SIPP, Hargreaves Lansdown and Funds

EdInvestor

Should be no problem as commercial property is a permitted investment in a SIPP pension.

Gettingeven

Thanks for your response. It's a minefield.

LongTermLurker

Gettingeven wrote: »

Does anyone know if I can then use this money to buy commercial property or is the transferred bit earmarked for pension only?

Bear in mind the property will become part of your pension and as such you can never sell it and take the money out (apart from the ability to take the 25% lump sum, of course).

purch

So, it says:
Initial Charge 5% Is this the fee HL charge me of the total of the fund purchased? I thought that HL didn't charge fees for dealing on most of their funds..... Or I have picked a fund as an example of one of those that they do charge for!?
Initial Saving 5% Whats this??
Annual Charge 1.25 % (is this the amc from the fund company or HL??)

Are you sure a SELF INVESTED PERSONAL PENSION is the right vehicle for you ??

skylight

purch wrote: »

Are you sure a SELF INVESTED PERSONAL PENSION is the right vehicle for you ??

Not at the moment they are not.

I have only just started to investigate this and wanted to clear up any questions I had. Being very clear on charges was one of them; I did guess it was the charges being reimbursed but I wanted to know rather than assume. And there is always someone on MSE who knows the answer - regardless of the question!

jamesd

Initial charge is the normal charge made by the fund manager on purchases. Initial saving is how much of that is removed, so 5% initial and 5% saving means no initial charge, though there may still be some small difference between buying and selling prices due to costs, negligible unless you're planning to sell again within days.

Annual charge is the AMC from the fund provider, which is used in part to pay HL a commission each month and is how they generate money from your purchases.

If you're interested in learning, the HL SIPP isn't a bad choice. If you aren't interested in learning the cost issues start to matter more in the long term. In the short term the time isn't long enough for charge differences to matter much and the amount of money you have invested also makes mistakes less painful. I think that if you're curious and not investing tens of thousands initially then experimenting and learning via HL is quite a good idea.

sabelu

jamesd wrote: »

You can take 25% tax free lump sum. You're allowed to recycle up to £17,500 (1% of the lifetime allowance whatever that is, currently 1.75 million) and can do it for a spouse regardless of that. You can also continue previous contribution rates. You can recycle 20% of the lump sum if that's higher than these numbers.

Note that you should not plan to recycle. The anti-recycling rules only apply to those who plan in advance to recycle so if you don't plan it then in theory you're not affected by them, though proving it may be tough. In your case you're taking the lump sum now because you're approaching 50 and the age limit is increasing to 55 soon, so that's what is driving you to take the lump sum now, not any plan to recycle. Then, once you have the lump sum, you'd not plan to actually retire and could choose to put the money into a pension if you like.

I assume that HL will allow you to open a second SIPP to continue investing. Phone them and they will describe how this works with them.

Recycling reduces the lump sum you have as cash in hand. You take 25% then you can only take 25% of that 25% after the recycling. It's good if you want income, not so good if you want a lump sum. If your anticipated pension income in retirement is over 23k or so then you may find it better to have tax free income from ISAs rather than more taxable pension income, to avoid age allowance reduction. If the taxable income goes into higher rate the benefit of using the ISA increases further. In those cases taking the lump sum and moving the money into ISAs as fast as possible is the way to go.

You won't have to take the lump sum from all of the pension pot if you don't want to, though with the age increase from 50 to 55 in April 2010 it's likely that you will need to if you want to take benefits before you're 55. Don't do it before April 2010 and you cant take anything from the that portion before you're 55. So take benefits and the 25% lump sum but don't take an income from the bit that is in income drawdown is one way to go if you don't need the income yet.

If you did recyle the lump sum that would be tied up until you're 55, with no access to it, unless you took benefits on that portion before April 2010 as well. Not a problem to do it before April 2010, ask HL for details.

If you won't be using your full cash and S&S ISA allowances it's quite likely to be a good choice for you to take lump sum up to 20,400 to use two years worth of ISA allowance. Possibly more, anything up to five or more years can be more than worthwhile.

When no benefits are taken a pension is fully inheritable as a lump sum without tax. When benefits, including the tax free cash, have been taken then there's a tax charge of 35% if it's taken as a lump sum but none if it's used to buy annuities or put into drawdown by the recipient.

It's hard to be very specific because your anticipated income in retirement, need for income now, whether you plan to carry on working, at what approximate income and whether you need lump sums or income in retirement (or before retirement) more are some of the factors to consider.

But in general: if your greatest need is taxable income in retirement, take the lump sum and recycle it, taking the lump sum from the recycled contribution before April 2010 as well. Then either recycle another time or decide it's not worth it for the amount you can recycle and move on to using ISAs instead for the lump sum that remains.

Are you saying I can taske the lump sum twice, i.e. once before April 2010 and recycle, would that be in a new SIPP? And then before 55? If i take lump sum in early 2010 the balance goes into drawdown? But if I defer the drawdown does it sit effectively as it does in the SIPP at the moment? Are there increased charges, how does it differ, can I invest as I do in the SIPP at the moment?

jamesd

Yes, you can take a lump sum then put some of the lump sum into another pension and take a lump sum from that, subject to the limits in the anti-recycling rules. You can do this several more times with steadily decreasing amounts if desired.

If you're 50 now you can do it until April 2010. From April 2010 the age to take benefits, including a lump sum, rises to 55.

If you use drawdown and don't take an income, yes, the money remains invested just as it is now, with the same freedom to choose and use investments. Any extra money would need to be contributed to a different virtual pot at the pension company to keep it apart from the part where drawdown has started but that's not a problem.

knuckledragger

Can the contents of an AVC or FSAVC be transferred in to a SIPP?

purch

In most cases Yes.

FSAVC's are now treated in the same way as any other Personal Pension.