UFPLS withdrawals from a SIPP with two funds.

Roy1234

I'm thinking of moving two separate pensions to a well-reviewed company, who will allow regular UFPLS withdrawals without the high minimum amounts (e.g. £5k) many impose. They are fine with doing this monthly, whatever amount I want, but said I'd need to sell some pension fund units to create the cash balance, which will still be associated with the pension, to cover the monthly payments.

They offer SIPPs, and my plan was to keep the two pensions separate within the new SIPP account (as standard pensions do not allow this), say one fund at lower risk to draw off monthly, the other at higher risk to leave alone to grow.

However the idea of UFPLS when there are two separate funds seems to cause them great confusion, saying that the UFPLS would somehow need to be spread across both funds. Given I have to sell shares to create the cash account, this seems nonsense to me, as I'll have to sell shares in either Fund A or Fund B. I can't think why some strange hybrid selling of shares would be needed?

All uncrystallised funds are 25/75 tax-free/taxable, it should make no difference which fund I sell shares of for cash, then later withdraw as a monthly payment.

Are they wrong, or am I?

NoMore

naming the company would help as different companies can have different process for how they deal with drawdown and it could be confusion over how it works for that particular company.

Roy1234

It's AJ Bell, who have been generally very helpful, but I cannot fathom them on this point.

BobR64

I'm not with AJ Bell but I think of them as one of the big established brokers like HL (who I am with) who provide a lot of flexibility in terms of what you may hold in your SIPP.

Holding two funds is nothing out of the ordinary. In my SIPP, I have various ETFs, ITs, shares, gilts, etc. and I am sure that I could have the same with AJB. I wouldn't expect to have to sell a little bit of each holding when it comes to the time I want to make a UFPLS withdrawal. That makes no sense.

I wonder if there have been some crossed wires somewhere.

NoMore

Are they automatically going to sell each month to produce the cash on your behalf, or do you have to manually sell and they just provide the ufpls from the available cash to you.

If it's the first, I could see that they sell equally across all your funds, to keep the same overall asset allocation, so they are not making any market timing decisions on your behalf, this would protect them from complaints about them selling the wrong thing at the wrong time. I know you want to only sell from one fund, but the way they have set it up may not allow them to do this.

Roy1234

https://forums.moneysavingexpert.com/discussion/comment/81974365#Comment_81974365

No it is not automatic, they made it clear I would have to sell shares for the cash fund, perhaps as you say because they don't want any comeback on which shares & when they were sold if by them. Or likewise skewing the risk profile depending on what was sold/kept.

BobR64 - I hope you are right that wires are crossed, it makes no sense otherwise.

Albermarle

I'm thinking of moving two separate pensions to a well-reviewed company, who will allow regular UFPLS withdrawals without the high minimum amounts (e.g. £5k) many impose. They are fine with doing this monthly, whatever amount I want, but said I'd need to sell some pension fund units to create the cash balance, which will still be associated with the pension, to cover the monthly payments.

They offer SIPPs, and my plan was to keep the two pensions separate within the new SIPP account (as standard pensions do not allow this), say one fund at lower risk to draw off monthly, the other at higher risk to leave alone to grow.

This is rather confusing way of explaining the position, which could possible have confused AJ Bell.

If you move two separate pensions to AJ Bell, you will then only have one pension/SIPP ( not two) . You can have two ( or a lot more ) investments in that pension. Also you can do similar with 'standard providers', so not sure what you mean by saying they do not allow this.

Separately depending on your current two pensions are with and what they are invested in, it may or may not be possible to transfer the investments to AJ Bell and it would have to be a cash transfer.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81974365#Comment_81974365

Some providers will sell investments for you, if you do not have the cash available, with no charge. AJ Bell want you to have the cash available. Not sure what happens if you do not. Either the transaction fails or they whack you with a big charge, I guess .

phlebas192

https://forums.moneysavingexpert.com/discussion/comment/81974468#Comment_81974468

Had this with my wife's regular withdrawals from her drawdown account. There was sufficient cash to cover it but I had just sold an IT (settled T+2 days) and immediately used the funds to purchase a gilt (settled T+1) and the extra day for the sale to settle happened to coincide with the monthly payment date. AJ Bell wrote to say that they couldn't process the payment but would do so as soon as the sale had settled. They did this and made the payment same day without charging their usual fee for a CHAPS payment.

They probably wouldn't be so accommodating if this happened regularly and I have made a note to be careful trading around the payment date to avoid this scenario in the future!

Roy1234

https://forums.moneysavingexpert.com/discussion/comment/81974462#Comment_81974462

Perhaps you are right this is a terminology issue. Their Ready Made Pension, as they call it, would not allow a split of pots in different risks. They appear to offer the conventional Cautious/Balanced/Adventurous options I've seen in workplace pensions, therefore not a choice of funds or more than one fund.

Their SIPP can hold two pots, I assume the correct word is funds. Assuming I can transfer the two pensions held elsewhere to AJ Bell (or else we don't have this issue!), to be kept as separate funds, are you saying I should be able to separately sell shares in either one of them to produce the cash fund?

Albermarle

The SIPP can hold as many investment funds as you want, so if you want a split of funds you will have to use their SIPP rather than the Ready Made option. Then you should have no problem selling down whichever one(s) you wanted to get the cash for withdrawal.

It is unlikely that you would not be able to transfer your two old pensions ( unless they have special features), but it is probable ( not certain) that the investments you hold in those old pensions will not be available in the AJ Bell SIPP. So in this case the transfer would have to be in cash, and then when it arrived at AJ Bell, you would have to buy the investments you wanted.

If you post details of the two old pensions and who the providers are, then you could get some more definitive comment.