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Drawdown - frequently asked questions

Moving funds into drawdown

Managing your drawdown

  • Can I make additional contributions to my Vantage SIPP after drawdown has commenced?

    Yes, you can make further pension contributions and will receive tax relief on personal contributions provided you are within your contribution limits and you are under age 75. The current standard annual contribution allowance of £40,000 will apply (some higher earners may have a lower allowance). Contributions above this allowance will be taxed as income.

    Within the standard allowance there is a Money Purchase Annual Allowance (MPAA) of £10,000.

    The MPAA will be triggered once the first income payment has been made. Just taking tax-free cash will not trigger the MPAA.

    Those in capped drawdown who choose not to lift the cap on their income, will not be subject to the Money Purchase Annual Allowance, provided they do not flexibly access any other pension benefits.

    Further monies can be moved into capped drawdown providing the plan is in partial drawdown. Otherwise, moving more monies into drawdown will convert the entire plan to flexible drawdown where post 6 April rules will apply, including the MPAA after the first income payment has been taken from flexible drawdown.

    Please call us on 0117 980 9940 if you would like to discuss how this works in more detail.

  • How do I convert my existing capped drawdown to flexible drawdown?

    Those in capped drawdown in the Vantage SIPP can convert to flexible drawdown free of charge. Simply contact us on 0117 980 9940 and we will send you the appropriate application. Alternatively request your transfer pack online.

    Once the cap is removed, flexible drawdown rules will apply to all existing and future arrangements within your drawdown account. If you are not already affected then from the date you take your first income payment under these new rules, any future money purchase contributions (such as to your SIPP) will be restricted to £10,000 per annum,

  • Where can I invest my drawdown account?

    You can invest in the wide range of investments available in the Vantage SIPP.

  • Can I buy a short term annuity with my drawdown account?

    The Vantage SIPP does not offer the facility to buy a short term annuity. A short term annuity is different to a lifetime annuity that can be purchased from drawdown.

Taking an income

  • Can I alter the level and frequency of my income payments?

    You can vary the amount and frequency of payments at any time, free of charge.

    You can choose to receive one-off (ad hoc) payments as and when you require income or you can choose to receive a regular income. Regular payments can be made monthly, quarterly, half-yearly or yearly.

    The same payment frequency (and month for annual payments) will apply to all underlying arrangements within your drawdown account. All income payments, including one-off payments, are made on the 28th of the month (or the previous working day if the 28th is not a working day). Any written or verbal instruction to change your income or request a one-off payment must be received at least 10 working days before the 28th of the month in which the instruction should take effect.

    For those in capped drawdown the total income taken must stay within the maximum GAD limit.

  • How much income can I take?

    Normally there is no maximum or minimum limit to the amount of income you can take. You can just take your tax-free cash and no income if you wish.

    In capped drawdown there is a limit on the amount of annual income you can take. This limit is initially based on the value of your SIPP and your age on the day the cap was calculated. It is calculated using tables produced by the Government Actuary's Department (GAD) and is referred to as the GAD limit. This limit is re-calculated at least every 3 years and annually after age 75.

    The maximum income will be 150% of the equivalent conventional annuity using the same fund value. You can take any amount you choose up to the maximum income each pension year.

    There is no maximum income limit for those who convert or apply for flexible drawdown.

  • How will any income be taxed?

    Drawdown income payments are subject to PAYE Income Tax. If you make a large withdrawal this could push you into a higher tax bracket. We are required to deduct income tax at source. HM Revenue & Customs rules mean that your income could initially be taxed under an emergency tax code. Find out more by using our emergency tax calculator.

  • How often is the GAD limit calculated in capped drawdown?

    The GAD limit is calculated on the start date and must be reviewed at least every three years until age 75.

    You may request a new GAD calculation to take effect on any anniversary of the plan; this will start a new three year period.

    If you move further funds into a partial capped drawdown arrangement, a review of the GAD limit is triggered. The new GAD limit will take effect immediately unless the new income limit is lower, in which case it will take effect on the anniversary of the plan. This type of review will not start a new three year period. This review may result in a lower maximum income.

    If you use some of your capped drawdown funds to purchase an annuity the GAD limit will be recalculated but the new limit will not apply until the next anniversary of the plan. Again this will not start a new three year period.

    After age 75, the GAD limit is reviewed annually on each anniversary.

    In some circumstances a review may result in a lower maximum income, even if the fund value has increased.

  • What happens if there is insufficient cash to cover any income payments?

    You are responsible for ensuring there is always sufficient cash in your Vantage SIPP drawdown account to meet your requested income payments. Any investments which need to be sold in order to ensure this should be sold before the 10th of the month in which the payment is due, to guarantee your income. Where there is insufficient cash in your account for us to meet a requested income payment in full, a reduced payment of the cash available will be made. No payment will be made where the reduced payment is less than £50. Please refer to our factsheet: How to manage cash in your drawdown account to meet income payments and fees for more information.

Moving funds out of drawdown

Fees and charges

  • What is the annual management charge in the Vantage SIPP Drawdown arrangement?

    The charge to hold funds is tiered within the Vantage SIPP Drawdown arrangement:

    • 0.45% per annum on the first £250,000 of funds
    • 0.25% on the value of funds between £250,000 and £1m
    • 0.1% on the value of funds between £1m and £2m
    • No charge on the value of funds over £2m
    • The annual charge to hold shares, bonds, Investment Trusts, ETFs or gilts in the Vantage SIPP Drawdown arrangement is 0.45% (capped at £200 per annum)

  • How do I pay my fees and charges?

    We collect fees and charges from available cash on your account. If there is no available cash within your account, we will try to collect fees from cash you hold in your Fund & Share Account.

    Our system will look to collect fees in this order:

    • Loyalty bonuses received on units purchased before 1 April 2014. If no loyalty bonuses then;
    • Cash in the account in which the fees were generated. If no cash on the account then;
    • Cash in your Fund & Share Account. If no cash in your Fund & Share Account then;
    • Sell holdings to cover fees from the account in which the fees were generated
  • What is the Suggested Minimum Cash Balance?

    The Suggested Minimum Cash Balance is designed to give you an idea of the amount of cash you should hold to meet the next few months’ fees, and other outgoings. However, it is just a suggestion and you can ignore it (or amend it) if you wish.

    The Suggested Minimum Cash Balance provides a good guide to how much cash you could hold, but as the value of your holdings will rise and fall, so will your fees. You may wish to adjust the cash balance you hold if there is a significant change in the value of your holdings.

  • When do you collect fees and charges?

    Management fees are charged on a monthly basis and are calculated based on the value of your holdings at the end of each month. They are collected in the next month.

  • Where can I see the fees or charges that have been applied to my account?

    You can view the management fees and charges which have been applied to your account by logging in and going to the Account Administration section of each account you hold. You then simply need to click on the ‘view history of fees charged’ link.

  • How can I pay fees from outside my Drawdown arrangement?

    If you choose not to hold cash within your account or do not wish to use cash from within a tax wrapper (SIPP/Drawdown) to pay fees, you can choose to have all fees collected from the Fund & Share Account.

    To choose this option:

    • Go to the 'Account Settings' section of your account
    • Select the ‘Fee and Minimum Cash Balance’ tab
    • Follow the proceeding onscreen instructions
    • Click on 'Fee collection options'
    • Follow the onscreen instructions to edit your fee collection method
  • Will you tell me before you sell my holdings?

    We provide a notification service to let you know if you have insufficient cash on your accounts to pay fees due and your investments are at risk of being sold. You will then be able to add money (allowances permitting), or sell holdings of your choice to raise money, and therefore avoid your investments being automatically sold. This is an opt-in service so please set an email alert now.

  • How will you collect fees and charges if there is insufficient cash on my account?

    If there is insufficient cash on your account and in the Fund & Share Account to pay, we will sell sufficient holdings to cover the amount owed and restore the suggested minimum cash balance. There will be a charge of £1.50 per deal if an automatic sale is required.

Reaching age 75

  • What happens to my drawdown fund on my 75th birthday?

    It is possible to carry on in drawdown indefinitely.

    If your fund value is higher on your 75th birthday than when you first went into drawdown, the growth will be tested against the lifetime allowance.

    For those in capped drawdown, after age 75 your income limits will be reviewed annually rather than every three years.

Lifetime allowance

  • What is the lifetime allowance?

    Every individual has a set level of benefits they can draw from pension schemes in their lifetime without triggering certain tax charges. This measure is referred to as the lifetime allowance. For the 2016/2017 tax year it is £1 million.

  • When will my Vantage SIPP be tested against the lifetime allowance?

    Your Vantage SIPP funds will be tested against the lifetime allowance at the following times:

    • When you take a lump sum payment (such as an Uncrystallised Funds Pension Lump Sum) from your SIPP before age 75.
    • When you move funds into drawdown before age 75, even if you choose not to draw an income.
    • When an annuity is purchased with your funds before age 75.
    • When you reach age 75; this includes any remaining funds in your SIPP from which you have not already taken benefits.
    • On transfer to a Qualifying Recognised Overseas Pension Scheme before age 75.
    • If a beneficiary takes a lump sum payment, from funds which have not been moved into drawdown, where death occurred before age 75.
    • If a beneficiary moves funds into drawdown or purchases an annuity, using funds which have not been moved into drawdown, where death occurred before age 75.

    Every time your benefits are tested against the lifetime allowance (excluding payments to beneficiaries) you will be required to provide information to enable us to do this. It is only the growth in the value of the funds since they were first moved into drawdown which is tested when you use them to buy an annuity before age 75, or when you reach age 75.