![]() In some cases, you will need to sell your existing funds to raise £100,000 which can then be reinvested in your drawdown account. If your SIPP is invested in a number of funds, Zoe Dagless from investment platform Vanguard explains that the funds can often be moved without the need to sell and repurchase the investments.īut while some providers let you choose which ones to move over to the drawdown account, others will just transfer a proportion of the funds you hold in your SIPP. See our pick of the best pension drawdown providers. Not all providers give their customers the option of drawdown either, which means some people have to transfer their pension funds elsewhere to take advantage of it.Įven if your pension provider does offer drawdown, make sure you compare it to other companies because the fees, funds and flexibility can vary. ![]() You asked which part of your SIPP can be moved into drawdown and I’m afraid this will depend on your provider as there is no set way. But bear in mind that you could end up paying income tax on the amount you withdraw above the personal allowance of £12,570 a year. ![]() With drawdown, the £75,000 remains invested - or is reinvested - but you can take an income from that pot when you need it. This means the remaining £75,000 would be moved into a drawdown account. So in order to access a £25,000 tax-free lump sum, you would have to disturb £100,000 of your £200,000 pension fund. Each time you crystalise a chunk of your pension, a quarter of it is tax-free. To access your pension you need to “crystalise” some of it which means you’re cashing it in. While it offers more flexibility than annuities, pension drawdown rules can be confusing. You can’t use drawdown for final salary pensions which provide a guaranteed income for life.īefore the pension freedoms were introduced in 2015, most retirees had no option but to buy an annuity from an insurer, so pension drawdown - sometimes known as income drawdown - is a relatively new concept. Pension drawdown applies to defined contributions schemes, where the value is determined by the amount you pay in and the performance of the investments. Our annuities versus drawdown guide outlines the pros and cons. You could also use a mixture of these options. This includes buying an annuity, which provides a guaranteed regular income, or pension drawdown, which gives more flexibility over how much to take from your pension pot. Once you’re old enough to access your pension, which for most schemes is 55, you have a number of options of how to withdraw your money. If you’re struggling to get your money back or have a personal finance issue you would like us to investigate, write to us Troubleshooter says What about any cash generated by that part of my SIPP that isn’t in drawdown?” I’ve also been reading about withdrawing the natural yield but how would that work? If I’ve moved some of my pension into drawdown and it keeps generating cash, can I keep withdrawing it without having to move any more into drawdown? Once my investments are in drawdown, how are subsequent increases or decreases in the values of the investments then taxed? If the answer is yes then what happens if I don’t want to sell any of my investments when I do this? Do I have to sell and buy them again if I’m moving them into drawdown? That’s easy enough to grasp but what I’m struggling to wrap my head around is which £100,000 part of my pension is moved into drawdown and which isn’t? Can I decide this for myself? If my self-invested personal pension has a value of £200,000 and I decide I want to withdraw £25,000 in tax-free cash then my understanding is that in order to do this I must move £100,000 into drawdown. “I have been reading about pension drawdown but I’m finding it hard to understand how it actually works in practice.
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