SIPP withdrawal/drawdown

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  • A_T
    A_T Posts: 959 Forumite
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    zagfles wrote: »
    You can sell holdings, but withdrawing the cash is a bit more complicated as apart from the 25% tax free, they need to pay the rest through PAYE (normally) so it gets taxed.

    I did not realise platforms would apply PAYE to pension withdrawals. That's going to make things quite complicated with the State Pension and any other pensions.
  • Linton
    Linton Posts: 17,162 Forumite
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    A_T wrote: »
    I did not realise platforms would apply PAYE to pension withdrawals. That's going to make things quite complicated with the State Pension and any other pensions.
    All other pensions except SP will use PAYE and each will be given a separate tax code. Yes it does add complication but HMRC will sort it all out and once set up it works fine. You can change the allcation of the tax allowance and tax on SP to the various pensions if yot wish.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    Audaxer wrote: »
    As I've recently learned more about investing I've moved some lump sums into S&S ISAs and plan to transfer more as Fixed Rate Cash ISAs mature. Since reading about SIPPs I thought it may be a good idea to transfer £2880 annually into a SIPP (to the same fund(s) as investing in ISA) and benefit from the government contribution to make it up to £3600 annually. I understand I would be limited to pay in £2880 annually as I have retired and only in receipt of pension income.

    I wouldn't need immediate access to the SIPP any more than I would my S&S ISAs, but I thought that if I did need to sell investments and draw cash, as I'm over 55 it would be as accessible in the SIPP as in the ISA, apart from the fact that I would be paying tax on 75% of the cash withdrawn?

    I would select a platform with no charges for withdrawing cash from a SIPP - I understand HL does not charge for that.

    Is it that straightforward or am I missing something?

    It's nearly that straightforward. :D You need to get a tax code to give the SIPP provider.

    You may or may not pay tax on the 75% depends what your other tax position is. I'll be taking money out of my SIPP next tax year without paying any tax on it as I won't have any taxable income for a few years (until SP kicks in). So it depends on your exact tax position.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    A_T wrote: »
    I did not realise platforms would apply PAYE to pension withdrawals. That's going to make things quite complicated with the State Pension and any other pensions.

    Not really once it's set up but it may need a little juggling initially.
  • Audaxer
    Audaxer Posts: 3,508 Forumite
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    AnotherJoe wrote: »
    It's nearly that straightforward. :D You need to get a tax code to give the SIPP provider.

    You may or may not pay tax on the 75% depends what your other tax position is. I'll be taking money out of my SIPP next tax year without paying any tax on it as I won't have any taxable income for a few years (until SP kicks in). So it depends on your exact tax position.
    Thanks. I'll be on standard rate tax when/if I need to make withdrawls. So in time if I sold say £2k of my SIPP investments and withdrew that as a lump sum, I'd have 20% tax deducted from £1,500 of it through a new PAYE code on my SIPP, and my other pensions wouldn't be affected. Is that correct?
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
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    The provider may use the emergency tax code on the first withdrawl which would leave you owing tax but then a BR (basic rate) tax code should be issued by HMRC so any further withdraw are taxed correctly.
  • A_T
    A_T Posts: 959 Forumite
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    Thanks for all the input in this thread - SIPP platforms are none of them clear on the alternatives to accessing your pension when the time comes. They all talk about "drawdown" without mentioning the option of simply sell holdings and withdrawing cash whenever you feel like it

    One example is Cavendish

    https://www.cavendishonline.co.uk/pensions/faqs/

    "For the time being it is not possible for clients of the Cavendish Online FundSupermarket Pension to take withdrawals from their pension by going into drawdown. This is because we are not permitted to provide our clients with advice relating to drawdown.

    If you wish to drawdown from your pension you will need to transfer or re-register your pension away from the Cavendish Online FundSupermarket Pension to another provider who can provide drawdown. We do hope to be able to provide our clients with access to drawdown at some time in the future."

    So does this mean you cannot access your pension at all when the time comes and it will be necessary to transfer to another platform? Or does it simply mean the mysterious "drawdown" option is not available, but that ordinary withdrawal taxed as income is available? The website does not seem to say.
  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    Remember that providers will only really talk about options they offer. They are also not allowed to steer or advise on the options available. That is no their job and most do not have the regulatory permissions. Some issue generic information though.
    So does this mean you cannot access your pension at all when the time comes and it will be necessary to transfer to another platform?

    yes.
    Or does it simply mean the mysterious "drawdown" option is not available, but that ordinary withdrawal taxed as income is available?
    Drawdown is not mysterious. It has been available for well over a decade. Drawdown is drawdown. Basically, any option that utilises an unsecured pension option is drawdown.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • zagfles
    zagfles Posts: 20,323 Forumite
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    A_T wrote: »
    Thanks for all the input in this thread - SIPP platforms are none of them clear on the alternatives to accessing your pension when the time comes. They all talk about "drawdown" without mentioning the option of simply sell holdings and withdrawing cash whenever you feel like it
    You mean UFPLS? Any decent platform offers that, eg see http://www.hl.co.uk/pensions/drawdown/what-are-the-alternatives
  • A_T
    A_T Posts: 959 Forumite
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    zagfles wrote: »
    You mean UFPLS? Any decent platform offers that, eg see http://www.hl.co.uk/pensions/drawdown/what-are-the-alternatives

    Cavendish doesn't seem to.
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