Taking HL draw down

Ciprico

One reason to consider NOT transfering the whole lot into the drawdown account is, if your transfer exceeds the £1.07M threshold, (ie you're taking max £268,275), you would still  be able to take 3 additional 10k small pots from the original sipp if you had left 30k in it.

You can't take small pots from drawdown acct.

(So you effectively increase the 25% tfls by 30k)

jaybeetoo

Albermarle said:

jaybeetoo said:

The drawdown account is not just marketing.  They are two separate accounts.  If you have investments in a HL SIPP and a HL drawdown SIPP, they charge you two lots of fees!  I moved all my investments from the SIPP to the drawdown SIPP.

. In legal/tax terms, you either have an uncrystallised pot ( where no tax free cash has been taken) or a crystallised pot where the tax free cash has been taken, and any more withdrawals are potentially taxable. 

Some providers like to call the latter a drawdown account. It probably rolls off the tongue a bit better.

You will be charged two lots of fees, but the total fees will be the same as before. eg

£100K uncrystallised pot at 0.45 % = £450 pa

Take £10K tax free cash and you are left with ;

£60K uncrystallised at 0.45% = £270
£30K crystallised at 0.45% = £135 

When I crystallised some of my Fidelity pension pot ( very similar provider to HL) they asked if I wanted to keep the same investments in the crystallised part as the original uncrystallised, or change them. 

That is not always true.  You are just talking about funds.  If your investments are ETFs, shares or investment trusts, the maximum charge is £200 per pension account.  If I’d left half of my investments in the SIPP and half in the Drawdown SIPP, I would have been charged two lots of £200.  I double checked with HL and they confirmed this.  I moved everything to Drawdown as I wasn’t willing to be charged double unnecessarily.

As someone else has pointed out, even with funds you can end up paying more because of the charging structure.

squirrelpie

jaybeetoo said:

I moved everything to Drawdown as I wasn’t willing to be charged double unnecessarily.

But that presumably means you have to take 25% tax free from your whole pot, which some people may not wish to do. Even if they do, they may wish to stagger it over multiple tax years to use ISA allowances for example. Worrying about £200 of charges may or may not be worth it.

Baldytyke88

squirrelpie said:

jaybeetoo said:

I moved everything to Drawdown as I wasn’t willing to be charged double unnecessarily.

But that presumably means you have to take 25% tax free from your whole pot, which some people may not wish to do. Even if they do, they may wish to stagger it over multiple tax years to use ISA allowances for example. Worrying about £200 of charges may or may not be worth it.

With it all in drawdown, I assume it is all taxable. I will come close to the 40% tax threshold, so I will contribute more to my pension if I go over the limit.

I did think that the drawdown was classified as a pension, and I could still make pension contributions into it.

phlebas192

BobR64 said:

phlebas192 said:
 

That's right. The fees will be the same if you only invest in OEICs but with HL could be substantially more if you are invested in shares or ETFs. For platforms that apply a notional split to uncrystallised / drawdown (eg AJ Bell and ii) then the fees will always be the same.

It's actually the other way round with HL. Share-like holdings can be substantially cheaper because of the £200 pa annual cap. Once your SIPP is above £44,444.44 it starts being cheaper to hold it all in ETFs rather than OEICs.

I was talking about the impact on fees of moving some into drawdown, not comparing the costs between ETFs and OEICs. 

If you had £200k in ETFS in a HL SIPP and moved half of it into drawdown then you would now be paying fees of £400 rather than £200, hence more expensive than not moving some into drawdown. With AJ Bell the fees would remain at £120 and with ii £129.90.

FIREDreamer

Ciprico said:

One reason to consider NOT transfering the whole lot into the drawdown account is, if your transfer exceeds the £1.07M threshold, (ie you're taking max £268,275), you would still  be able to take 3 additional 10k small pots from the original sipp if you had left 30k in it.

You can't take small pots from drawdown acct.

(So you effectively increase the 25% tfls by 30k)

The pcls (though for a small pot it is just called tax free cash not pcls) is increased by 3 lots of £2,500 i.e. £7,500.

I have taken 2 such pots so far.

thingswerentthisbadinmyday

Baldytyke88 said:

squirrelpie said:

jaybeetoo said:

I moved everything to Drawdown as I wasn’t willing to be charged double unnecessarily.

But that presumably means you have to take 25% tax free from your whole pot, which some people may not wish to do. Even if they do, they may wish to stagger it over multiple tax years to use ISA allowances for example. Worrying about £200 of charges may or may not be worth it.

I did think that the drawdown was classified as a pension, and I could still make pension contributions into it.

I have both SIPP and Drawdown accounts with HL.
Monthly (or lump sum) contributions can only be made into my SIPP, not the Drawdown.

dunstonh

thingswerentthisbadinmyday said:

Baldytyke88 said:

squirrelpie said:

jaybeetoo said:

I moved everything to Drawdown as I wasn’t willing to be charged double unnecessarily.

But that presumably means you have to take 25% tax free from your whole pot, which some people may not wish to do. Even if they do, they may wish to stagger it over multiple tax years to use ISA allowances for example. Worrying about £200 of charges may or may not be worth it.

I did think that the drawdown was classified as a pension, and I could still make pension contributions into it.

I have both SIPP and Drawdown accounts with HL.
Monthly (or lump sum) contributions can only be made into my SIPP, not the Drawdown.

I wish providers wouldn't make things messier than needed.

You have a SIPP which is part crystallised and part uncrystallised.  Both bits are a SIPP.  Monthly contributions can only be made to the uncrstallised segment.

Baldytyke88

thingswerentthisbadinmyday said:

I have both SIPP and Drawdown accounts with HL.
Monthly (or lump sum) contributions can only be made into my SIPP, not the Drawdown.

I did it all online and didn't realise I would be close to the 40% tax bracket, they sent me a message saying the process will be delayed due to payments from HMRC.

They then gave me the option of a partial drawdown. I spoke to them, and I have left the SIPP open with 2 shares and £1k still in

SouthCoastBoy

Albermarle said:

jaybeetoo said:

The drawdown account is not just marketing.  They are two separate accounts.  If you have investments in a HL SIPP and a HL drawdown SIPP, they charge you two lots of fees!  I moved all my investments from the SIPP to the drawdown SIPP.

. In legal/tax terms, you either have an uncrystallised pot ( where no tax free cash has been taken) or a crystallised pot where the tax free cash has been taken, and any more withdrawals are potentially taxable. 

Some providers like to call the latter a drawdown account. It probably rolls off the tongue a bit better.

You will be charged two lots of fees, but the total fees will be the same as before. eg

£100K uncrystallised pot at 0.45 % = £450 pa

Take £10K tax free cash and you are left with ;

£60K uncrystallised at 0.45% = £270
£30K crystallised at 0.45% = £135 

When I crystallised some of my Fidelity pension pot ( very similar provider to HL) they asked if I wanted to keep the same investments in the crystallised part as the original uncrystallised, or change them. 

How about the thresholds, if you hold more than 250k it is .25%, below 250k .45%

say you had 600k in SIPP 250k charged at .45% 350k at .25%, go into drawdown assume take no lump sum, but put 100k into drawdown

so now have 100k @ .45% from drawdown SIPP account
250k @.45% from SIPP account 250k @ .25%, so you are now paying .45% on 350k rather than 250k. Is my reasoning correct or have I misunderstood?