Implications of taking your benefits
Once you have taken your 25% Tax Free Lump Sum then any investment growth on the fund would be available through Flexi-Access Drawdown and any withdrawals would be subject to tax at your marginal rate. The only way for any uncrystallised funds to accrue would be to contribute monies to the scheme or to transfer in uncrystallised funds you may hold in pensions outside the SIPP.
Once funds are accessed through Flexi-Access Drawdown then you will trigger the Money Purchase Annual Allowance (‘MPAA’) meaning your annual allowance for contributions to be made to the scheme will be reduced from the current rate of £60,000 per annum to just £10,000 per annum. You would also lose the right to pay any accrued allowance for previous tax years.
Members in Capped Drawdown have the option to switch to Flexi-Access Drawdown at any time if they wanted to withdraw an amount in excess of their annual limit. However, in doing so, they would lose the right to pay in the maximum annual allowance and would be subject to the MPAA described above.
Benefit Process & Funding
We will require our fully completed and signed benefit request form (available on our website). If you are receiving advice in relation to the withdrawal, then your adviser will also need to countersign the form. If you are not receiving advice, please contact our offices as we will need to provide additional documentation for direct withdrawals.
We will need to formally value the scheme prior to processing any request for Tax Free Cash. Most investment values will be obtained by a member of our Pensions Team with the exception of Commercial Property. If you hold a Commercial Property either individually, or jointly as part of a Group SIPP, then we will need a valuation from a RICS Registered Surveyor which has been completed no more than 6 months prior to you wanting to take the Tax Free Cash. This can be a full valuation or short form ‘Desktop’ valuation and would need to be instructed by the member, any associated invoice can be addressed to, and paid for, by the scheme.
Finally, you will need to ensure that there is sufficient liquidity in the scheme to be able to pay the desired level of income. It may be necessary to arrange withdrawals from your investments to cover the payments.
Before Proceeding
Deciding when is best to access your pension and the level of payments you wish to proceed is a difficult and complicated decision. Organon are not regulated to offer any advice in this regard, and we would always recommend you speak to an independent financial adviser in the first instance. If you don’t have an adviser, you may be able to find one at www.unbiased.co.uk. Alternatively you can speak to Pension Wise which is a free and impartial pension guidance service offered by HMRC, you can arrange appointments on-line, face to face or speak to someone by phone, more details can be found at www.moneyhelper.org.uk.
