The TD SIPP offers you flexibility in the way you take benefits from your pension. Benefits are available to you from the age of 55 and you don't even have to stop working.
Once you have decided when to draw your benefits you have a number of options as to how you take your benefits.
Pension Commencement Lump Sum
However you choose to take your benefits you normally have the option to take 25% of the value of your SIPP as a tax free cash lump sum at the point you decide to take benefits.
Once you have decided whether to take a lump sum payment from your SIPP, the funds remaining can be used to either provide you with a drawdown pension directly from your SIPP or can be passed to an insurance company of your choice to purchase an annuity.
Capped Drawdown (drawdown pension):
From age 55, the funds remaining in your SIPP can be used to provide you with a drawdown pension. Your funds remain invested and you continue to manage your investment strategy. Income is available to you up to a maximum level (set by HMRC), in line with the income you could receive from a lifetime annuity, providing you are holding sufficient cash to make the payments. There is no minimum pension, so you can decide not to take any income, if you wish. Capped Drawdown replaced the previous methods of drawing an income - called 'Unsecured Pension' and 'Alternatively Secured Pension - from 6th April 2011.
This additional method of drawing an income was introduced on 6th April 2011 and can also be taken from age 55. If you can demonstrate that you have a guaranteed income of at least £20,000 per annum from other sources (such as a state pension, annuity or final salary scheme) you can choose this option. There are no limits to the amount of income you can take, and your funds remain invested in your SIPP.
If you choose instead to purchase an annuity we will arrange for your funds to be paid to an insurance company of your choice who will pay you a regular pension income for the rest of your life. You will need to make a number of decisions about the annuity you purchase at the outset, such as whether to include a pension for your spouse or partner when you die. The annuity rates offered by insurance companies can vary considerably so it is important that you shop around before making your choice.
You may find that you do not need to take all of your pension benefits at one time. You may be taking partial retirement and only need part of the income available to you to top up the salary you are drawing or you may have other income that you can draw on in retirement. The TD SIPP lets you take your benefits in stages so that you can take as little or as much as you need.
Before deciding on the benefits that you want to take from your TD SIPP you should refer to our Retirement Benefits Guide for more information about the options available to you and the benefits and risks associated with those options. Please also see the risk warnings below and to the right.
If you are unsure regarding the benefit options available to you, you must contact a suitably qualified financial adviser.
We understand that you may wish to take advice at important key events throughout the lifecycle of your TD SIPP and particularly when you are considering taking benefits. You can ask TD to make payments for this advice to your financial adviser on your behalf from within your TD SIPP (please refer to the TD SIPP Financial Adviser Charging Form available from our Useful Forms section of the website for more information). Your TD SIPP may be subjected to additional tax charges at the point you withdraw funds if your pension is valued at more than the lifetime allowance (£1.5 million for 2013/14 reducing to £1.25 million for 2014/15).
If you start to take benefits earlier than you originally intended, the level of the benefits you can take may be lower than expected and may not meet your needs in retirement.
Your TD SIPP may be subjected to additional tax charges at the point you withdraw funds if your pension is valued at more than the lifetime allowance (currently £1.5 million for 2013/14).
If you take a drawdown pension this may erode the capital value of your fund.
If investment returns are poor and a high level of income is taken this will result in your TD SIPP falling in value and could result in a lower income than anticipated in the future.
Fifty-nine and nearing retirement
John is getting ready to semi-retire and spend more time on the golf course. He has made considerable contributions to his pension throughout his life and has accumulated a good level of investment knowledge. He has gradually moved his portfolio into less risky stocks, focusing on fixed interest and cash investments.
He has taken out a TD SIPP and is now looking forward to the flexibility that it offers him in retirement. John doesn't need to take an income from his SIPP as he's still drawing a salary but he has decided to draw the lump sum available to him as this is tax free and enough to treat his wife and himself to a round the world trip of a lifetime now that he has more time.
This case study is for illustrative purposes only and isn't based on a real life example.
What you need to know before you open an account
Please make sure that you have read and understood all of the relevant documentation below.
Further details are also available in the Terms of Service which you should refer to before applying for an account
All investments carry a varying degree of risk. It's important that you understand the nature and risks of the different investments available through TD Direct Investing. You may not get back the money you invest and you should not view the past performance of investments as a guide to their future performance. Read more about the risks of investing.
Your money and investments
Before applying for an account it is important you understand how your money and investments will be held and the investor protection schemes that apply. We will hold your money in accordance with the FSA's client money rules and we may pool your investment with those of other customers. Read more about how we will hold your money and investments.
Conflicts of interest
We have a conflicts of interest policy that identifies circumstances that constitute, or may give rise to, conflicts of interest which pose material risk of damage to one or more of our customers. Read more about our conflicts of interest policy.
Summary of charges
Trading commissions start from £5.95 depending on how often you trade. Our standard online rate is £12.50 and it will cost more for trades on non-UK markets.
If you hold funds a platform fee will apply. If you move your stock transfer out charges will apply. See our Rate Card for full details.
Key Features Illustration
When applying online you will be asked to produce a Key Features Illustration, which gives you important information to help you decide if the TD SIPP is right for you. You will be taken to AJ Bell's website to do this. Before applying online you can take a look at AJ Bell's Illustration website and read the Key Features Illustration fact sheet and Key Features Document.
Open a TD SIPP
Lines are open Monday to Friday 7.30am to 9pm and Saturdays 9am to 3pm
Return the form to us at Customer Accounts Dept., TD Direct Investing, Exchange Court, Duncombe Street, Leeds LS1 4AX