HL SIPP - Drawdown
Posted: May 21st, 2023, 3:44 pm
Hi, I have a few questions about my Hargreaves Lansdown SIPP and drawdown if anyone could help please.
Background
I have a SIPP with HL and also a DC pension pot with a former employer. For the moment I'd like to keep them separate for reasons relating to eggs in basket and costs. The LTA, if it gets reinstated, is not likely to be an issue and it's unlikely I will be returning to full time work.
Plan
I intend to take the 25% tax free cash from my HL SIPP and move the remainder into drawdown. Sometime after that I will start to take an income from the drawdown pension with the idea of staying under my annual tax allowance. Some years in the future I will probably transfer my DC pension pot from my former employer to a HL SIPP and repeat the process of taking 25% tax free cash and moving the remainder into drawdown. I will also be receiving (I hope) a full basic state pension, but that doesn't form part of these questions, though of course it will be a factor in how much tax I will be paying on my drawdown pension at that time.
Questions
1) Am I ok to repeat the process twice? I.e. SIPP -> 25% tax free cash and drawdown pension on my current HL SIPP and the same again if I transfer my former employer's DC pension pot to a HL SIPP at some time in the future? I.e. I don't have to do it all at once?
2) When I take the 25% tax free cash from my HL SIPP, do I actually need to do anything as for as HMRC is concerned? Is there a form I need to fill in to tell them it's my tax free cash? Is there any danger that they could be notified of the lump sum dropping into my bank account and then deciding it forms part of my taxable income for the year and I have to explain it's my 25% tax free cash so please leave me alone? Do I need to fill in a tax return in respect of the tax free cash or so anything else? I do have a government gateway account if that is relevant.
3) When I start to take an income from the drawdown pension pot with HL, the monthly amount will be my annual allowance divided by 12 (I will have no other taxable income as I'll also be using an ISA) so there should be no tax liability. However, I understand that HL will still deduct 20% tax from my monthly withdrawals and I will need to reclaim this from HMRC
i) Is there an online form I need to complete for this?
ii) Is this sent just before or after the end of the tax year in question?
iii) How long does HMRC tale to refund the tax paid?
iv) Do I need to provide HMRC with something from HL confirming details of the monthly withdrawals so they can confirm what tax has been paid and what is due back to me?
4) If anyone has taken the 25% tax free cash from a HL SIPP and moved into drawdown, is there anything you wish you'd known beforehand or are there any minor pitfalls to avoid or helpful bits of advice to smooth the process?
Thanks in advance.
Background
I have a SIPP with HL and also a DC pension pot with a former employer. For the moment I'd like to keep them separate for reasons relating to eggs in basket and costs. The LTA, if it gets reinstated, is not likely to be an issue and it's unlikely I will be returning to full time work.
Plan
I intend to take the 25% tax free cash from my HL SIPP and move the remainder into drawdown. Sometime after that I will start to take an income from the drawdown pension with the idea of staying under my annual tax allowance. Some years in the future I will probably transfer my DC pension pot from my former employer to a HL SIPP and repeat the process of taking 25% tax free cash and moving the remainder into drawdown. I will also be receiving (I hope) a full basic state pension, but that doesn't form part of these questions, though of course it will be a factor in how much tax I will be paying on my drawdown pension at that time.
Questions
1) Am I ok to repeat the process twice? I.e. SIPP -> 25% tax free cash and drawdown pension on my current HL SIPP and the same again if I transfer my former employer's DC pension pot to a HL SIPP at some time in the future? I.e. I don't have to do it all at once?
2) When I take the 25% tax free cash from my HL SIPP, do I actually need to do anything as for as HMRC is concerned? Is there a form I need to fill in to tell them it's my tax free cash? Is there any danger that they could be notified of the lump sum dropping into my bank account and then deciding it forms part of my taxable income for the year and I have to explain it's my 25% tax free cash so please leave me alone? Do I need to fill in a tax return in respect of the tax free cash or so anything else? I do have a government gateway account if that is relevant.
3) When I start to take an income from the drawdown pension pot with HL, the monthly amount will be my annual allowance divided by 12 (I will have no other taxable income as I'll also be using an ISA) so there should be no tax liability. However, I understand that HL will still deduct 20% tax from my monthly withdrawals and I will need to reclaim this from HMRC
i) Is there an online form I need to complete for this?
ii) Is this sent just before or after the end of the tax year in question?
iii) How long does HMRC tale to refund the tax paid?
iv) Do I need to provide HMRC with something from HL confirming details of the monthly withdrawals so they can confirm what tax has been paid and what is due back to me?
4) If anyone has taken the 25% tax free cash from a HL SIPP and moved into drawdown, is there anything you wish you'd known beforehand or are there any minor pitfalls to avoid or helpful bits of advice to smooth the process?
Thanks in advance.