Drawing from SIPP monthly

specious

Good afternoon. I posted on the benefits board before and they sent me here, as it is more a pension question than a benefit one. 

ESA and pension — MoneySavingExpert Forum

I have a relative who receives disability benefits that are not means-tested. She is only allowed £85 net a week in pension before her benefits are impacted. She has a small public sector pension which pays around £100 a month. 

She has also been paying £2880 / 3600 into a SIPP with HL and has around £15000 in there, all in cash, so no charges. 

She is on target to qualify for a full state pension in 5 years time. 

The problem is that she has unused personal allowance at the moment, but if the threshold freeze continues, her state pension will likely use all of it, meaning 75% of any withdrawals from the SIPP after pension age will be subject to tax. 

What mechanism would be available to withdraw £200 a month from her pension at the moment, to use some of her personal allowance, without a reduction in benefits? 

Would HL be suitable for that, or would she need to transfer? 

Marcon

specious said:

Good afternoon. I posted on the benefits board before and they sent me here, as it is more a pension question than a benefit one. 

ESA and pension — MoneySavingExpert Forum

I have a relative who receives disability benefits that are not means-tested. She is only allowed £85 net a week in pension before her benefits are impacted. She has a small public sector pension which pays around £100 a month. 

She has also been paying £2880 / 3600 into a SIPP with HL and has around £15000 in there, all in cash, so no charges. 

She is on target to qualify for a full state pension in 5 years time. 

The problem is that she has unused personal allowance at the moment, but if the threshold freeze continues, her state pension will likely use all of it, meaning 75% of any withdrawals from the SIPP after pension age will be subject to tax. 

What mechanism would be available to withdraw £200 a month from her pension at the moment, to use some of her personal allowance, without a reduction in benefits? 

Would HL be suitable for that, or would she need to transfer? 

The mechanism is 'phased drawdown' which HL offers - but whether that would impact on her benefits is another matter (and seems to have been addressed in the thread to which you helpfully linked in your post above).

As she wants to use her personal allowance and not impact on her benefits, it sounds as if taking 25% of each withdrawal as tax free cash, with the remaining 75% potentially taxable, would fit the bill. She can't take 'just' taxable cash from a defined contribution scheme without first taking some tax free cash - that's simply how the system works.

Her first withdrawal (or first couple of withdrawals) will be taxed, but she can reclaim the tax and HL would be issued with an appropriate tax code by HMRC which will be applied to future withdrawals.

squirrelpie

You can arrange for HL to make a monthly drawdown payment but as noted in your other thread she would need to take the tax-free portion as an initial lump, or forgo it. She could move £800 into drawdown, and take the £200 tax free payment, then take monthly payments of £200 for the next three months until the drawdown account was empty. Then repeat the whole process over again, three times a year in total. It might be worth explaining the situation to HL and asking them what they recommend.

edit to add: in principle she could use a withdrawal method called UFPLS and repeat it every month, but HL don't offer repeated UFPLS as a service, and so far as I know none of the other normal SIPP platforms do either.

xylophone

https://www.hl.co.uk/help/adding-and-withdrawing-money/accessing-pension/ufpls