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
    5.4K Posts
    1,000 Posts First Anniversary Name Dropper
    ✭✭✭✭
    Why would tax be deducted from a tax free lump sum?
  • edited 27 August 2021 at 11:28AM
    AlbermarleAlbermarle Forumite
    10.3K Posts
    10,000 Posts Third Anniversary Name Dropper
    ✭✭✭✭✭
    edited 27 August 2021 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
    220 Posts
    Seventh Anniversary 100 Posts
    ✭✭
    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
    10.3K Posts
    10,000 Posts Third Anniversary Name Dropper
    ✭✭✭✭✭
    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
    5.4K Posts
    1,000 Posts First Anniversary Name Dropper
    ✭✭✭✭
    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
    220 Posts
    Seventh Anniversary 100 Posts
    ✭✭
    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
    10.3K Posts
    10,000 Posts Third Anniversary Name Dropper
    ✭✭✭✭✭
    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
    5.4K Posts
    1,000 Posts First Anniversary Name Dropper
    ✭✭✭✭
    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.
Sign In or Register to comment.
Latest MSE News and Guides

Alexa, tell me some top tips

How can this Forumite maximise their smart speaker?

Join the Forum discussion

State pension shortfalls for women

MPs call it a 'shameful shambles'

MSE News