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Drawing Natural Yield from a SIPP

Including Financial Independence and Retiring Early (FIRE)
TheDove
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Drawing Natural Yield from a SIPP

#212628

Postby TheDove » April 4th, 2019, 11:50 am

My wife and I are in what I’ll optimistically call the ‘early stage’ of retirement and run ISAs via the HL platform from which we draw dividend income, broadly following HYP principles. I also have a SIPP of smaller size, also constructed along HYP lines, from which I’d planned to start drawing the natural yield but nothing more.

I just found out that HL no longer offer a ‘natural yield’ withdrawal option. Essentially now you’re obliged to draw a specified sum at fixed intervals, both of which can be varied at will. I was very much hoping to avoid the bother of this, and simply draw (in this case taxable) income as I do from the ISAs. I can more than live with the lumpiness of natural yield, although I appreciate others may feel differently.

I’d be grateful to know of any platform which offers a natural yield option and/or to understand why this is, or seems to have become, such an unattractive option for platforms to offer. Maybe there’s some regulatory kink I’ve missed.

I’ve searched widely and fruitlessly on this board and elsewhere, so I’m hoping someone can shed some light.

Thanks in advance
Dove

kempiejon
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Re: Drawing Natural Yield from a SIPP

#212639

Postby kempiejon » April 4th, 2019, 12:15 pm

I do not have a SIPP with Halifax but they do offer "pay away immediately" as a way of dealing with dividends in their other accounts.

Dod101
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Re: Drawing Natural Yield from a SIPP

#212642

Postby Dod101 » April 4th, 2019, 12:30 pm

I am not sure whether Alliance Trust Savings do so for a SIPP but since they do so for an ISA I expect they will for a SIPP. I draw the accumulated yield once a year only but ask them to do so. Note though that they are being sold to Interactive Investor and they will not do so for either an ISA or a SIPP. They accumulate dividends in a separate account (or I think you can automatically reinvest them) and then manually draw them down yourself.

Dod

Alaric
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Re: Drawing Natural Yield from a SIPP

#212687

Postby Alaric » April 4th, 2019, 2:42 pm

TheDove wrote:I’d be grateful to know of any platform which offers a natural yield option and/or to understand why this is, or seems to have become, such an unattractive option for platforms to offer. Maybe there’s some regulatory kink I’ve missed.


It's probably the complication of having to deal with PAYE. For a while I was drawing income from a taxed account with what was then TD. It didn't seem too difficult to watch for the receipt of dividends and transfer them more or less as they arose to a bank account. That's not a facility often available on SIPPs.

genou
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Re: Drawing Natural Yield from a SIPP

#212696

Postby genou » April 4th, 2019, 3:18 pm

Alaric wrote:
It's probably the complication of having to deal with PAYE.


That would be my bet as well. AJBell will let you have the natural yield from a dealing account or ISA, but not a SIPP.

swill453
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Re: Drawing Natural Yield from a SIPP

#212700

Postby swill453 » April 4th, 2019, 3:25 pm

genou wrote:
Alaric wrote:
It's probably the complication of having to deal with PAYE.


That would be my bet as well. AJBell will let you have the natural yield from a dealing account or ISA, but not a SIPP.

They'll also let you make free ad hoc cash withdrawals from an ISA, but charge £30 a time to do so from a SIPP.

Not sure I'd want that for every dividend.

Scott.

Dod101
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Re: Drawing Natural Yield from a SIPP

#212711

Postby Dod101 » April 4th, 2019, 4:16 pm

Alaric wrote:
TheDove wrote:I’d be grateful to know of any platform which offers a natural yield option and/or to understand why this is, or seems to have become, such an unattractive option for platforms to offer. Maybe there’s some regulatory kink I’ve missed.


It's probably the complication of having to deal with PAYE. For a while I was drawing income from a taxed account with what was then TD. It didn't seem too difficult to watch for the receipt of dividends and transfer them more or less as they arose to a bank account. That's not a facility often available on SIPPs.


I hadn't thought of that but of course they pay us net of tax and must account to HMRC for the tax deducted. OTOH is that very much different from a monthly salary?

Dod

swill453
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Re: Drawing Natural Yield from a SIPP

#212715

Postby swill453 » April 4th, 2019, 4:30 pm

Dod101 wrote:I hadn't thought of that but of course they pay us net of tax and must account to HMRC for the tax deducted. OTOH is that very much different from a monthly salary?

Not really, but it's certainly much more complex than withdrawing from an ISA, which is more like a bank account withdrawal.

And of course you could have several separate withdrawals per month, depending on how many dividends you have coming in.

I'd say it's a combination of (high) cost and (low) demand. I certainly wouldn't want "uncontrolled" taxable payments coming out of my SIPP as I keep a tight rein on withdrawing exactly the right amount in a year to stay under the tax threshold.

Scott.

Dod101
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Re: Drawing Natural Yield from a SIPP

#212718

Postby Dod101 » April 4th, 2019, 4:39 pm

I do the same Swill. In fact I leave it until the end of February and then ask for a payment during March to keep under the basic tax threshold as by then I know where I stand. It also happens to coincide with a low point in the year for dividends anyway.

Dod

TheDove
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Re: Drawing Natural Yield from a SIPP

#212952

Postby TheDove » April 5th, 2019, 2:07 pm

Many thanks all for the informed input.

Being a SIPP newbie TBH I hadn’t fully clocked that withdrawals are nett of tax. A single annual withdrawal towards the end of the tax year certainly appears the way to go, and also leaves the opportunity for a meaningful topup or two instead.

Clarifying a semi-obscure issue such as this is to my mind where TLF really comes into its own. I’m most grateful.

Dove


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