tax code that rolls forward from year to year. Though you still need to take a payment in March to use all your allowance.

Hmmm - I have seen posts on here before claiming that even if you take a big amount in March, the tax could still be wrong.  However, I would have thought that if you already have a correct tax code and you take a large lump sum in March, it should work fine and you should pay the correct amount of tax, so maybe you are correct there.  I guess it has to be a cumulative tax code.

Ciprico

I'll be taking my sipp monthly to enable "regular gifts" to my kids if I decide to do so....

Taking monthly leaves that door open. Taking annually doesn't.....

Skinnydad

Thanks for everyone's response.  Much appreciated and points I didn't consider. I have a small pension finishing this month and it's paid out monthly. My thoughts (maybe short-sighted) was taking it annually allowed me to leave the the rest invested without touching it and seeing if it recovered the amount taken. I don't think in the long run this will make a great deal of difference. So it's down to fees I'll ask Aegon what they charge for a monthly drawdown. I've been using as a test some money from my TFLS to supplement my income at 500 PM so I know I'd need to take approx. 650 out (going forward) to cover tax at 20%. This would mean a withdrawal of approx. 7800 PA. My existing fund has recovered this much in the past 10 months. I suppose my thinking was if I take 7800 PA and the fund recovers by this PA then I'll be quids in.  In that I'll still have my original fund as it is. Naivety on my part as this can go down as well as up. It's always good to get alternate views especially on the how, where any why for of Funds, and pensions.  Thanks again to everyone. Much appreciated.    

cfw1994

SouthCoastBoy said:

cfw1994 said:

SouthCoastBoy said:

When I start to draw from my pension, I intend to withdraw once per year towards the end of Feb/early March.

Why do you intend to do that?

• Less admin required from me
• I will have worked out my income from interest on savings accounts so will know how much to take to ensure I am below the tax threshold.
• I will then have my budget for the next tax year ensuring I don't overspend
• Taking it at the end of the tax will hopefully cause less tax calculation angst with respect to the Inland Revenue

Just realised I missed your reply to this.
Fair enough.
I’d I always think having a monthly draw makes me less likely to overspend than having a big pot to get at, & once you are set with HMRC then there isn’t much to worry about either way, really.
Each to their own though 👍

Qyburn

Sarahspangles said:

Pat38493 said:

If you only take out the full amount once in the year, you may end up paying too much (or too little) tax and have to jump through some hoops with HMRC to sort it out.

I assume that’s only true in the first year, as thereafter you have a tax code that rolls forward from year to year. Though you still need to take a payment in March to use all your allowance.

We took lump sums last year, but this year's tax codes assigned to the pension schemes are still non-cumulative "month one" codes.  

poseidon1

Could also consider quarterly payments.

My Sipp investments generate monthly, quarterly and half yearly interest and dividend payments from a  mix of bonds, gilts, equity income etc. The regular income cash flow, will easily support quarterly payments without having to resort to investment sales.  Also the admin to access UFPLSs  with Interactive Investors less of a chore on a quarterly basis.

Linton

Possibly depending on your platform arranging a drawdown can be a significiant hassle.  One typically has to inform the platform that a particular payment is required and ensure that sufficient money is available in cash in the account at least 2 weeks before the platform's monthly payroll date.  

Much easier to drawdown once a year in March to avoid lump sum tax issues as part of overall investment management.