Miniscule SIPP drawdown - disproportionate fees?
-
- Posts: 2
- Joined: January 1st, 2020, 9:11 am
Miniscule SIPP drawdown - disproportionate fees?
Hello. Can anyone help? In post-work liberation (6 months away) I plan to avoid higher tax rates by a whisker. An occupational pension, a further pension and the SRP leaves me with only c£1500pa to take from a SIPP. The fees for draw down seem high, given this small sum. Has anyone else faced a similar situation, or have advice? (As is clear, I am new to this). Thanks for any help.
-
- Lemon Half
- Posts: 7479
- Joined: November 4th, 2016, 6:11 pm
Re: Miniscule SIPP drawdown - disproportionate fees?
It'll depend on your SIPP provider. AJ Bell, for example, don't charge anything for drawdown. Though their standard monthly fees for holding the SIPP may not be the lowest.
Scott.
Scott.
-
- The full Lemon
- Posts: 16601
- Joined: November 4th, 2016, 3:58 pm
Re: Miniscule SIPP drawdown - disproportionate fees?
For this tax year you can earn £50,270 before hitting higher rate (40%) tax. Throw in capital gains (£12,300), interest (£5,000) and dividends (£2,000), and it is possible to earn up to £69,570 a year without paying higher rate tax, with more in an ISA of course. That is actually a decent deal if the government doesn't mess with it.HughUK wrote:Hello. Can anyone help? In post-work liberation (6 months away) I plan to avoid higher tax rates by a whisker. An occupational pension, a further pension and the SRP leaves me with only c £1500pa to take from a SIPP. The fees for draw down seem high, given this small sum. Has anyone else faced a similar situation, or have advice? (As is clear, I am new to this). Thanks for any help.
So first, make sure you are that close to 40% tax. Secondly, most pensions can be deferred. I am currently deferring all three of my pension drawdowns because I don't want an extra £45,000 a year in income whilst I already have other unavoidable income that will push me into higher tax territory.
All that said, if I really could not avoid 40% tax then I might regard a hefty drawdown fee as just another kind of tax and, if a flat rate, draw down more anyway and stick it all in an ISA.
-
- The full Lemon
- Posts: 15021
- Joined: October 10th, 2017, 11:33 am
Re: Miniscule SIPP drawdown - disproportionate fees?
£1500 in drawdown from a SIPP is surely not worth the candle. Reduce your expenses by this figure and you are saving £125 per month. Anyone can do that.
Dod
Dod
-
- Lemon Slice
- Posts: 497
- Joined: November 4th, 2016, 8:51 pm
Re: Miniscule SIPP drawdown - disproportionate fees?
I've just made a one-off single payment withdrawal for the year (as opposed to setting up a monthly thing) from my AJ Bell SIPP with no charge over and above the custody fee. You might want to check again with your provider.
An additional hoop is tax withholding, as this was the first time I'd done this they withheld tax using some sort of emergency code as there was no prior relationship between me, them and HMRC, I can claim this back by filling out the P55 form online and thereafter I'll be on the right tax code for future withdrawals.
An additional hoop is tax withholding, as this was the first time I'd done this they withheld tax using some sort of emergency code as there was no prior relationship between me, them and HMRC, I can claim this back by filling out the P55 form online and thereafter I'll be on the right tax code for future withdrawals.
-
- Lemon Half
- Posts: 7479
- Joined: November 4th, 2016, 6:11 pm
Re: Miniscule SIPP drawdown - disproportionate fees?
Having the correct tax code doesn't help, I'm afraid. If you make a single large withdrawal early in the year they'll always over-tax it, as the way payroll works it assumes you'll take that amount per month.Fluke wrote:An additional hoop is tax withholding, as this was the first time I'd done this they withheld tax using some sort of emergency code as there was no prior relationship between me, them and HMRC, I can claim this back by filling out the P55 form online and thereafter I'll be on the right tax code for future withdrawals.
As you say though, you can easily claim it back.
Scott.
-
- Lemon Slice
- Posts: 497
- Joined: November 4th, 2016, 8:51 pm
Re: Miniscule SIPP drawdown - disproportionate fees?
But isn't the clue in the name? it's a 'one-off' withdrawal not a 'regular monthly' withdrawal. Or doesn't HMRC get that from the provider?swill453 wrote:Having the correct tax code doesn't help, I'm afraid. If you make a single large withdrawal early in the year they'll always over-tax it, as the way payroll works it assumes you'll take that amount per month.Fluke wrote:An additional hoop is tax withholding, as this was the first time I'd done this they withheld tax using some sort of emergency code as there was no prior relationship between me, them and HMRC, I can claim this back by filling out the P55 form online and thereafter I'll be on the right tax code for future withdrawals.
As you say though, you can easily claim it back.
Scott.
-
- Lemon Half
- Posts: 7479
- Joined: November 4th, 2016, 6:11 pm
Re: Miniscule SIPP drawdown - disproportionate fees?
As far as I know, no they don't pass that information to HMRC.Fluke wrote:But isn't the clue in the name? it's a 'one-off' withdrawal not a 'regular monthly' withdrawal. Or doesn't HMRC get that from the provider?
I drew down the £12,570 personal allowance in September and my tax code is the normal 1257L, which AJ Bell knew about. They still took off about £1300 in tax which I have reclaimed (but not yet received) using the online P55.
Scott.
-
- Lemon Quarter
- Posts: 3577
- Joined: November 4th, 2016, 8:43 pm
Re: Miniscule SIPP drawdown - disproportionate fees?
In Scotland its £43,663 and 41%Lootman wrote: For this tax year you can earn £50,270 before hitting higher rate (40%) tax.
-
- Lemon Quarter
- Posts: 2149
- Joined: December 7th, 2016, 9:09 pm
Re: Miniscule SIPP drawdown - disproportionate fees?
Can I point out that we don't know how HughUK took his small amount or even his provider.
A J Bell have changed how they charge, but they use to charge £100 for taking an odd payment rather than a regular payment.
They don't seem to any more.
They do charge £25 if you want a payment by CHAPS rather than BACS.
Charges are a minefield.
A J Bell have changed how they charge, but they use to charge £100 for taking an odd payment rather than a regular payment.
They don't seem to any more.
They do charge £25 if you want a payment by CHAPS rather than BACS.
Charges are a minefield.
-
- Posts: 2
- Joined: January 1st, 2020, 9:11 am
Re: Miniscule SIPP drawdown - disproportionate fees?
May I just thank you all for your help and views. I appreciate it. BW Hugh
-
- Lemon Quarter
- Posts: 4265
- Joined: November 14th, 2016, 7:33 pm
Re: Miniscule SIPP drawdown - disproportionate fees?
My understanding is that the interest and dividend allowances do not increase the higher rate threshold:Lootman wrote:For this tax year you can earn £50,270 before hitting higher rate (40%) tax. Throw in capital gains (£12,300), interest (£5,000) and dividends (£2,000), and it is possible to earn up to £69,570 a year without paying higher rate tax, with more in an ISA of course.
https://www.gov.uk/government/publicati ... allowances
-
- Lemon Slice
- Posts: 881
- Joined: November 4th, 2016, 1:12 pm
Re: Miniscule SIPP drawdown - disproportionate fees?
It's worse than that - the Starting Rate for Savings ( the 5K above ) tapers away; long gone before you get to higher rate tax.GeoffF100 wrote:My understanding is that the interest and dividend allowances do not increase the higher rate threshold:Lootman wrote:For this tax year you can earn £50,270 before hitting higher rate (40%) tax. Throw in capital gains (£12,300), interest (£5,000) and dividends (£2,000), and it is possible to earn up to £69,570 a year without paying higher rate tax, with more in an ISA of course.
https://www.gov.uk/government/publicati ... allowances
-
- The full Lemon
- Posts: 16601
- Joined: November 4th, 2016, 3:58 pm
Re: Miniscule SIPP drawdown - disproportionate fees?
Fair point, although given that my bank is currently offering 0.05% on its savings account, the amount required to receive £5,000 a year in interest is £1,000,000!genou wrote:It's worse than that - the Starting Rate for Savings ( the 5K above ) tapers away; long gone before you get to higher rate tax.GeoffF100 wrote: My understanding is that the interest and dividend allowances do not increase the higher rate threshold:
https://www.gov.uk/government/publicati ... allowances
-
- Lemon Quarter
- Posts: 4265
- Joined: November 14th, 2016, 7:33 pm
Re: Miniscule SIPP drawdown - disproportionate fees?
When I last looked the best rate was 2% for a five year bond guaranteed by the FSCS. I have got a five year ladder, with roughly six monthly rungs.Lootman wrote:Fair point, although given that my bank is currently offering 0.05% on its savings account, the amount required to receive £5,000 a year in interest is £1,000,000!
-
- Lemon Quarter
- Posts: 2278
- Joined: November 4th, 2016, 3:22 pm
Re: Miniscule SIPP drawdown - disproportionate fees?
I would take a step back- your occupational pensions /state pensions are likely going to be there until you drop dead, so no sliver of available basic rate band looks likely within your life. Accordingly you likely either loot it whilst alive and take higher rate IT charge but at least get 25% tax free amount or you effectively leave it alone for family to inherit post your death.