Interactive Investor - calculation of 25% tax free cash when holding Index Linked Gilts

mdonaldo

Just thinking about a phased drawdown workaround. Tax-free cash is taken when you designate uncrystallised assets for drawdown. 

So provided you only designate each index-linked gilt for drawdown once they've redeemed, then you'll always get their full value. 

That is, you wait until each linker turns into its equivalent lump of cash, designate it for drawdown, take 25% tax-free cash. 

Sparschwein

AJ Bell is saying in that case, that they are showing one value in the portfolio view but will then go on to deflate the value of the asset when providing a PCLS valuation.

That's surely based on a misunderstanding. I makes no sense for the provider because it means *more* work to find a different value than in the portfolio view. An overworked customer service rep may easily lump linkers in with other bonds and forget that besides clean and dirty price there is a third option. 

In fact AJ Bell told me the opposite, in writing. I asked "When calculating the 25% tax-free lump sum from the SIPP, do you use the valuation of the Inflation-linked bond as A) the clean price or the dirty price (the actual market value) or C) the clean price incorporating inflation-adjusted principal?"
AJ Bell wrote back "C".

Lowtrawler

Sparschwein said:

AJ Bell is saying in that case, that they are showing one value in the portfolio view but will then go on to deflate the value of the asset when providing a PCLS valuation.

That's surely based on a misunderstanding. I makes no sense for the provider because it means *more* work to find a different value than in the portfolio view. An overworked customer service rep may easily lump linkers in with other bonds and forget that besides clean and dirty price there is a third option. 

In fact AJ Bell told me the opposite, in writing. I asked "When calculating the 25% tax-free lump sum from the SIPP, do you use the valuation of the Inflation-linked bond as A) the clean price or the dirty price (the actual market value) or C) the clean price incorporating inflation-adjusted principal?"
AJ Bell wrote back "C".

Based on the posts from the first 2 posters, I also reached the conclusion I had been misinformed and AJ Bell would be a suitable provider for an in specie transfer. Your post has confirmed this. 

If the Ombudsman does not find in my favour, I will make additional enquiries with AJ Bell and likely initiate an in specie transfer to them.

mdonaldo

@Sparschwein - thanks for the update. That's much more reassuring and makes more sense. "C" is the price shown on the platform. I've asked AJ the same question so will report back. What are the chances I get a completely different answer? 

mdonaldo

AJ Bell tell me the valuation would be "with indexation included." 

I'm gonna keep that email on file.