SIPP Pension withdrawal query

[chip*]

Just been thinking about my old age and how to manage my pension withdrawal, but I am unfamiliar with the current rules and regulations.

Say for a SIPP Pension of £100,000

From 55-60: I wish to withdraw £10,000 over the next 5 years.
From 61-65: I don't need to draw on the SIPP pension.
From 66-beyond: I wish to restart withdrawing the SIPP pension, but the amount varies depending on the saving balance.

As per above, my withdrawal amount will vary over the years. Is this variable withdrawal option allowed with the SIPP pension, or once I start to withdrawal, must I accept my annual pension even though I don't need the cash?

Thanks
Tom

[PurpleMoonlight]

Yes, under current legislation you can do that.

If you were to crystallise £10,000 each year, 25% of it will be free of income tax and the remainder £7,500 assessed under PAYE. So if you have no other income in the tax year the whole £10,000 will be tax free.

[TFP]

PurpleMoonlight said:

Yes, under current legislation you can do that.

If you were to crystallise £10,000 each year, 25% of it will be free of income tax and the remainder £7,500 assessed under PAYE. So if you have no other income in the tax year the whole £10,000 will be tax free.

On the second point, this is one way it could be drawn but what you say does not encompass the full flexibilities and thus the tax position would not always be this.

What you detail is UFPLS, rather then full drawdown.

[PurpleMoonlight]

TFP said:

On the second point, this is one way it could be drawn but what you say does not encompass the full flexibilities and thus the tax position would not always be this.

What you detail is UFPLS, rather then full drawdown.

An UFPLS will indeed suffer emergency tax on payment, but any overpaid tax can be reclaimed.

[chip*]

Thanks for the above info.

I had to google "UFPLS" to understand what it meant! As a result, I have spent a fair bit of time reading & learning about the pension options. Based on what I know so far, I can either use the FAD or UFPLS method to extract my pension funds as summarized in my original post. However, based on my recent intensive research/reading, I need to factor other considerations too:

- whether I need the 25% tax free portion upfront, if so, what amount I need.
- assess withdrawal amount to ensure growth / capital preservation.
- other taxable income could exceed my personal allowance + trigger higher band rate of tax too
- ability to replenish my pension pot with tax relief is limited to £10k once I start drawing on my taxable part of my pension.
- IHT decision as pension will be fully transferable to spouse.

Phew! It's been a steep learning curve as I didn't appreciate this huge tax minefield for what I thought to be a "simple" process! Thanks for your above advice as it led me to do my homework!!

[PurpleMoonlight]

chip* said:

Phew! It's been a steep learning curve as I didn't appreciate this huge tax minefield for what I thought to be a "simple" process! Thanks for your above advice as it led me to do my homework!!

Indeed, every time the Government tinkers with pensions they get exponentially more complicated.