HL SIPP - Inundated by Drawdowns?

ColdIron

ian16527 said:

SVaz said:

One UFPLS means taking the Whole yearly amount in one go,  25% tax free and 75% taxable - there is no ‘monthly income’. 

You are referring to Flexi access drawdown where you take the tax free amount up front then draw monthly income from the crystallised bit.  

My Wife prefers FAD because she doesn’t have to wait for a tax refund like she would with UFPLS.  She crystallises £5600, takes £1400 tax free cash then £350 a month income, which uses her spare personal allowance. 

 So if its a UFPLS, then both the TFLS and remaining 75% would be paid out together to the customers nominated bank account. 

Yes. It would also trigger the MPAA. UFPLS cannot be automated with HL. You need to instruct them each time

 But in the OP's first post he intimates that he has to request the 75% to be paid out from his drawdown account

"I noticed that this request when it was sent to HL was dealt with pretty quickly, within a day or two. I saw that a quarter of the money (tax free) appeared in my bank account and the remainder went to a drawdown account. I then found out that in order to get the full amount you withdraw from the SIPP into your bank, you need to put in another request to withdraw the money in the drawdown account to your bank."

So is this normal for UFPLS with HL

No because what has been described is flexi access drawdown which has two parts. 1) Crystallise some or all of your SIPP and take the tax free sum. 2) Separately, at any time later, request regular automated payment. If you wanted ad hoc lump sums you wouldn't use FAD (although you can), you'd use UFPLS

Albermarle

ian16527 said:

SVaz said:

One UFPLS means taking the Whole yearly amount in one go,  25% tax free and 75% taxable - there is no ‘monthly income’. 

You are referring to Flexi access drawdown where you take the tax free amount up front then draw monthly income from the crystallised bit.  

My Wife prefers FAD because she doesn’t have to wait for a tax refund like she would with UFPLS.  She crystallises £5600, takes £1400 tax free cash then £350 a month income, which uses her spare personal allowance. 

Yes sorry for my terminology mix up.

 So if its a UFPLS, then both the TFLS and remaining 75% would be paid out together to the customers nominated bank account. 
 But in the OP's first post he intimates that he has to request the 75% to be paid out from his drawdown account

"I noticed that this request when it was sent to HL was dealt with pretty quickly, within a day or two. I saw that a quarter of the money (tax free) appeared in my bank account and the remainder went to a drawdown account. I then found out that in order to get the full amount you withdraw from the SIPP into your bank, you need to put in another request to withdraw the money in the drawdown account to your bank."

So is this normal for UFPLS with HL

With a provider like HL, you have two options for withdrawal.

1) UFPLS - Each withdrawal consists of exactly 25% tax free and 75% taxable. There is no drawdown account.
You have to request every withdrawal separately.

2) FAD - You request a tax free amount. You get that in cash, and three times that amount goes into a drawdown account. You can then request regular payments ( monthly for example) and they will happen automatically.
Of course you have to make sure you request enough tax free cash initially to make sure an adequate amount is in the drawdown account, to make the regular payments. So some monitoring is needed, but less onerous then requesting a UFPLS payment every month.

If you employ a financial advisor, they can easily organise regular UFPLS payments with the providers they use.
However most providers dealing directly with the public do not offer this facility.

ader42

 leicestersq, why do you think that funds and shares inside the pension in a drawdown account are not in a tax wrapper? They are.

Just move some shares/cash into the drawdown account, and sell shares as and when needed to make sure enough cash is available for the monthly drawdown you set up. 

I’m aware that I’m the 3rd person on this thread to point this out…

If you want regular UFLPS change provider. 

Nebulous2

I've a friend with some tax-allowance left, who wants to withdraw what he can tax-free.

 He simply crystallises £800 at a time. He gets £200 tax-free, then withdraws £200 a month from the drawdown account, then repeats. He hasn't bothered setting up automatic monthly payments, he just requests it every month before the 17th. 

I see he is getting a modest amount of interest in the drawdown account as well, and HL don't charge him for holding cash. 

Doing that is relatively simple and gives you 3-4 months at a time, depending on whether you take the tax-free money in one of the months, or take it on top and still draw the monthly amount. 

leicestersq

An update for those who are interested.

I received a message from HL, one sent to many customers by the looks of it.
The message said that if you still wanted to withdraw your money after the budget then do nothing, but to contact them if you no longer wanted to drawdown your money. How odd?

The only way I can make sense of it is that HL deliberately held up withdrawals, probably in concern for those wishing to take their money out of a tax wrapper. Why would HLdo this? My guess is that they were in contact with HM Treasury and told the Treasury about all of the withdrawal requests. I suspect that the Treasury told them that there wouldnt be a change to the tax free cash amounts (maybe what HL even helped them decide not to change the limit).

If they were told this, what would HL do? They couldnt tell you that there would be no change because that would have been privileged/insider information. Instead I think that they decided to delay withdrawals, allowing people to have a more informed choice after the budget rather than a panic guess as many must have taken.

Yes, this worked out OK for those who didnt really want to drawdown their money and now will reverse their decision. But it didnt work out for people like me who did want to drawdown their cash and would have been held up by these 'delays'.

Of course all of the above is speculation. But I cannot interpret the communication from HL about 'are you sure you want to drawdown your cash?' plus the timing of it immediately after the budget in any other way.

flaneurs_lobster

They just have a large backlog. They are seeking to portray this large backlog as an "opportunity" for their customers to change their minds if they want to.

Clever PR.

They do not have a secret back-channel to HM Treasury.

The only people who got early sight of the Budget provisions were absolutely everyone when someone pressed the "Publish" button on the OBR Report 2 hours early. 

ali_bear

Or possibly there is a huge backlog at HMRC. My assumption is that every pension withdrawal has to involve interaction between the provider and HMRC and understandably in these hollowed-out times the HMRC may be experiencing operational difficulties in servicing that demand. Offering the possibility of cancelling a load of withdrawals post-budget is a way of clearing part of the workload for all parties. 

dunstonh

The only way I can make sense of it is that HL deliberately held up withdrawals, probably in concern for those wishing to take their money out of a tax wrapper. Why would HLdo this? 

No they wouldnt do that.    That is just a tin foil hat allegation by you.

My guess is that they were in contact with HM Treasury and told the Treasury about all of the withdrawal requests.

Whilst some have accused the Treasury of bias towards HL and Vanguard (financial press following the budget), why would the Treasury have taken interest in smaller or medium sized players like HL? (in respect of pensions).

 I suspect that the Treasury told them that there wouldnt be a change to the tax free cash amounts (maybe what HL even helped them decide not to change the limit).

The Treasury told everyone about 2 weeks before the budget that there wasnt going to be a change.

Of course all of the above is speculation. But I cannot interpret the communication from HL about 'are you sure you want to drawdown your cash?' plus the timing of it immediately after the budget in any other way.

Its silly speculation.

Virtually all providers that have a fairly manual back office drawdown process had issues with workload and extended their usual service standards.

DIY providers appear to be more susceptible to people making rash, silly decisions.     

To me, it actually seems like common sense for them to do.  If they can get x% of those drawdown cases cancelled, it helps reduce their backlog and saves them money.

flaneurs_lobster

ali_bear said:

Or possibly there is a huge backlog at HMRC. My assumption is that every pension withdrawal has to involve interaction between the provider and HMRC and understandably in these hollowed-out times the HMRC may be experiencing operational difficulties in servicing that demand. Offering the possibility of cancelling a load of withdrawals post-budget is a way of clearing part of the workload for all parties. 

Don't see why, it's either taxable pay (and gets reported) or non-taxable (so it doesn't). HMRC don't need to sign off on individual transactions.

Albermarle

If the tax free cash stays with HL, they can continue to charge a platform fee, so with my cynical hat on, that might be part of the reason.
Also these providers do not like to see  their Assets Under Management decreasing generally.