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SIPP Drawdown plans
Supernova
Posted: 03 March 2013 13:43:58(UTC)
#11

Joined: 03/02/2013(UTC)
Posts: 5

Thanks again James, and John.

I'll check out Sippdeal and ETFs.

I'm confused about diversifiers for the non-equity part. People seem to have had a downer on bonds for a while and I'm not sure of an alternative yet.

Similiarly, before I transfer the company pension next year, the default core fund is invested 90% in equity trackers across regions with 0% costs and 10% in corporate bonds. Quite a good thing given the recovery from 2008 so far but a bit risky going forward I would have thought.

Cheers
paul fisher
Posted: 03 March 2013 17:08:54(UTC)
#12

Joined: 15/09/2010(UTC)
Posts: 10

Was thanked: 3 time(s) in 2 post(s)
I agree that SIPPs are only really any good if you can get 40% tax relief on the way in, and only pay 20% tax on the way out. Otherwise ISAs are much better.
The Alliance Trust SIPP, has recently started charging £162 p.a. and is now only worth having if you have a large pot.
SIPPdeal has the cheapest charges that I have found, but be careful as I think that they have more than 1 type of SIPP and they have different charging structures.
2 users thanked paul fisher for this post.
Supernova on 18/03/2013(UTC), Stephen Garsed on 18/03/2013(UTC)
gggggg hjhjkl;'
Posted: 03 March 2013 18:26:41(UTC)
#13

Joined: 11/02/2012(UTC)
Posts: 38

Thanks: 59 times
Was thanked: 28 time(s) in 17 post(s)
"Money/assets moved into flexible drawdown are valued each three years and this sets a maximum amount you can withdraw from them over that three year period"

No they are NOT!!

If you meet the flexible drawdown criteria (currently £20K in pension assets, reviewable in 2016)) then you can withdraw, what you like , when you like.

However remember there is a one off charge to set this up (HL charge some £290) and you cannot make any future pension contributions.



2 users thanked gggggg hjhjkl;' for this post.
Supernova on 18/03/2013(UTC), Stephen Garsed on 18/03/2013(UTC)
James Burn
Posted: 04 March 2013 07:41:34(UTC)
#14

Joined: 13/03/2010(UTC)
Posts: 51

Thanks: 4 times
Was thanked: 27 time(s) in 21 post(s)
Supernova,

Interesting question about diversifiers. During historic extreme stress on shares, property prices also seem to have been affected, and corporate bonds and most hedge funds were in the 2008 stress. Gold seems to have had a mixed record. Oil has kept value most times so far. Index linked bonds of short duration (or matching duration to how you would spend them) is propably part of the answer. Probably also important to consider diversifying within the low risk part of the portfolio.

BTW, I realised I said something potentially misleading above regarding FSA projection rates because they have already agreed to decrease them from next year to 3.5% real return for a portfolio 67% equity and 33% bonds. (PwC, who advised the FSA on the change, also came up with the same figure for a portfolio 57% equity, 10% property, 10% corporate bond, 23% government bond based on average real returns of 4.75%, 3.5%, 2.25% and 0.75% respectively.)

Another perspective on your current portfolio is half of the value is what you will spend over the next 18 years or so and the other half is what will grow into the portfolio you need to have in 18 year's time. Equities will always be a sensible choice for the latter.
2 users thanked James Burn for this post.
Supernova on 18/03/2013(UTC), Stephen Garsed on 18/03/2013(UTC)
Supernova
Posted: 18 March 2013 16:18:14(UTC)
#15

Joined: 03/02/2013(UTC)
Posts: 5

Thanks Paul, gggggg (:-)) and James

Food for thought.

Sorry I had to abandon thread temporarily - back to work and also number-crunching my budget to a deadline.

The impression I get is that I should be allowing for total charges of around 1.5% whichever route I go. Would that be reasonable? Including Custody charges, drawdown fees and suchlike.

I'm also thinking I might need some initial advice on the best way to structure drawdowns from what will hopefully be a £500K SIPP and £100K ISA to provide a decent income for some time in a tax-efficient way - i.e how much to phase the drawdown each year and possibly be able to reinvest into ISAs and the SIPP again?

Not overly keen on paying £1000s for that advice, so wondering what is the most cost-effective? Obviously good advice might be worth it.

One thing I thought of was that I'll be 55 next January and still a 40% taxpayer. Got a few months to take some TFC and reinvest, subject to whatever the recycling rules might be?

Cheers
tony m
Posted: 18 March 2013 17:51:49(UTC)
#16

Joined: 20/12/2011(UTC)
Posts: 51

My understanding of SIPP investment for a absic rate taxpayer is as follows

Invest 80
Tax relief 20
Total 100
Tax free lump sum 25
Amount invested 75

Income at 5% 3.75
Tax at 20% .65
Net income 3.1

Therefore a net income of 3.1 is obtained for a net investement of 55 (80-25)
A return of 5.6%

If the 55 is invested outside a SIPP then the net return is
55*5% less 20% tax = 2.2
A return of 4%

Is my understanding correct?
Roydo
Posted: 18 March 2013 18:55:01(UTC)
#17

Joined: 10/02/2012(UTC)
Posts: 101

tony m;18793 wrote:
My understanding of SIPP investment for a absic rate taxpayer is as follows

Invest 80
Tax relief 20
Total 100
Tax free lump sum 25
Amount invested 75

Income at 5% 3.75
Tax at 20% .65
Net income 3.1

Therefore a net income of 3.1 is obtained for a net investement of 55 (80-25)
A return of 5.6%

If the 55 is invested outside a SIPP then the net return is
55*5% less 20% tax = 2.2
A return of 4%

Is my understanding correct?


Pretty much. Tax relief is the trade off for reduced flexibility.
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