Taking first UFPLS from a small Hargreaves Lansdown SIPP

Nationwide8 wrote: »

Hmmm just thought of something,my private pension amount monthly would take a chunk out of that monthly allowance of £917 ?? Which would leave more to be taxed on ?? But is that up to HMRC to work out not HL ?

btw,This one lump sum SIPP withdrawal and my private pension together for tax year 16-17 isn't above my PA so any tax I will be claiming back.

The whole point of them giving you an 'emergency' tax code is that they don't know if you have a private pension amount monthly which was using up some of your allowance or nothing at all using up your allowance. They are just saying what tax do we withhold when we know nothing about this person other than we are paying them £1400 this month of which £1050 is taxable.

The assumption is that if they carry on paying you a taxable income of £1050 a month that's £12600 a year and you would be getting the first £11000 at 0% with £1600 at 20%... so they better withhold tax at 20% on £1600 a year which is £26 a month. It's a guess.

Yes of course if some other job or pension was using up all the £11000 and you were really getting £12600 a year from HL, perhaps they should be taxing you a lot more - but as in fact you are not going to be over the personal allowance with this lump sum withdrawal because it's a one-off and not recurring, it's worked out quite neatly and there's not much to claim back as it happens.

faddy wrote: »

I could probably work this out by trawling through this thread, but how soon after opening a HL SIPP would I be able to withdraw a UPFLS allowing for forms going back and forth?

The key takeaways if you don't want to read the thread are:

- you can fund your account via debit card as part of the account opening process online.

- if you make a contribution up to and including the 5th of a month it will be taken into account for that month's tax relief claim to HMRC and then be credited to your account on the 21st of the following month (or next working day).

- to withdraw via UFPLS you have to complete the risk questionnaire and get it back to them, which you can either do by clicking on their website to get it sent in the post, filling it out and posting it back, or by phoning them and talking through it and answering the questions after going through security to check it's you.

- after they have the completed risk questionnaire they can send you the application form for a UFPLS withdrawal which will arrive in a day or two by post or within a few minutes / hours by email. Then you can fill it out and sign and return it in the post with copy of your ID. Once this reaches them by post if all is in order it might take 3-4 working days for the funds to show as withdrawn from your online account and credited to your bank with the tax deduction.

Would I be able to withdraw the whole amount paid in (taxed at 15%?) before the HMRC top up arrives? I'm assuming HL wouldn't close the account knowing a top up was on its way?

They won't close the account while they are waiting for money which is owed to your account by HMRC. Meanwhile you could take out every other penny that was sitting in your account if you wanted (i.e. your contributions plus interest or investment returns).

However, if you do that (drain the account) and you had only done a contribution amount of £2880 like the other people in this thread, the outstanding tax claim is only £720 ; once that arrives it will be available for you, but your account will be below the £1000 minimum below which they reserve the right to close your account, and if you have maxed out your contribution allowance you will not be able to top it up until the next tax year so your account is sitting there at risk of closure.

If you don't invest the £720 tax relief when it arrives and plead with them not to close the account because you are definitely going to add more to it next tax year, honest guv... they may just unilaterally decide they will close the account and charge you a £295+vat (~£350) fee, which is their charge for early account closure within a year of opening the account.

You might prefer to avoid that crippling fee by making sure there is more sloshing around in the account than £720. For example only take out £2600 of your £2880 and then leave £280 which together with the £720 incoming claim makes £1000 sitting in the account to keep the account ticking over until it has been open long enough to avoid the 'early closure' fee and just pay the standard £25+vat fee.

It remains to be seen what attitude they take to their £1000 minimum limit which is a relatively new one. It just gives them some "terms and conditions" support if they decide they want to close down your account because you are taking the mick by making them work for free when you don't actually want any investments. Being a guinea pig to find out what circumstances they'll really go ahead with it, could be an expensive lesson.