ii SIPP in drawdown

TJ666

I was after anyones experience of initiating drawdown from an Interactive Investor SIPP.  I was thinking / hoping you could keep funds invested whilst in a crystallised pot, e.g. you might crystallise a few years worth of funds, then turn them into cash when closer to actually transferring to your bank monthly .  I was expecting / hoping to select funds in specie to transfer from a non-crystallised pot to a crystallised pot.  

My husband has just submitted a years worth of drawdown, but I've had conflicting information about how this works, ii says he needs it in cash.  Do people in practice only crystallise funds a year at a time,  or have to transfer to cash to transfer to a crystallised pot, then re-invest after transfer, this seems laborious and wasteful.  Thanks in advance.

NoMore

Notional split - ii

II use notional split, this means there's no crystallised pot that you choose what to invest within. Your entire portfolio is tracked with x% of the total being assigned as crystallised.

The idea is you invest in what proportion you want in your portfolio without having to worry about whether its crystallised or not. Some people don't like this and prefer specific pots to be able to control their investments. If that's you, then I suggest you may want to move provider.

MK62

With II, there are no crystallised and uncrystallised pots, just a single pot with a notional % split between crystallised and uncrystallised parts of the pot. There are pros and cons of doing it this way......some prefer it and some don't, but it is what it is.

When you wish to withdraw, you just sell whichever assets you want, to create the cash needed to fund the withdrawal, and the % split between crystallized and uncrystallised is recalculated for you, depending on how you structure the withdrawal.

Triumph13

To give an example, if your pot was £400k and you wanted to crystallise £100k of it, taking your £25k tax free and say another £5k of taxable drawdown, then you would:
1. First sell enough funds to have the £30k in cash.
2. Ask them to crystallise £100k taking 25% tax free and also to pay you £5k, less any tax due,  from the crystallised funds.

Before you start, you are 100% uncrystallised.

Step 1 has no impact.  After step 2 you have £300k UC funds and £70k of C funds left with II so they therefore calculate your account to be 81.08% UC, 19.92% C.  These percentages, rather than actual amounts, are what they record in their system and apply to your portfolio balance.  Every time you make a withdrawal from or addition to the SIPP, they recalculate that percentage.

Hoenir

TJ666 said:

My husband has just submitted a years worth of drawdown,

Requested a lump sum? 

TJ666

Triumph13 said:

 Every time you make a withdrawal from or addition to the SIPP, they recalculate that percentage.

Thanks, thats incredibly useful, I hadn't heard about this way of doing it.  Now I know the name for it I will google it for pros and cons.  I'm trying to think through the implications, e.g. the 70k crystallised funds if they grow.  However, this is the same as if it was in a separate crystallised pot, left invested, could increase or decrease in size.  So it seems that the main issue is getting the mental model right of how it works.