Should I start a SIPP?

jamesd

Masomnia wrote: »

I remember the same happening on here with Blackrock's Absolute Alpha fund, people rushing in and then complaining when their investment went down.

No reason to complain when it went down, it didn't have a no drops guarantee...

Just in case you didn't follow it at the time what happened there seems mainly to have been the manager assuming that oil prices would stay high and then that they would rise when they had fallen, so the fund had a net long exposure to oil stocks. Same mistake essentially as Warren Buffett made.

Still managed to do way better than the equity market, but gilts did better still.

You do gain from the pension tax relief in two ways:

1. on the 25% tax free lump sum, where you got relief on the way in and paid no tax on the way out.
2. through the personal allowance that reduces the amount you pay the tax on: relief on it all going in, taxed on only the part above the personal allowance on the way out.

You also gain in both an ISA and a pension from tax-advantaged growth over the years that increases both of those two effects.

One choice to make today is to wonder whether the basic rate of tax and pension tax rebate will increase. If it does that would mean that you can benefit from using a S&S ISA today and a pension once the rebate increases. Just using a cash ISA won't work unless the stock markets stay the same or go down, because you'd lose any market growth between now and the rate change, likely to be far more than a possible increase in the tax gain.

whiteflag_3

EdInvestor wrote: »

If you later want to put the money into a pension and have a job, you can get tax relief on the whole lot, not just £3,600 a year.

Hello Edinvestor

Thanks for your informative posts . To help me and other readers undertstand more about this statement, can you clearly state what you mean and also explain how you know what the UK tax regimes will be in relation to pensions over the next forty years?

Thanks again

Whiteflag

shrewdcookie

You could consider building funds now in a S&S ISA - maybe you're too young to commit funds to a SIPP/Personal Pension - remember once the money is in it can't come out!

After building funds under an ISA, you could maybe benefit from higher rate tax relief on contributions in at a later age, rather than taking basic rate relief now.

HTH