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AMENDMENT TO DATE - Drawdown Pensions - Increase to 120% p.a.
Annie Cross
Posted: 22 January 2013 12:17:25(UTC)
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My husband and I are now retired and we set up our pension drawdown accounts with Hargreaves Lansdown, which operated from 19 December 2011 and 19 March 2012 respectively. The amount we have been able to drawdown (100%) is disappointingly small compared to our expectations, due to the Government moving the goalposts from 120% to 100% in 2011. Subsequently we have found ourselves looking for alternative means of income due to the restricted cashflow we are suffering.

We are therefore dismayed to hear that only from 26th March 2013, AND ONLY at the anniversary date of the original GAD evaluation, can we have a revised calculation using the 120% figure. This means my wife will have to wait 9 months and I will have to wait 51 weeks.

Is there any way this can be appealed against? Can we pay larger fees and move these dates forward by any means? Any ideas or background knowledge which may help would be gratefully received.
2 users thanked Annie Cross for this post.
colin cross on 22/01/2013(UTC), Guest on 27/01/2013(UTC)
deeply realistic
Posted: 23 January 2013 10:12:25(UTC)
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I'm also with HL. I suggest you talk to them and ask what can be done.
Two possibilities to consider:-
Request a new GAD just after the March date. If your investments value is than at a peak or have increased, that will increase your income.
Change your drawdown date/frequency so you get the 120% figure after March.


As a general note, if you have a SIPP, you should always take the max possible out of it provided you are not in a 40% tax band, You can then put any unrequired money into other savings- ISA or VCT or CGT taxable product. Why? Simply because any money left when you (both) have died is taxable at 55%, and in the meantime you didn't get the benefit of it.
Far better to pay basic rate tax only.
4 users thanked deeply realistic for this post.
colin cross on 23/01/2013(UTC), Guest on 27/01/2013(UTC), Stephen Garsed on 31/01/2013(UTC), Michael Ward on 25/03/2013(UTC)
lynne shaffer
Posted: 23 January 2013 15:46:18(UTC)
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I just spoke to HL today, and the review of the maximum you can withdraw is nothing to do with the date you actually withdraw from your fund. It's the anniversary of when you first started teh SIPP and is therefore NOT alterable.

Sorry to deliver bad news1
3 users thanked lynne shaffer for this post.
colin cross on 23/01/2013(UTC), Guest on 27/01/2013(UTC), Stephen Garsed on 31/01/2013(UTC)
colin cross
Posted: 23 January 2013 17:30:33(UTC)
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I have been busy digging deeper into this for my wife and Iand it does look pretty insoluble.
you can only move out of a drawdown scheme to go into an annuity, nowhere else, so you
cannot "bed and breakfast" your drwdown by closing it and reopening it the next as anew one.
One interesting thing I found out which Ihad never been made aware of is that you can take
out 100% of your annual entitlement on day 1 if you want to and then have nowt for 364 days.
Which of course means you can re-invest it and get at least 3% more, conservatably.
Food for thought..........
3 users thanked colin cross for this post.
Guest on 27/01/2013(UTC), Stephen Garsed on 31/01/2013(UTC), Michael Ward on 25/03/2013(UTC)
SKYSHIP
Posted: 27 January 2013 10:22:01(UTC)
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Annie & Colin....

You may find you actually shouldn't go for an early review as the drawdown rate reflects three inputs:

# Age
# GAD rate
# 10yr bond rate (?I think it's the 10yr - may be longer...)

Because of the last input your drawdown might actually be lower, even though the GAD rate is increased back to 120%. I reviewed in Apr'11 & I would certainly be worse off assuming the same Fund Value.

Also, you need to consider that Fund Value aspect....is your Fund now at a higher level...as when in Income Drawdown mode your Fund is always having to climb the down escalator!

This is always a great tool too use:
http://www.hl.co.uk/pens...come-drawdown-calculator
clarkkent
Posted: 27 January 2013 11:13:36(UTC)
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The big question is, 120% of what? The bigger your pot the more your 120% will produce.
So why not turn some of your pot into your own choice of shares, because most of the funds that your drawdown is invested in are the same old top ten companies with very little growth and just relying on dividends.
If you look at the performance graphs of your funds since 2008, they all follow the same path downwards during 2008/2009, few of them stopped the decline and straight lined during the recession.
You can choose shares for growth, and that growth can be far more spectacular than your present funds can produce, plus you can turn them back into cash if things look bad or apply stop losses if you are concerned about the future.
Of course, there is one drawback. You have to put some effort in to learn the ropes, but, HL has a screen where you can have a fantasy share dealing account so there's no risk and there's a mountain of help and info on the net to help you.
Give it a try, it's not quite as difficult as you might think!
SKYSHIP
Posted: 27 January 2013 12:30:46(UTC)
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Superman - "...because most of the funds that your drawdown is invested in are the same old top ten companies with very little growth and just relying on dividends."

Have I missed something? I've re-read the posts three times but see no mention of a Provider investing Annie & Colin's cash in "Funds" - or directly into under-performing FTSE blue chips for that matter.

So to what exactly are you referring?
Fund of Funds
Posted: 27 January 2013 14:41:16(UTC)
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deeply realistic;17659 wrote:
I'm also with HL. I suggest you talk to them and ask what can be done.
Two possibilities to consider:-
Request a new GAD just after the March date. If your investments value is than at a peak or have increased, that will increase your income.
Change your drawdown date/frequency so you get the 120% figure after March.


As a general note, if you have a SIPP, you should always take the max possible out of it provided you are not in a 40% tax band, You can then put any unrequired money into other savings- ISA or VCT or CGT taxable product. Why? Simply because any money left when you (both) have died is taxable at 55%, and in the meantime you didn't get the benefit of it.
Far better to pay basic rate tax only.


I disagree that you should always take the max drawdown from your SIPP when paying basic rate or no tax. It may be the case if you are single but if you have a partner then just put the proportion into drawdown that you need.Leave it invested in your SIPP if you do not need it. Why, because when one partner dies the spouse will receive any SiPP or part of it that has not gone into drawdown as a tax free payment with no 55% tax charge. Also your money left in a SIPP is in a tax efficient wrapper and to withdraw money with 20% tax to reinvest back into similar investments or 2-3% cash does not seem sensible. If you have a partner only withdraw what you need.
clarkkent
Posted: 27 January 2013 15:24:19(UTC)
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Silly me. You are absolutely right, of course, it's all in cash.
Why on earth would I think that their money would be invested wisely.
My apologies.
SKYSHIP
Posted: 27 January 2013 15:43:26(UTC)
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clark - no need to be so flippant....

Without actually saying so you perhaps allude to the most important aspect of SIPP management, namely investment performance.

Was that meant to be the gist of your post/
clarkkent
Posted: 27 January 2013 18:15:22(UTC)
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Forget it.
colin cross
Posted: 29 January 2013 11:07:58(UTC)
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The total portfolio in question is 45pc funds and ITs, ave 5pc min yield,plus 55pc shares across 60 or so companies, all at 4-8 pc, apart from a few recovery punts and hospital cases( TCook !!!).
Yes, what I really want is to run down our SIPPS and build up the ISAs over the next 10 years, maybe then putting
The rump of the SIPPS into annuities to avoid the 55pc for the taxman, but I need to run it down so hence my quest.

Regards to all

Colin and A nine


Bestmate
Posted: 29 January 2013 17:23:39(UTC)
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"I disagree that you should always take the max drawdown from your SIPP when paying basic rate or no tax. It may be the case if you are single but if you have a partner then just put the proportion into drawdown that you need.Leave it invested in your SIPP if you do not need it. Why, because when one partner dies the spouse will receive any SiPP or part of it that has not gone into drawdown as a tax free payment with no 55% tax charge. Also your money left in a SIPP is in a tax efficient wrapper and to withdraw money with 20% tax to reinvest back into similar investments or 2-3% cash does not seem sensible. If you have a partner only withdraw what you need."[/quote]

Fair enough if this is the main source of income for your spouse after your death, however, you may also want to consider heirs other than your spouse. If you get out as much as you can (at the 20% tax rate only) then the IH Tax will be levied on this eventually at 40% over and above the concessionary limit if this applies to your estate. If it is left in DD then the 55% levy will apply, irrelevant of the size of your estate. Naturally this can change, but this is the situation now, as I understand it.
1 user thanked Bestmate for this post.
Stephen Garsed on 13/02/2013(UTC)
PhilB
Posted: 11 February 2013 15:27:56(UTC)
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I might be a bit too late to comment usefully, but I was caught badly by the 100% rule and think there IS a way to "force" a recalculation of your underlying capped drawdown (you are in capped drawdown and cannot go to flexible?).

Either put some new money (up to £2880, gov't raises this to £3600 - the max. if you are not working and earning) and then "crystallise" it for drawdown. I believe this will ensure your entire enlarged SIPP fund must be recalculated. Put the new money in now and crystallise it after 26 March and hopefully all will work out.

Or pay H-L for a recalc as soon as they are permitted to do it after 26 March - maybe you have been down that route already, being the reason for your "51 weeks" comment.

I stress I am no expert on this, so maybe completely wrong, but worth enquiring all the same! Good luck with this.
1 user thanked PhilB for this post.
colin cross on 11/02/2013(UTC)
colin cross
Posted: 11 February 2013 15:58:40(UTC)
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Phil

Are you suggesting I put up the 2880 into a new SIPP entirely and then this may trigger an overhaul
of my entire pot if I apply to make this a drawdown after 26/3 ?
My current SIPP review date is 19 March, hence my moan at having to wait 51 weeks !

I do know it is not possible to add to the existing drawdown but you idea is a bit different, who knows ??

Regards

Colin
PhilB
Posted: 11 February 2013 16:52:58(UTC)
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Hi Colin,

No - a new SIPP would defeat the whole thing.

Let me tell you where my researches got me:
1) with a SIPP in capped (not flexible) drawdown you can add new money, but if you have no earnings - from work, as opposed to investments/pensions - this amount is restricted to £3600 gross
2) that is a maximum, the minimum will be governed by H-L's rules
3) new cash in a SIPP must be "designated" for drawdown

I am not certain, but I believe it may be the case, that when you "designate" the additional, new money for drawdown, the rules state that the entire SIPP fund must be recalculated at that date, which becomes the new "pension anniversary date". Do the "designation" bit after 26 March to get the 120% plus the extra year or so of age, plus a bigger SIPP "pot" (hopefully). By the way this does incur a charge from H-L.

It would be well worthwhile talking to H-L to ask the question of whether I have got it right or not. If I have, you achieve your goal.

Some wording about this can be found on HMRC's technical pages - but beware, the going is very difficult for the layperson. A phone call to H-L would be easier.


martigapito broker
Posted: 12 February 2013 00:18:49(UTC)
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Joined: 11/02/2013(UTC)
Posts: 2

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colin cross
Posted: 12 February 2013 16:10:19(UTC)
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This must be a misposting as it is totally off the wall !!

Colin
colin cross
Posted: 13 February 2013 13:43:32(UTC)
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PhiilB

I am away at present but will follow up with h-l on my return and keep you posted, thanks again

Colin
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