Pension Drawdown

dunstonh

She would like to start taking a regular £800 per month from her SIPP but does not want a tax free lump sum.

Whilst that is theoretically possible, only a very small number of providers support it. It's rare that there can be any justification for not wanting a tax-free lump sum.

Basically what we want to do is convert all of her SIPP to a drawdown pension and start taking cash from it but without taking a tax free lump sum.

It may be an idea to tell us what you're trying to achieve by doing that as it's unlikely to be suitable.

She's OK with taking the tax free element, but does not want a huge initial lump sum. I think we are misunderstanding what the process is.

She doesn't need to. UFPLS would be fine in that case. However, there's a limited number of providers available on the direct-to-client market that offer regular UFPLS. It's strange because virtually all IFA providers offer it.

However, an alternative is to draw the equivalent of 20,000 out and pop it into a stocks and shares ISA. ISAs and pensions share the same investment options and have the same charges, so it's neither here nor there.

It's also possible that the provider she's with at the moment only offers limited functionality. A lot of older workplace pensions and legacy pensions don't offer all the options. That usually requires a transfer to a modern plan.

kermchem

Her SIPP provider can probably offer FAD but only on a part of her pot. Convert say £20k to a crystallised pot, so out comes 25% tax free, £4k, and then take £800 taxable per month until the £16k runs out. Then repeat. Avoids one big lump sum, and more likely to be offered by diy providers. Catch can be how the crystallised and uncryst pots pay fees.

QrizB

Convert say £20k to a crystallised pot, so out comes 25% tax free, £4k, and then take £800 taxable per month until the £16k runs out

I'm sure we all realise that 25% of £20k is £5k.

kermchem

https://forums.moneysavingexpert.com/discussion/comment/82136594#Comment_82136594

Yes, maths slipped me there. Sorry.

BikingBud

My plan, trying to get £100k out in the next 7 years, before state pension:

• This year - £25k lump sum - no tax > flexible ISA
• Remaining £75k @ 20% keeping below high rate threshold
  • £11500 each year for 6 years > ISA
  • ~£6450 for final year with small HR burden

Assumption 🤣tax bands remain as is.

If it takes longer, as SP kicks in more will go to tax.

Sound sane?

NoMore

https://forums.moneysavingexpert.com/discussion/comment/82136630#Comment_82136630

Do you have other income during these years ? Why not take out 25k out each year to fill the ISA if you have enough headroom below the higher rate tax band ? Why the wait to take it over 7 when you can get it in to ISA in 4 ?

BikingBud

Yes I am bouncing off the HR tax threshold.

I've accumulated very nicely via Sal Sac and now trying to ensure I can get it out most efficiently.