SIPP, Hargreaves Lansdown and Funds

LongTermLurker

ossian wrote: »

Hi,

I've decided that the flexibility of having my protected rights in a SIPP outweighs the risks. So I'm about to contract out for this and next financial years.

Am I right in thinking you're currently contracted in? If so, imo, I don't think it's worth contracting out now as it's been stated (and I think you know this) that you will be forced to contract back in in 2012.

I'm contracted out and have been since the late 80s/early 90s and in certain situations, it's the right thing to do, but with only 2 years to go, the benefits are questionable. The only way I can see it being good for you is if your reason was mainly down to a lack of faith in the S2P being retained, and I see your point there!

ossian

Thanks for the interesting reply.

LongTermLurker wrote: »

Am I right in thinking you're currently contracted in?

Yes I am and have been for one financial year :rotfl:

LongTermLurker wrote: »

If so, imo, I don't think it's worth contracting out now as it's been stated (and I think you know this) that you will be forced to contract back in in 2012.

I realise that I can only contract out for this financial year and next.

LongTermLurker wrote: »

The only way I can see it being good for you is if your reason was mainly down to a lack of faith in the S2P being retained, and I see your point there!

I think we are on the same page. My view is that given that Nick Clegg has said that S2P is likely to be replaced with a flat rate pension then why should I pay extra for the same benefit as others. This is just another tax not a pension contribution.

Even if this change isn't made I believe that there is less risk of the government detrimentally changing the rules regarding funds in my SIPP than there is of them mucking around with state pensions to my detriment. I trust myself more than governments present and future.

Finally, I wish to retire or semi-retire when I still have life in me and I don't know how long I have or how many healthy years I have. I know too many that have died young or suffered ill health long before the state retirement age.

So far the signals from government have shown more enthusiasm for deferring "benefits" from state controlled pensions than for interfering with an individuals private pensions and retirement options. In fact the changes for private pensions have been considerably more positive. I am banking on state controlled pensions being at greater political risk than ones private pensions.

There are no guarantees but this leads me to think that two years of protected rights money in my hands even invested in a fund with a record of unspectacular but solid out-performance is more likely to give me the option of scaling down my working arrangements before I am 63.

This is of course nothing more than my opinion of the way the wind is blowing and not advice or fact.

Any idea where I get this ASCN from? I suspect I'll need to phone HL on Monday

LongTermLurker

I think we are on the same page.

All good, solid reasons and especially valid seeing as you've only been contracted in for the one year.

Any idea where I get this ASCN from? I suspect I'll need to phone HL on Monday

Sorry, can't help on that one but I think they will fill that in - as you say, give them a bell tomorrow.

nadroj_2

I decided to contract out this year and next for the same reason. That is, it looks as though S2P will be sacrificed as part of the move to bring the Basic State pension up to £140/week from 2015. That means that a contracted out zombie fund is likely to be better than being contracted in.

I am 42, a high earner from an S2P perspective (I earn over the £40,040 Upper Earnings Limit). For my age that means my rebate is ...

Rebate: £2,555.15
Tax Relief on Rebate: £139.98
Total Rebate: £2,695.13

I have never contracted out but intend to do so from now until April 2012 after which I won't be able to. That means I'll be contracted out for 2 years which is nearly £5400 - worth having.

The problem is in finding a pension plan that will accept rebates. I am currently a member of a Defined Contribution Group Flexible Retirement Plan with Standard Life through my work. This plan won't accept NI rebates from contracted out members.

So I rang Standard Life a few days ago asking about estalishing a personal plan to accept contracted out NI Rebates. I was told that this is no longer offered when setting up a new personal plan. They said that they had stopped offering them in light of the April 2012 deadline after which everyone not in a Final Salary scheme will have to opt back in.

Does anyone know of a good Personal Pension Plan that can be newly opened now to accept contracted out rebates ?

Thanks all.

dunstonh

Does anyone know of a good Personal Pension Plan that can be newly opened now to accept contracted out rebates ?

Most of the them still do.

jamesd

nadroj, Hargreaves Lansdown is one option that makes it easy to do.

You might also compare the costs of funds in the Standard life plan with those available from other providers. You might be able to set up a personal pension somewhere else and save on the fund annual charges by transferring lump sums into that other plan from time to time. Or not, it depends on how cheap the SL deal you have is. HL probably won't be cheaper.

nadroj_2

Thanks for your responsesjamesd and dunstonh. I read the entire "Opt out of SERPS/S2P?" thread before commenting on this thread, and your names came up over and over. I really learnt a lot from that thread.

Jamesd - I never considered setting up a seperate personal pension and transferring from my work one into that. I wasn't aware I could, but I see no reason why I wouldn't be able to. My work DC plan provides members with a 0.6% discount on the AMC of whatever fund we invest in, so it's probably not worth transfering out of the group plan on the basis of seeking lower commissions.

I'll give Hargreaves Landsdown a ring today and see what they can offer. I'd only be looking to put my S2P rebates into it for now. I noted that Tom McPhail of Hargreaves Landsdown predicted the other day that there would be a rush to opt out of S2P this year and next because of the forthcoming changes. He didn't say that Hargreaves Landsdown wouldn't be provding supporting pension plans to facilitate that.

jamesd

That 0.6% discount would make it hard to be more competitive on price.

nadroj_2

Hi,

I have another Q regarding my pension fund. I own an old ruin in Italy that I'm trying to restore (when time and funds allow). Nearby (but not adjacent to my restoration project) some farmland has come up for sale. It is about half an acre and is planted in olive trees. It is priced very reasonably, but I don't have any money to buy it. I heard that agricultural land (farmland) could be purchased using a SIPP as agricultural land qualifyies as 'commercial' propert provided there is no residential element to it.

Can anyone recommend a SIPP provider that could assist with this, where the fees wouldn't be through the roof. I'm talking about a 20,000 euro purchase, so exorbidant legal/admin fees could quickly swallow this up and make it not worthwhile. My money is in a Group Flexible Retirement Plan, but I would transfer the funds out of this into the SIPP.

The SIPP providers I've noted in a google search as offering this type of investment are

Hornbuckle Mitchell
Suffolk Life
TM SIPP Services
Merchant investors & Wintherthur

If anyone on the forum has bought overseas land through a SIPP I'd be particularly interested to know the SIPP provider they used.

Thanks

Greg_Kingston

Hi nadroj,

I'm able to speak on behalf of Suffolk Life. Apologies for the delay in replying - we're primarily a B2B company and don't formally monitor forums such as this.

Suffolk Life would be unlikely to help you with the property situation you've outlined. Overseas property is complicated, and certainly within a pension will also require the expertise of native legal experts to transact. Without full access to the numbers one can't be certain (and this would be up to you to decide anyway) however as you've already observed, a property value of $20,000 would be considered low relative to the costs that a specialist SIPP provider would need to levy to administer an investment of this nature.

Just because the property is overseas doesn't mean that it is exempt for HMRC rules, and any provider will have a headache in ensuring that these are met. For example, the property will be expected to pay a rent back to the pension, and if it doesn't then tax charges could easily apply.

This type of investment certainly shouldn't be ruled out, however I would imagine that the general view is that it would need to be of a higher value in order to overcome the overheads of fixed rate pricing. Having said that, we do have a few commercial properties of this sort of value on our books, however they're normally accompanied by a relatively high rental income.

I can't give advice on this, and this is just my own opinion - you should seek financial advice if you have specific questions.

Greg Kingston, head of marketing, Suffolk Life.