Crystallisation practicalities

RecliningInPeace

I would appreciate some help with the practicalities of moving money to drawdown and then to my bank account, particularly around ensuring the drawdown account is funded sufficiently when my draw instruction needs to be executed. The assumptions are simplified to focus on the issue.

Assumptions:
- retired, 56
- only source of income is a SIPP
- need £4k net income per month
- choose to use flexible drawdown 
- ignore emergency tax code issues 
- ignore fees
- anything in drawdown account is already cash

Scenario:
In month 1 I crystallise £4,444 and get tax-free cash of £1,111 into my bank account. The other £3,333 is transferred to the drawdown account. I draw the taxable part from the drawdown account, tax of £457 is deducted and I get £2,876. Between that and the TFC my net income for the month is £3,987. All good.

Questions:
The scenario means the drawdown account is funded with just enough to meet needs, but what do people do in practice? Do they crystallise a few months' requirements at a time and draw down monthly what they need, then crystallise again for a few months say a month in advance, always leaving a buffer in the drawdown account? Do they draw a little more than needed each month and let a buffer build up in the drawdown account? Some other approach?

Slight tangent:
If you have a standing instruction with the provider to give you £x per month, is it up to you to ensure you have crystallised enough into the drawdown account, or would they do it?

Many thanks 

leosayer

What you describe sounds more like monthly UFPLS than flexi-access drawdown.

It would help if you advised the name of your SIPP platform as each has their own capabilities and foibles which might dictate your approach.

RecliningInPeace

The provider is AJ Bell.

leosayer

I understand that AJ Bell do monthly UFPLS so once set up, you will just need to make sure you have the £4,444 in cash in good time each month.

Hopefully someone with direct experience can confirm this. Maybe they can automate the sale as well.

RecliningInPeace

Thanks for taking the time to reply. 

The mention of UFPLS (and I agree, in retrospect that is effectively the scenario I described) made me think I was overthinking this.

If I simply crystallised the full annual gross amount (it would be £53,333 in my example), took the £13,333 in TFC, I could use that to cover the first three or so months, then the rest remained invested and I could start drawing down from month 4 onward. That leaves me the flexibility to adjust what I draw month by month from month 4 - there are some peaks in my annual budget. I could also break that into two six-month chunks with the same approach, I suppose.

Thanks again.

Hoenir

leosayer said:

I understand that AJ Bell do monthly UFPLS so once set up, you will just need to make sure you have the £4,444 in cash in good time each month.

Hopefully someone with direct experience can confirm this. Maybe they can automate the sale as well.

Yes. Merely a question of ensuring an adequate cash balance is maintained. 

Earliest in the month that the money has been deducted is the 20th. 

Personally I always hold two months of drawdown cash in hand. Allowing for accrued interest and dividends to flow through.