How much pension to move into drawdown

QrizB

15Manor said:

So, can anyone answer my question please?
How much should we put into drawdown? £1,073K or the whole pot and are there any advantages/disadvantages of one over the other?

There's no point in crystallising more than you need to, in my opinion. So crystallise the £1073k and leave the rest as it is until you need it.

Ciprico

I recently had the same dilemma.

I crystalised the whole lot because it avoided the hassle of having to decide which funds went in the drawdown acct and which stayed in the sipp.

Things to consider:

 If the rules change, there could be a benefit in leaving the remainder in the SIPP.

Also you can possibly apply the small pots rules to 3 x £10k of the remaining sipp, so get more pension out tax free.

Contents of Sipps are iht free until 2027

I didn't think the first suggestion above likely, and didn't think of the second until after I had actioned drawdown...

My logic for taking the full tax free amount was, because just retired, I had derisked a large part of the sipp into gilts.

Gilt gains in sipp/drawdown acct would be taxed on withdrawl

Using low coupons gilts the gains from same gilts would be mostly tax free in a general acct....

phlebas192

15Manor said:

On behalf of my husband.
He has a SIPP of £1,200,000 (it was of course more a couple of weeks thank you Donald and Elon!) He retires today before state pension age. We do want the £268K to pay down our mortgage.
My question is, does he move the whole amount into drawdown or just the £1,073K to generate the £268K?
Are there any reasons that either would be better?
I have googled but I am stuck. Many thanks for any help you can give.

As the rules currently stand, there's no advantage to one or the other. So it all comes down to how you think future rule changes might affect things, eg:

 - it is possible that the Lump Sum Allowance might be increased in the future and that it will be made retrospective (so that having previously taken 100% of it won't stop you taking more). IMHO there's a small chance of the former and next to no chance of the latter.

 - it is possible that the LTA will be reintroduced with immediate effect and amounts over that not yet in drawdown will face a tax penalty (IIRC it was 55% previously). Again, my opinion is that there's only a small chance of this happenning.

If you want certainty then crystallise the lot now. If you are prepared to take a bit of a gamble then only do the amount required to generate the full Lump Sum Allowance.

15Manor

Thank you 

Hoenir

Knowing that your low interest rate mortgage product is going to expire and that stock markets face an extended period of uncertainty. Making a plan for settling the mortgage would appear to be the priority. As the risks are heavily weighted towards the downside. 

ian16527

The benefit for taking only what you need into drawdown, i.e. £107.3K and leaving the rest in your pre retirement account is that this amount will still be available to use with a TFLS element including any market increases (although not this week  )
The remaining 804K will be taxable as will any market increases it makes during the drawdown process