Pension drawdown

kie-ade

I would be very grateful if someone could help.

I am about to begin taking money from my Bestinvest SIPP (first ever drawdown).

I wanted to take a UFPLS of £16760 in order to make best use of my tax free allowance so that the full amount would be tax free (I will have no other income this tax year).

Bestinvest informs me though that they do not offer UPFLS any more and I would have to take it as draw down.

They advised that I would have to put the whole pension into drawdown though.

My understanding (if correct) is that UPFLS would be better because (when compared to full drawdown) any growth of 25% tax free amount of the uncrystallized remainder of my pension would continue to grow tax free?

I plan to switch to Interactive Investor anyway, but to do an in specie transfer now will take too long for me to access my pension through them this tax year.

Any thoughts would be appreciated.

dunstonh

My understanding (if correct) is that UPFLS would be better because (when compared to full drawdown) any growth of 25% tax free amount of the uncrystallized remainder of my pension would continue to grow tax free?

Yes, UFPLS first your scenario. Drawdown doesn't

I plan to switch to Interactive Investor anyway, but to do an in specie transfer now will take too long for me to access my pension through them this tax year.

Perhaps risk a cash transfer?

molerat

One point, even though no tax would be due on a £16760 withdrawal the provider will deduct £4034.70 tax due to the way the PAYE system works until you get a code allocated. That would have to be reclaimed or squared up with another withdrawal in M12 once a code is allocated.

kie-ade

'Yes, UFPLS first your scenario. Drawdown doesn't.'

'Even with the pension in a "drawdown account" the growth will still be tax free on any tax free amounts held.'

Thanks for replying so quickly dunstonh & molerat.

It's that part that is confusing me. Unless I'm misunderstanding (quite possible) these answers regarding the tax free status (of the residual tax free amount) seem to conflict?

DRS1

We don't know how much is in your pension so we don't know why Bestinvest said you have to put the WHOLE pension into drawdown. In your scenario it is theoretically possible to take £4190 as a tax free lump and crystallise the remaining £12562.50 and then drawdown that £12570 as taxable income.

If you do that then any remainder of the pension stays uncrystallised and the tax free lump sum attached to it can continue to grow and still be tax free.

kie-ade

https://forums.moneysavingexpert.com/discussion/comment/81877122#Comment_81877122

Thanks Dunstonh.

I would prefer, then, to stick to my original plan of taking UFPLS.

Although being out of the market isn't ideal, I guess selling all my funds is the only way I could, possibly, transfer quickly enough to take a UFPLS this tax year.

By the way, Best Invest didn't mention they didn't offer UFPLS anymore even after discussing exactly what I wanted to 3 separate people.

kie-ade

https://forums.moneysavingexpert.com/discussion/comment/81877181#Comment_81877181

Hi, thanks for your response.

Yes, that's what I wanted to do but they said that I would have to put the whole amount (@£150,000) into drawdown. I wouldn't be surprised if that was incorrect advice as Bestinvest seem to have given me conflicting & incorrect advice regarding this since I first contacted them last week. I'm not very impressed with them at the moment!

DRS1

When you want to take benefits do you have to speak to someone at Bestinvest or are there any forms to fill in? I am wondering if the forms (if there are any) suggest you might have more flexibility than they say over the phone.

kie-ade

https://forums.moneysavingexpert.com/discussion/comment/81877237#Comment_81877237

Yes, very perceptive of you!

The forms do seem to suggest I could put part into drawdown (percentage or fixed amount) but that's not what the 'advisor' said.

I think he is wrong, but I just don't trust them now!

Their information online regarding drawdown is also a little vague.

I think I will have to write to them to make sure I get a proper response in writing.

DRS1

It can be luck of the draw when you phone up. I even had one person say "you're lucky you got me because I know all about this" - different pension company though so don't ask me who that was.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81877253#Comment_81877253

With other well known SIPPs, like HL, Fidelity, AJ Bell, II etc you can take just some of the tax free cash, and then take a regular income from the crystallised part. So you would be putting just part of the pension into drawdown.

If you are happy to just take one or two UFPLS payments per year, then that is probably easier. If you want more regular income, drawdown is easier.

Although being out of the market isn't ideal, I guess selling all my funds is the only way I could, possibly, transfer quickly enough to take a UFPLS this tax year.

Also worth noting that it is usually simpler to transfer uncrystallised pensions than crystallised, or part crystallised ones.