Cashing in a SIPP

[rfisher]

What happens to the assets held in a SIPP when it is finally used to provide a pension?

if it includes your PBD business (including your commercial property that you purchased through the SIPP and you pay the rent into your SIPP) and a load of btl property, does all this continue to function as before?

Pension has to be taken at 75 or sooner I think?

Ta.

[JulianPH]

It all depends on how you want to take your benefits. If you want to take tax free cash as a lump sum and use the rest to purchase an annuity then the all assets within your SIPP will need to be sold in order to do this.

If you want to take tax free as a lump sum and the 'drawdown' an income (from a mixture of investment income - rent/dividends/interest/etc. - and perhaps growth achieved on shares/funds/etc.) then you only need to sell sufficient assets to pay the tax free lump sum.

If you are not going to take the tax free element as a lump sum but use it instead to reduce the tax liability on any income you drawdown from the SIPP then no assets need selling.

In a very simplistic scenario if your SIPP only held one commercial property (you mentioned buy-to-let, you can't do this with residential property in a SIPP) worth, say, £500,000 with rental income of £40,000 a year (after any charges) you can drawdown anything up to this level without needing to sell anything.

Your SIPP bank account will have been receiving this rental income prior to you starting to take benefits and you can take your tax free lump sum from that (assuming it has built up enough of a balance).

If you want to take more income than this (or buy an annuity) then you would obviously have to sell the property to be able to do so.

Cheers

[rfisher]

Thanks.

So several options.

How is the number crunching for each option usually done - IFA, SIPP provider, internet forum (only joking)?

Once you have made a choice is that set in stone or can you change later?

Bit of a black box these SIPPS as far as I can tell.

[anonymous-user]

rfisher said:

Thanks.

So several options.

How is the number crunching for each option usually done - IFA, SIPP provider, internet forum (only joking)?

Once you have made a choice is that set in stone or can you change later?

Bit of a black box these SIPPS as far as I can tell.

A SIPP is about as flexible as you get for a pension.

You can take money as and when you need it - you don't have to take a regular income. Plus if you want to keep the asset you can raise finance against it to provide some cash for a lump sum (although there are rules about how any such loan is structured)

[PurpleMoonlight]

The SIPP is just the tax wrapper to hold the investments.

There are HMRC rules about what you can and cannot do within the SIPP (and retain the tax advantages).

Each SIPP provide has their own internal rules in addition which may restrict how you would wish to operate your SIPP.

[JulianPH]

rfisher said:

Thanks.

So several options.

How is the number crunching for each option usually done - IFA, SIPP provider, internet forum (only joking)?

Once you have made a choice is that set in stone or can you change later?

Bit of a black box these SIPPS as far as I can tell.

An adviser or SIPP provider can assist you in this - and you can get a lot out of a forum like this one!

If you buy an annuity then that is irreversible (despite the government trying to change this) and you cannot get your cash back. If you remain invested within your SIPP and draw down an income you can always decide to buy an annuity later though. In any scenario once you have taken your tax free cash you can't pay it back in (and why would you ever want to!).

A SIPP is (as has been said above) the most flexible type of personal pension you can get.