Taking My First TFLS from Fidelity SIPP

I'm about to take my first TFLS from a SIPP I have with Fidelity. Browsing their website, I don't want to incur any "advice" fees and all I want to do is take a proportion of my 25% lump sum (not all of it). I don't want to drawdown any further income at the moment. 
I just wondered if anyone else has done this and if it's relatively simple. Also, will tax automatically be deducted on this payment, which I then have to claim back? My SIPP is all sitting in a Vanguard 80/20 account, so there is only one fund to sell to realise cash.
Any advice gratefully received.

Replies

  • Dazed_and_C0nfusedDazed_and_C0nfused Forumite
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    Why would tax be deducted from a tax free lump sum?
  • edited 27 August at 11:28AM
    AlbermarleAlbermarle Forumite
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    edited 27 August at 11:28AM
    You do not have to pay for any advice , but you will have to book a telephone appointment to speak to a retirement guidance person at Fidelity . ( in the personal finance world - guidance is free and general - advice is personal , regulated and you have to pay for it )
    The reason is twofold. They want to know that you fully understand what you are doing and the options available. Your question about tax on  a tax free lump sum is typical of the sort of misunderstandings that can occur, and that a chat with them will probably be helpful anyway .
    Also it covers Fidelity in case you later say you made a mistake and want to reverse the decision or claim compensation or whatever.
  • jim8888jim8888 Forumite
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    I think I read somewhere that the pension companies automatically deduct tax at source from a pension payment at the basic rate before paying it out, and you then have to claim it back - happy to be totally wrong on this though!
  • AlbermarleAlbermarle Forumite
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    jim8888 said:
    I think I read somewhere that the pension companies automatically deduct tax at source from a pension payment at the basic rate before paying it out, and you then have to claim it back - happy to be totally wrong on this though!
    Yes you are wrong . The issue is that when you first take taxable income the tax can be more than expected, and you need to claim some back. 
  • Dazed_and_C0nfusedDazed_and_C0nfused Forumite
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    And they don't deduct basic rate tax.

    They use the emergency tax code (1257L) on a non cumulative basis which, depending on the amounts involved, means tax is deducted at some or all of the following rates, 0%, 20%, 40% and 45%.
  • jim8888jim8888 Forumite
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    jim8888 said:
    I think I read somewhere that the pension companies automatically deduct tax at source from a pension payment at the basic rate before paying it out, and you then have to claim it back - happy to be totally wrong on this though!
    Yes you are wrong . The issue is that when you first take taxable income the tax can be more than expected, and you need to claim some back. 
    Okay, so I assume Fidelity manage that in declaring that taxable income is being taken from a pension? As advised, I will give them a call  :)
  • AlbermarleAlbermarle Forumite
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    jim8888 said:
    jim8888 said:
    I think I read somewhere that the pension companies automatically deduct tax at source from a pension payment at the basic rate before paying it out, and you then have to claim it back - happy to be totally wrong on this though!
    Yes you are wrong . The issue is that when you first take taxable income the tax can be more than expected, and you need to claim some back. 
    Okay, so I assume Fidelity manage that in declaring that taxable income is being taken from a pension? As advised, I will give them a call  :)
    Taking taxable pension income is the same as getting a taxable wage from work.
    Fidelity will take tax off on behalf of HMRC just like your employer did/does.
  • Dazed_and_C0nfusedDazed_and_C0nfused Forumite
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    jim8888 said:
    jim8888 said:
    I think I read somewhere that the pension companies automatically deduct tax at source from a pension payment at the basic rate before paying it out, and you then have to claim it back - happy to be totally wrong on this though!
    Yes you are wrong . The issue is that when you first take taxable income the tax can be more than expected, and you need to claim some back. 
    Okay, so I assume Fidelity manage that in declaring that taxable income is being taken from a pension? As advised, I will give them a call  :)
    Yes, once you start taking taxable income they will report the details to HMRC.

    Essentially you will be on the pension companies payroll with a tax code, P60 each year etc.  Just they are paying you a pension not wages.
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