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    • TARDIS
    • By TARDIS 10th Sep 17, 10:48 AM
    • 13Posts
    • 7Thanks
    TARDIS
    SIPP or other pension
    • #1
    • 10th Sep 17, 10:48 AM
    SIPP or other pension 10th Sep 17 at 10:48 AM
    I've been reading this forum for a few months and have learnt loads, many thanks!

    I'd be grateful for people's opinions on whether my plan is sensible please.
    DH and I are both early 40s with good DB pensions -small amount available from age 60 and most at 68. We hope to retire around 58 so need something to bridge the gap. I'm likely to get close to the LTA, but DH is nowhere near. We have at least £1k a month we'd like to put in another pension for him. We already have enough in cash savings and pay £500 a month into a S&S ISA.

    We were thinking of using Vanguard LS40 (he's quite cautious) via Cavendish online, but read a couple of posts recommending the Cavendish Aviva stakeholder pension saying SIPPs can be quite complex. I thought that by using LS40 he shouldn't have to do anything other than set up the direct debit so should be straight forward, or am I missing something?
Page 1
    • dunstonh
    • By dunstonh 10th Sep 17, 10:56 AM
    • 89,531 Posts
    • 54,982 Thanks
    dunstonh
    • #2
    • 10th Sep 17, 10:56 AM
    • #2
    • 10th Sep 17, 10:56 AM
    but read a couple of posts recommending the Cavendish Aviva stakeholder pension saying SIPPs can be quite complex.
    Stakeholders are the basic option in the accumulation phase. Minimal number of funds, all have full due diligence carried out with 100% FSCS protection. Does not support drawdown. Largely a niche option nowadays.

    Generically, SIPPs are the experienced investor option. For the person that wants to access more advanced investment options. Lower FSCS protection and over 30,000 investment options including things that have no FSCS protection and total loss is possible. Scope for mistakes is much greater (and most pension complaints at the FOS are about people investing in unconventional things that have gone wrong). However, the DIY market has focused, almost in entirety, on SIPPs because their lower level of regulation and protection means that they are cheaper to offer.

    Personal pensions are the middle ground between SIPP and Stakeholder. However, they are mostly used by intermediaries/advisers and not those going DIY.

    So, if you are going DIY, you may just have to go SIPP because that is the market. Dont go stakeholder if you plan to use drawdown.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • atush
    • By atush 10th Sep 17, 11:05 AM
    • 16,246 Posts
    • 9,917 Thanks
    atush
    • #3
    • 10th Sep 17, 11:05 AM
    • #3
    • 10th Sep 17, 11:05 AM
    Bsically, Stakeholders wont offer Vanguard series, and My aviva pensions havent either.

    So if you want to use VLS 40, then you will need a sipp
    • zagfles
    • By zagfles 10th Sep 17, 11:20 AM
    • 12,263 Posts
    • 10,206 Thanks
    zagfles
    • #4
    • 10th Sep 17, 11:20 AM
    • #4
    • 10th Sep 17, 11:20 AM
    I've been reading this forum for a few months and have learnt loads, many thanks!

    I'd be grateful for people's opinions on whether my plan is sensible please.
    DH and I are both early 40s with good DB pensions -small amount available from age 60 and most at 68. We hope to retire around 58 so need something to bridge the gap. I'm likely to get close to the LTA, but DH is nowhere near. We have at least £1k a month we'd like to put in another pension for him. We already have enough in cash savings and pay £500 a month into a S&S ISA.

    We were thinking of using Vanguard LS40 (he's quite cautious) via Cavendish online, but read a couple of posts recommending the Cavendish Aviva stakeholder pension saying SIPPs can be quite complex. I thought that by using LS40 he shouldn't have to do anything other than set up the direct debit so should be straight forward, or am I missing something?
    Originally posted by TARDIS
    SIPPs are as complex as you make them, you choose the investments so you choose the complexity, and the risk etc. Don't worry too much about FSCS protection - unit linked funds are ringfenced from the provider's assets so can't be claimed by creditors if the provider goes bust (unlike bank accounts). See http://forums.moneysavingexpert.com/showthread.php?t=5706255

    Or you could use the stakeholder above, but don't think they tend to offer drawdown so you could transfer out when you're ready to drawdown - check the transfer charges, I think they're generally quite low on stakeholders.

    Post on the Savings and Investment board for investment advice - a lot more experienced investors there.
    • BLB53
    • By BLB53 10th Sep 17, 11:54 AM
    • 1,107 Posts
    • 890 Thanks
    BLB53
    • #5
    • 10th Sep 17, 11:54 AM
    • #5
    • 10th Sep 17, 11:54 AM
    We were thinking of using Vanguard LS40 (he's quite cautious) via Cavendish online, but read a couple of posts recommending the Cavendish Aviva stakeholder pension saying SIPPs can be quite complex.
    Vanguard LS 40 would be a v good option but not sure whether Cavendish would be the best choice of platform - I have a feeling they currently do not offer drawdown so if that is the case you would need to transfer at some point.

    I have used AJ Bell Youinvest and hold Vanguard LS 60 - the platform charges are 0.25% for funds so that may be worth a look.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • TARDIS
    • By TARDIS 10th Sep 17, 7:34 PM
    • 13 Posts
    • 7 Thanks
    TARDIS
    • #6
    • 10th Sep 17, 7:34 PM
    • #6
    • 10th Sep 17, 7:34 PM
    That's really helpful, many thanks everyone. Didn't realise you couldn't drawdown from a stakeholder pension - need to do a little more reading I think.

    Was focusing on somewhere to accumulate the pension then could transfer somewhere else for drawdown if cavendish don't offer it by then, which is another reason I was attracted to them as no exit fee.
    Will look at Youinvest but think they're more expensive than cavendish as they'll be a small charge for the monthly purchases and an exit charge if choose to move later.
    • Makavelio
    • By Makavelio 13th Sep 17, 9:33 AM
    • 11 Posts
    • 0 Thanks
    Makavelio
    • #7
    • 13th Sep 17, 9:33 AM
    • #7
    • 13th Sep 17, 9:33 AM
    [QUOTE=BLB53;73105098]Vanguard LS 40 would be a v good option but not sure whether Cavendish would be the best choice of platform - I have a feeling they currently do not offer drawdown so if that is the case you would need to transfer at some point.

    How are you getting on with AJ bell as I am not sure to go with them or H&L. I am thinking of transferring my old employer group pension with £10500 into a SIPP and using the Vanguard LS 60 as it has a lot of the same holdings as my passive plus fund 3 with Standard Life. The fees on my Standard life are 1% AMC and 1.025% Fund charge so quite high. Thanks
    • ex-pat scot
    • By ex-pat scot 13th Sep 17, 10:11 AM
    • 205 Posts
    • 224 Thanks
    ex-pat scot
    • #8
    • 13th Sep 17, 10:11 AM
    • #8
    • 13th Sep 17, 10:11 AM
    You won't need to be accessing the cash for roughly 15 years, so why concentrate on those SIPP providers that offer that feature? The relative functionality and costs are likely to change fundamentally for each of the providers in that time frame.


    As a general approach, putting as much away as possible is a very sensible start.
    As to which (you or your hub) contributes - that's a combination of current marginal tax rate, anticipated tax rate at retirement, LTA and AA. (these things aren't easy!).


    1. in the absence of any other considerations, I would bias the contributions to the higher rate earner. I presume that, as a personal (rather than company) pension setup, that there would be no salary sacrifice, and therefore the effective tax would be 20% / 40%


    2. Tax rate at retirement. If one person is likely to have unused personal allowance (£11,500 today and counting), then clearly there would be little or no tax to pay when accessing the pension. Conversely, if you are likely to be a 40% tax payer in retirement (possible, if you are at LTA), then even though you might be obtaining 40% relief now, you would be paying 40% tax on withdrawal.


    3. LTA. Be careful. Especially with DB pots. Whilst there are general messages that the LTA will be increased in line with inflation, and other general comments, I have little faith that this will happen. Indeed there have been suggestions that the LTA be further restricted. Additionally, the current "LTA test" for DB schemes is 20x the annual benefit. This multiple (or basis of valuation) may well change.
    4. AA. Difficult to anticipate accurately under DB scheme contributions (ie you will only know after the year, how much the "deemed" contribution has been and therefore how much of your AA remains for you to use through personal pension ./ SIPP.)


    The other thing that you don't need to concern yourselves with yet, is your options from age 55.
    Your DB schemes kick in at 60 / 68.
    That doesn't mean you can't access any of those funds before then.
    there are options, including:
    - early access, taking the actuarial reduction (a certain % for each year you access the funds early)
    - taking the 25% PCLS (tax free cash element) of the first one and living off that
    - transfer at any point of one or all of the DB schemes into DC


    You don't need to worry about these, except to the extent that you know you will have options from 55.
    • TARDIS
    • By TARDIS 13th Sep 17, 4:04 PM
    • 13 Posts
    • 7 Thanks
    TARDIS
    • #9
    • 13th Sep 17, 4:04 PM
    • #9
    • 13th Sep 17, 4:04 PM
    You won't need to be accessing the cash for roughly 15 years, so why concentrate on those SIPP providers that offer that feature? The relative functionality and costs are likely to change fundamentally for each of the providers in that time frame.


    As a general approach, putting as much away as possible is a very sensible start.
    As to which (you or your hub) contributes - that's a combination of current marginal tax rate, anticipated tax rate at retirement, LTA and AA. (these things aren't easy!).


    1. in the absence of any other considerations, I would bias the contributions to the higher rate earner. I presume that, as a personal (rather than company) pension setup, that there would be no salary sacrifice, and therefore the effective tax would be 20% / 40%


    2. Tax rate at retirement. If one person is likely to have unused personal allowance (£11,500 today and counting), then clearly there would be little or no tax to pay when accessing the pension. Conversely, if you are likely to be a 40% tax payer in retirement (possible, if you are at LTA), then even though you might be obtaining 40% relief now, you would be paying 40% tax on withdrawal.


    3. LTA. Be careful. Especially with DB pots. Whilst there are general messages that the LTA will be increased in line with inflation, and other general comments, I have little faith that this will happen. Indeed there have been suggestions that the LTA be further restricted. Additionally, the current "LTA test" for DB schemes is 20x the annual benefit. This multiple (or basis of valuation) may well change.
    4. AA. Difficult to anticipate accurately under DB scheme contributions (ie you will only know after the year, how much the "deemed" contribution has been and therefore how much of your AA remains for you to use through personal pension ./ SIPP.)


    The other thing that you don't need to concern yourselves with yet, is your options from age 55.
    Your DB schemes kick in at 60 / 68.
    That doesn't mean you can't access any of those funds before then.
    there are options, including:
    - early access, taking the actuarial reduction (a certain % for each year you access the funds early)
    - taking the 25% PCLS (tax free cash element) of the first one and living off that
    - transfer at any point of one or all of the DB schemes into DC


    You don't need to worry about these, except to the extent that you know you will have options from 55.
    Originally posted by ex-pat scot
    Lots of food for thought, thanks.

    1. I'm on HR tax, he's on BR. Payments will be from our joint account not SS. By my calculations we're probably best doing a separate pension in his name considering the issues you raised:

    2. He will have unused allowance until aged 68. I will likely pay 20% from aged 60 and 40% from 68. He will probably stop work earlier than me due to preexisting (not life limiting) health problems.

    3. Not entirely sure when I'll finish working. Will likely exceed LTA if work and continue paying into the scheme up to 60 and don't taken main DB pension before age 68. Depends what inflation does amongst other things. No allowed to transfer into a DC scheme. Taking pension early is better than increasing lump sum in my scheme. Will continue to update spreadsheets and recalculate in my 50s as suggested.

    4. Far enough from AA at the moment to be comfortable with potential to get close - depends on if I opt to take on more management roles in the future. probably won't though as not worth the hassle and politics!
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