A J Bell SIPP - Taxable Element of Crystallised Funds - is a volatile value usual?

DairyQueen

I am scratching my head at the way that A J Bell operates drawdown. Could someone please advise whether A J Bell's valuing of crystallised funds is usual? 

In March, and after AJB’s last payroll run of the 24-25 tax year, I crystallised £7,500 of my SIPP. The 25% tax free amount (£1,875) was subsequently paid in a timely manner. On the same day I requested a small, monthly drawdown amount (£470) to be paid from the taxable element (£5,625) until further notice. The first payment was due on the first payroll date after the beginning of the 25-26 tax year in April. 

In their wisdom, instead of the £470 requested, AJB’s Benefits team processed a gross monthly sum of £3,100 (net £2,619.20). This hit my bank account on April 12th. I immediately raised a complaint and, after investigation, was asked to return the incorrect amount net of the correct payment. I returned £2,149.20 last week and today my SIPP has been credited with this amount, plus the erroneous tax deduction of £480.80 as no tax was due on the correct payment.

My next conversation with the AJB complaint handler took an interesting turn…

The remaining balance of this crystallised tranche of my SIPP is now not the £5,155 I had assumed (£7,500, less £1,870 TFC, less one month’s drawdown of £470). The balance is now £4,876.03. When queried, I was advised that any movement in the value of the SIPP is reflected proportionately across both crystallised and uncrystallised funds. 

As I have sufficient cash, and the amount entering drawdown is the 75% taxable element of the crystallisation event, shouldn’t this value (£5,625) be fixed at the date of crystallisation?

Notwithstanding the £470 already paid out, I am now in the peculiar (to me) position of having less cash in my drawdown account than would have been available on the date of the crystallisation event, or if I had taken this as a UFPLS. I chose to avoid the latter in order to sidestep the usual issues of overpayment of tax. 

I realise that if the SIPP had risen in value then the taxable element of the crystallisation event would have increased. 

Am I right in thinking that if my SIPP value fails to recover to its position as at the crystallisation date, I will need to crystallise a further sum to ensure there are sufficient drawdown funds to meet the £5,625 (to be paid in monthly instalments) that I had been planning to take in taxable income this year? 

I have been researching drawdown for years but I must have misunderstood how flexible drawdown works, and therefore need to change my method of drawdown or, possibly, my SIPP provider. 

Which providers, if any, hold crystallised funds discrete from those that are uncrystallised? Would this solve the issue of the changing value of my crystallised drawdown pot?

Thanks in advance.

Marcon

DairyQueen said:

As I have sufficient cash, and the amount entering drawdown is the 75% taxable element of the crystallisation event, shouldn’t this value (£5,625) be fixed at the date of crystallisation?

No. The value will fluctuate in accordance with the underlying investments.

DairyQueen

Thanks @Marcon. You live and learn.

Marcon

DairyQueen said:

Thanks @Marcon. You live and learn.

All of us, every day, when it comes to pensions!

Albermarle

Which providers, if any, hold crystallised funds discrete from those that are uncrystallised?

Of the usual main SIPP providers , HL and Fidelity have discrete pots.
Not sure how all the traditional insurers work ( Scottish Widows, Prudential etc ) 

squirrelpie

As Albermarle says, HL have separate pots, and the value in the crystallised pot will only vary if it is invested in something. As a completely separate investment to whatever's in the main SIPP.

I'm really surprised that AJBell run a shared pot system, especially if you crystallised cash.

ian16527

Vanguard hold separate funds too.

If you had the cash I would have thought like you that they would use the cash for transfer.

I have been caught out again with Vanguard as the move funds pro rata unless you move what you want to crystalise into cash yourself prior to requesting the move. 

I have just had a complaint partially upheld as they mucked about selling funds in the pre retirement account then moving this in cash to drawdown, then rebuying the same funds in drawdown then selling again and putting this amount in the Short term money market fund I requested, loosing £200 in the process. Then most of these transactions disappear. 

Luckily I started the request just before Mr Trump started his antics

DairyQueen

squirrelpie said:

As Albermarle says, HL have separate pots, and the value in the crystallised pot will only vary if it is invested in something. As a completely separate investment to whatever's in the main SIPP.

I'm really surprised that AJBell run a shared pot system, especially if you crystallised cash.

Yes, I crystallised cash. OH has a HL SIPP. The management of that being the factor that confused me with AJB. AJB's Benefit systems are smoke and mirrors as the transactions are not managed by IT systems or real time. They have administrators hitting keys (often erroneously) behind the scenes. I hate to say but this is my 3rd year of AJB drawdown, and the 3rd year of screw-up. I think that I will investigate Fidelity.

FIREDreamer

HL works well for me. And using ETF and Investment Trusts keeps platform fees capped at £45 pa for an ISA and £200 pa for a SIPP. SIPP and Drawdown SIPP are charged for separately as two separate SIPPs.

phlebas192

FIREDreamer said:

HL works well for me. And using ETF and Investment Trusts keeps platform fees capped at £45 pa for an ISA and £200 pa for a SIPP. SIPP and Drawdown SIPP are charged for separately as two separate SIPPs.

So potentially £400 pa in fees if you have relatively modest amounts in both uncrystallised & drawdown pots. Compare that to £120 max for AJ Bell if also investred in ETFs & ITs. So whilst HL would likely better suit the way the OP wants things to work, it will be at a cost.

OP - if you stay with AJ Bell then one option would be to use UFPLS rather than moving funds into flexi-drawdown. Taking £7.5k in UFPLS would give you an immediate £1,875 tax free and £5,625 taxable so no risk of that amount reducing. The downside is that you will be taxed on that withdrawal and will need to claim the tax back - but in the meantime you can "pay" yourself the monthly £470 amount from the withdrawn amount. Or you could do several smaller UFPLS withdrawals during the year. AJ Bell won't do automatic monthly UFPLS but I don't think there's a limit on how many you can request manually.

squirrelpie

phlebas192 said:

So potentially £400 pa in fees if you have relatively modest amounts in both uncrystallised & drawdown pots. Compare that to £120 max for AJ Bell if also investred in ETFs & ITs. So whilst HL would likely better suit the way the OP wants things to work, it will be at a cost.

HL don't charge fees on cash held in an account, but do pay some interest. So holding cash in the drawdown account is a good way to go.