Drawdown question

eastcorkram

Is the only difference between a SIPP, before and after some or all of it gets put into a drawdown account, that when you withdraw some, it's all taxed?

I have a SIPP with HL, which has not been touched.  To keep the question simple, if, currently it was at £100k. With 75k invested in two different funds, and 25k cash. If I wanted to take 25k tax free up front, I can do this, but it all has to move to a drawdown account. Not immediately planning on a regular drawdown. Can that still be invested, or does it all have to be moved to cash?

If it can stay invested, can I still buy and sell, move some to cash etc, exactly as I can already do? 

HappyHarry

The remaining fund can be invested with just as much flexibility on the investments as it was pre drawdown.

ColdIron

eastcorkram said:

Is the only difference between a SIPP, before and after some or all of it gets put into a drawdown account, that when you withdraw some, it's all taxed?

When you put it into DD your uncrystallised money becomes crystallised. All withdrawals are taxable, whether you are taxed will depend on your wider income situation. This is true for DD and UFPLS

I have a SIPP with HL, which has not been touched.  To keep the question simple, if, currently it was at £100k. With 75k invested in two different funds, and 25k cash. If I wanted to take 25k tax free up front, I can do this, but it all has to move to a drawdown account.

In that example, yes

Not immediately planning on a regular drawdown. Can that still be invested, or does it all have to be moved to cash?

Cash/invested it's up to you, just like it was in your uncrystallised account

If it can stay invested, can I still buy and sell, move some to cash etc, exactly as I can already do? 

Yes

Your HL dashboard will have 2 accounts, your original SIPP and a new one: SIPP Income Drawdown. They both work in the same way as regards buying selling etc. A useful feature of this is that you can have different funds in each, perhaps longer term growth in the SIPP and income producing ones in the Income Drawdown account for use when you trigger monthly, annual etc withdrawals of your cash

gm0

Crystallised = "marked to be taken as income" - roughly.  So the 25% taken out as tax free cash. Marks the remaining 75% as now taxable income when taken.  All the TFC is gone.  

This is not quite as tax efficient for many as taking small incomes a piece at a time each tax year with some being tfc (25%) and 75% being taxable.  Regular UFPLS method - monthly quarterly etc.  

The two advantages of the 25% lump are 1) if you have a use for the lump of capital (usually consumption/housing or gifting).  And 2) that it pretty much locks in the tax free cash allowance.  You already did it.  

Government changes in this area ARE frequent.  (And the speculation beyond that even wilder).  The approach to changes is generally transactions from date X (future) with an anti-avoidance clamp applied from date of budget publication.  Retrospective changes are a lot less common due to the complexity of opening up transaction histories with some arbitrary cut off date.  More that objection than the unfairness.  Stable rules for long term things like pensions has a value.  Sadly politicians discount it regularly in search of a quick buck