HL Sipp - Taking tax free lump sum.

Baldytyke88

https://forums.moneysavingexpert.com/discussion/comment/81881987#Comment_81881987

I telephoned them, I made sure there was enough cash and I now have an active SIPP and a draw down account.

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/81882179#Comment_81882179

Not entirely clear, and thanks for asking…..Let us say I want 25K TFLS. I sell funds in the SIPP to a value of 25K. This goes into SIPP cash account. I then request 75K into the drawdown account, but 75K of what? I assume I tell them 30K of one fund in the SIPP and 45K - of another ( for example) if I so wish? The 25K may take 15 days to hit my current account.

In addition, I assume it is easy enough to also ask them for 12K of the 75K (now taxable) funds to also go to my current account. Cash total of 37K. I assume I will have to sell 12K of them first - within the drawdown account?

Apologies for perhaps being thick, just want to make sure I understand things correctly.

Nebulous2

I've no idea about the choices you get on what goes into the drawdown account, as I've done this all in cash - but:

You don't ask for anything to be moved to a drawdown account. You ask for the tax-free cash.

Delays were well over 15 days earlier this year, there was a thread about it, with some people complaining, but they may have caught up somewhat now.

They pay you the £25k and simultaneously move £75k into a drawdown account, which is created for you if you don't have one.

Once the money is in the drawdown account, you can draw it down by request. Requests have to be made before the 13th of the month and are paid on the 28th.

Everything from the drawdown account will count towards your taxable income, and may be taxed depending on the tax code allocated to your HL pension.

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/81882361#Comment_81882361

Many thanks for that. I can understand that will apply if you sell 100K of funds and just deal in cash. However, if you only sell 25K what happens then? How is the 75K moved into the drawdown account?

thingswerentthisbadinmyday

https://forums.moneysavingexpert.com/discussion/comment/81882534#Comment_81882534

As part of the application process (I have always done mine on-line), you give instructions for which of your funds/shares (and how much of each if more than one) are to be transferred into the (new) Drawdown account.You also advise which of your funds or cash are to be used to make any small balancing adjustments.

Are you intending to use the on-line application process?

Albermarle

By asking for £25K tax free cash, HL will move £75K into a newly set up ( by them) drawdown account as part of the process. They will give you a choice of what investments to the value of £75K you want to be transferred to the drawdown account.

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/81882701#Comment_81882701

Thanks again. Yes, I was planning to use the on-line application process, but equally happy to pick up the 'phone and chat with them. Thinking about it, the cash route may be the simplest method, and it preserves some of the pot in the meanwhile, plus interest I believe. The intention would be to TFLS 25K/ann from the SIPP and withdraw 12K/ann from the drawdown account - thus minimizing tax obligations assuming my tax code is based on the the usual 12K or so tax free allowance. If the SIPP is a 400K pot, then I assume this methodology would last 4 years and I would have 252K remaining in the drawdown pot to use afterwards.

Another Q if I may - can I use this 252K to purchase an annuity?

thingswerentthisbadinmyday

https://forums.moneysavingexpert.com/discussion/comment/81882715#Comment_81882715

Sorry I can’t help with these additional questions as my experience doesn’t extend that far.

Suggest you call HL and discuss your options?

FIREDreamer

https://forums.moneysavingexpert.com/discussion/comment/81882715#Comment_81882715

Absolutely you can use that £252k to buy an annuity.

I fully annuitised my SIPP in two tranches (late 2023 and summer 2025) as I had plenty of risk assets in an ISA for what we need. I opted for RPI indexation.

No sequence of returns risk to worry about now.

I used Hargreaves’ annuity service and the rates I got I was more than happy with.

Albermarle

The intention would be to TFLS 25K/ann from the SIPP and withdraw 12K/ann from the drawdown account - thus minimizing tax obligations assuming my tax code is based on the the usual 12K or so tax free allowance. If the SIPP is a 400K pot, then I assume this methodology would last 4 years and I would have 252K remaining in the drawdown pot to use afterwards.

That is fine. Maybe an obvious comment, but you will not be able to withdraw from the drawdown account until it is set up. So tax free cash request first - then income request a couple of weeks later ( or any time after ) .