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How does it work - moving 50% of SIPP into drawdown
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- Lemon Slice
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How does it work - moving 50% of SIPP into drawdown
Hi,
I have a SIPP with YouInvest invested predominately in UK Shares which also has a cash balance from accumulated Dividend payments. Next year I will turn 55 and intend to move a proportion of the total fund into flexi-access drawdown taking 25% of proportion as a Lump Sum.
For sake of argument let's say the total fund value is £300,000 made up of £290,000 in UK shares and £10,000 in cash and I wish to move £150,000 into drawdown taking the £37,500 lump sum (PCLS). In order to take the PCLS I will need to sell £27,500 of the shares. Later I decide to take another £10,000 from the crystallised funds so I will need to sell more shares to fund this.
What I am struggling to understand is the practicalities of how my SIPP is separated. Is there a separation where 50% of the assets (i.e. specific shares) are put into drawdown and 50% left. If so, how is it decided which of the shares get moved. Or is it just left as one portfolio with a crystallised amount available for me to draw on by selling whatever I wish in the way of the shares? If so, how is the growth on the balance of the portfolio apportioned between the crystallised portion and the non-crystallised remainder?
I am presuming the method of this is common to all providers, HL, Youinvest etc. but I can't see any worked examples that make it clear.
Any help much appreciated from anyone who has done similar or who understands better how it works than I do.
I have a SIPP with YouInvest invested predominately in UK Shares which also has a cash balance from accumulated Dividend payments. Next year I will turn 55 and intend to move a proportion of the total fund into flexi-access drawdown taking 25% of proportion as a Lump Sum.
For sake of argument let's say the total fund value is £300,000 made up of £290,000 in UK shares and £10,000 in cash and I wish to move £150,000 into drawdown taking the £37,500 lump sum (PCLS). In order to take the PCLS I will need to sell £27,500 of the shares. Later I decide to take another £10,000 from the crystallised funds so I will need to sell more shares to fund this.
What I am struggling to understand is the practicalities of how my SIPP is separated. Is there a separation where 50% of the assets (i.e. specific shares) are put into drawdown and 50% left. If so, how is it decided which of the shares get moved. Or is it just left as one portfolio with a crystallised amount available for me to draw on by selling whatever I wish in the way of the shares? If so, how is the growth on the balance of the portfolio apportioned between the crystallised portion and the non-crystallised remainder?
I am presuming the method of this is common to all providers, HL, Youinvest etc. but I can't see any worked examples that make it clear.
Any help much appreciated from anyone who has done similar or who understands better how it works than I do.
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- Lemon Half
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Re: How does it work - moving 50% of SIPP into drawdown
AJ Bell keep track of the proportion of your SIPP that is crystallised, and recalculate the proportion at relevant transactions based on current values. As far as you're concerned you still have a single pot of shares and cash.
This proportioning is all done behind the scenes, you can't see any evidence of it in your online account. I believe they will tell you what proportion is currently crystallised if you ask them.
I believe not all providers do it the same way, and some will effectively present it to you as two accounts, crystallised and non-crystallised.
See also here viewtopic.php?f=17&t=3193#p70341
Scott.
This proportioning is all done behind the scenes, you can't see any evidence of it in your online account. I believe they will tell you what proportion is currently crystallised if you ask them.
I believe not all providers do it the same way, and some will effectively present it to you as two accounts, crystallised and non-crystallised.
See also here viewtopic.php?f=17&t=3193#p70341
Scott.
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- Lemon Pip
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Re: How does it work - moving 50% of SIPP into drawdown
HL split the crystallised funds into a separate account called SIPP Income Drawdown. When you crystallise an amount you must have the tax-free sum in cash in the main SIPP account and you can specify which holdings are transferred to the drawdown account. This seems a simple way to do it but there is one drawback: for shares HL charge 0.45% capped at £200 for each account and now you have 2 accounts so you can pay up to £400/year.
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- Lemon Slice
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Re: How does it work - moving 50% of SIPP into drawdown
So Scott, how do AJBell know which bit of the pot you want to take subsequent funds from? Say you had a 50% crystallised pot of £200k, and you took out £10k, how would they know if it was from the crystallised drawdown pot, and therefore taxable, or if it was an UFPLS, or in fact if it was £10k of tax free cash from crystallising another £40k?
Or, do you have to indicate this when you draw down?
Or, do you have to indicate this when you draw down?
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- Lemon Half
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Re: How does it work - moving 50% of SIPP into drawdown
Jabd2001 wrote:Or, do you have to indicate this when you draw down?
Exactly that. The benefit form has different sections for the different types of withdrawal.
In effect, if you have a split pot, the cash balance of your SIPP is neither crystallised nor uncrystallised. It only takes on one or other label when you actually withdraw it.
Scott.
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- Lemon Quarter
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Re: How does it work - moving 50% of SIPP into drawdown
swill453 wrote:Jabd2001 wrote:Or, do you have to indicate this when you draw down?
Exactly that. The benefit form has different sections for the different types of withdrawal.
In effect, if you have a split pot, the cash balance of your SIPP is neither crystallised nor uncrystallised. It only takes on one or other label when you actually withdraw it.
Scott.
I am not sure about this. With Hargreaves Landsdowne, it appears to be slightly different.
In effect, I have two different pots: one is crystallised and the other is not. Each pot has a cash balance that I can use for investment.
When a chunk is crystallised, it moves to the drawdown pot, and I can withdraw the TFLS for that chunk from the cash within the drawdown pot.
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- Lemon Slice
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Re: How does it work - moving 50% of SIPP into drawdown
@TUK, yes clearly the systems used by HL and AJBell are different.
It’s frustrating isn’t it that we can’t find out this detail in advance?
@scott, when you say ‘benefit form’ I hope you don’t mean a paper one....can you not make withdrawals online?
It’s frustrating isn’t it that we can’t find out this detail in advance?
@scott, when you say ‘benefit form’ I hope you don’t mean a paper one....can you not make withdrawals online?
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- Lemon Half
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Re: How does it work - moving 50% of SIPP into drawdown
Jabd2001 wrote:@scott, when you say ‘benefit form’ I hope you don’t mean a paper one....can you not make withdrawals online?
I'm afraid it's a paper one.
Once you have a regular withdrawal going, you can adjust it online. But the initial request is the paper form.
Scott.
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- Lemon Half
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Re: How does it work - moving 50% of SIPP into drawdown
TUK020 wrote:I am not sure about this. With Hargreaves Landsdowne, it appears to be slightly different.
In effect, I have two different pots: one is crystallised and the other is not. Each pot has a cash balance that I can use for investment.
As martinc mentioned above, HL do it a different way.
Back in the Motley Fool days, there was a user called sipptechie who was an anonymous AJBell employee who gave us a lot of useful information. With reference to the subject under discussion, I recall he said both methods were valid and approved, it was a choice made by the provider.
Scott.
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- Lemon Slice
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Re: How does it work - moving 50% of SIPP into drawdown
Thank you for all the replies to this thread. It has been most informative and helpful.
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