Sipps query

titewelshgit

In my current situation, SIPPS may be an ideal opportunity for me post A-day but I have some queries where learned contributors may be able to help (there can't be many sites where you get such professional, free advice and I am so grateful from past queries - very well done!)
I am after a tax free lump sum (I am 52) from previous pensions and not looking to draw an income on the remainder but to re-invest. In my current employ I contribute to a stakeholder which I am quite happy with (L & G, with my 7% being matched by my company). Can I invest a lump sum in a SIPP without a regular monthly contribution? Most advice on a SIPP seems to be for those who may not already contribute to a pension.
I also pay into an AVC for one of the pensions that I want to draw a lump sum from. Have AVC's now generally had their day and should I be looking to pay rather into a SIPP.
The 3 pensions that I am looking to get a lump sum from are with Prudential and I am quite pleased with their performance but they are not offering a SIPP at the moment, does anybody have inside news?
What exactly are hybrid SIPPS and what will be the determining factor in the best to go for in the glut that will surely be coming our way?

A lot of queries but any pearls of wisdom will as always be greatly appreciated.

EdInvestor

Recycling of pension lump sums into new pensions to get extra tax relief is not allowed, though I believe that if the amount is under 15k you can probably do it.

But if you take your tax free cash from your pension, you will probably be advised to move the remainder of the pension into a SIPP anyway and put it into income drawdown.If you wish to contribute more into the pension, choose the "phased drawdwon" option. I would suggest you investigate using your annual 7k ISA allowance to reinvest your cash.

If this is an occupational money purchase pension, you might not be allowed to take the cash under the scheme rules.Equally, check changes to the scheme rules about AVCs.

Note BTW that before disturbing any pensions in With profit funds, you should check whether there are any valuable guarantees attached.

dunstonh

Can I invest a lump sum in a SIPP without a regular monthly contribution?

yes.

Most advice on a SIPP seems to be for those who may not already contribute to a pension.

You rarely see any specific advice in print (i.e. media or websites). You just see comments, opinion and examples.

I also pay into an AVC for one of the pensions that I want to draw a lump sum from. Have AVC's now generally had their day and should I be looking to pay rather into a SIPP.

AVCs have been on their last legs after the changes in 2001. FSAVCs are basically a dead product now. AVCs can still offer benefits where the employer enhances the product or offers good terms. Apart from that, the tie ins with AVCs can mean that they are useless for people planning early retirement or phased retirement.

The 3 pensions that I am looking to get a lump sum from are with Prudential and I am quite pleased with their performance but they are not offering a SIPP at the moment, does anybody have inside news?

Its coming. Although their personal pension product is quite poor and pensions is not a big area for them so I wouldnt expect much from Pru.

What exactly are hybrid SIPPS and what will be the determining factor in the best to go for in the glut that will surely be coming our way?

Its a cross between a personal pension and a SIPP. First one should be out at the end of this month. I (like other advisors) are getting drip fed details on these. It will work exactly the same as paying into an ISA using a fund supermarket. There is no cash fund, there are no charges on the wrapper, it uses personal pension trust arrangements and can accept protected rights. For those that invest only in unit trusts/oiecs/SIVACs the hybrid SIPP will be desirable.

I see it as quite a desirable product from an advice point of view as it fits in perfectly with the new model advice basis. So I do have a bias there. However, I also like the simplicity or the contract by using personal pension rules rather than SIPP rules and the provider I have my eyes on for my own pension will not charge on switching funds, will allow unlimited funds to be held at any time and have no minimum holding per fund and have free annual automatic rebalancing.

Certain people on this board seem to promote SIPPs as being the best product in the world for everyone. The counter against that can make us seem a little anti-SIPP but that isnt the case. We just believe that the alternative pension contracts still have a place and for many people will be better options than a full SIPP.

DavidLaGuardia

EdInvestor wrote:

Recycling of pension lump sums into new pensions to get extra tax relief is not allowed, though I believe that if the amount is under 15k you can probably do it.

.

How on earth do they expect to enforce/police this? Everyone has a maximum contribution permitted according to earnings (subject to lifetime funding limits).

Paul_Herring

DavidLaGuardia wrote:

How on earth do they expect to enforce/police this? Everyone has a maximum contribution permitted according to earnings (subject to lifetime funding limits).

Not too sure how Ed's contribution was relevant to the OP's problem, but to answer the question, I'm assuming the onus is on the pension companies to inform government - some possibly helpful reading: http://www.hmrc.gov.uk/pensionschemes/lump-sums.htm

Specifically

11. Scope of the recycling rule

11.1 The recycling rule will apply where an individual envisages recycling a pension commencement lump sum by any means; from simply reinvesting the lump sum back into a registered pension scheme by way of a relievable pension contribution paid by the individual through to the use of any devices, schemes, arrangements and understandings of any kind, whether or not legally enforceable, that enable the effective recycling of a pension commencement lump sum.

11.2 The scope of the recycling rule includes any transaction entered into for the purposes of recycling. For example, the taking out of a loan to provide the wherewithal to pay a contribution into a registered pension scheme where that loan is to be repaid with the pension commencement lump sum.

It seems to me that the only people who could know about this would be the pension company receiving the monies.

EdInvestor

Not too sure how Ed's contribution was relevant to the OP's problem

The OP is asking if he can take a tax free cash lump sum from a pension and put it into a SIPP ( another pension).

I too wonder how this ban will be enforced.

Paul_Herring

EdInvestor wrote:

The OP is asking if he can take a tax free cash lump sum from a pension and put it into a SIPP ( another pension).

Ah. After years of reading the small print on CC T&C's I think I should have spotted that. Sorry.

I too wonder how this ban will be enforced.

No doubt it will be one of the fields on the Gubmint's Shiney New Database[tm] that contains all our personal details - specifically what's come out and what's going into our pensions; with the pension companies reporting the details to Gubmint.


I speculate, of course.