Final Salary Pension, SIPP, and ISA

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Hello,

I am 41, and have a final salary pension (about 15 years so far) which I can take (in full) from 63. I own my own house with no mortgage and have started putting a bit aside in an S+S ISA over the past year or so. I have a good salary, but don't think there is any chance of £1m, but then who knows, there is a still quite a few elections and budgets before I retire!

Is a SIPP something I should look into? In fact, am I eligible for a SIPP, or am I not eligible if I have a FS pension scheme? Silly question, but I just assumed I was for some reason...

Thanks

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  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    You are eligible for a SIPP. But it won't receive an employer contribution so it won't be especially attractive unless it lets you avoid higher rate tax.

    One exception would be if you wanted to retire before 63; then you could draw income from your SIPP while waiting for the FS pension to fall due. If that were your only income at the time it would be tax-efficient because it would use up your Personal Allowance vs income tax.

    The possibilities might include buying additional years in your FS scheme, or making AVCs. Neither of these would apply if your particular FS scheme doesn't offer them.

    Yet another possibility would be a LISA from 17/18 onwards. That would let you draw income tax-free from age 60 but would be less attractive than a SIPP that lets you avoid 40% tax. Except that the LISA is more flexible than a SIPP: the LISA will, if it functions as advertised, let you withdraw money before age 60 at the price of forgoing the subsidy that the sum withdrawn would otherwise have included.
    Free the dunston one next time too.
  • colsten
    colsten Posts: 17,597 Forumite
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    You need to check your Lifetime Allowance before you make a decision on extra pension contributions.

    A LISA is not an option for you as you need to be younger than 40 to take one out. A bog standard S&S ISA might be an option, though.
  • dunstonh
    dunstonh Posts: 116,383 Forumite
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    Is a SIPP something I should look into?

    Why SIPP?
    Why not stakeholder? Why not personal pension?

    You are looking at potential solutions but what problems are you trying to solve?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • quarky
    quarky Posts: 52 Forumite
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    Thanks for the replies.


    Why SIPP? I wasn't sure if a stakeholder pension was an option either to be honest. Ultimately I want to put spare money away (potentially for when I retire, but not necessarily, definitely 10-20+ years though). I currently place anything into a S+S ISA, but just don't know if there is a better place to put it..
  • Atreyu107
    Atreyu107 Posts: 96 Forumite
    edited 19 April 2016 at 3:30PM
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    Pensions are more tax efficient than ISAs due to the fact that you effectively get a rebate on any income tax you've paid on the money that will be used for contributions.

    I.e, if you're a basic rate taxpayer and contribute £10k, the government will bung in an extra £2,500. If you're a higher or additional rate taxpayer, in addition to the basic rate top up you also get relief at your marginal tax rate (though this won't actually go into the pension, it just increases your nil-rate band for the next tax year).

    It's generally a better option than an ISA if you're specifically concerned about retirement savings. The obvious downside is that you have to tie your money up until you're at least 55.

    As Dunstohn says, make sure you choose the right product for your goals. If you're happy using the DIY approach, a SIPP with a provider like AJ Bell is a good option. If you want to just 'set it and forget it', a stakeholder personal pension might be a better idea, and they're usually cheap in terms of fees.
    I work in the financial services industry but I am not a financial adviser. I do not give financial advice. Anything I say here is for discussion purposes only and should not be construed as advice.
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    colsten wrote: »
    A LISA is not an option for you as you need to be younger than 40 to take one out.

    Ah, I had assumed the OP was a woman, so that age is rather a negotiable construct.
    Free the dunston one next time too.
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