SIPP Opened - Investing for income?

gadgetmind

stringer_bell wrote: »

that's perfect then, will round me up to £50k, that way I won't incur any charge

I'm close to 100% sure that any new SIPP will have a Pension Input Period that matches the tax year, but PIPs are complex beasts, so it's best to make sure. If you have *any* other pensions running, you also need to consider these.

Ark_Welder

stringer_bell wrote: »

Hi All,
I've opened my sipp, and bought a few shares. Looking to buy some funds now. I'm only 27 so I normally invest for growth with my savings and therefore dont need the income. Is it best to invest for income with my pension? or a mix of both? Or just stick to growth?

Invest for total return, i.e. growth plus income. How you do this might depend upon your views of the various economies around the word: but whatever your view might be now, be prepared to change it at some stage!

Investing for growth is usually thought of as a low-yield activity. Conversely, investing for income is sometimes thought of as a high-yield activity. But the two should be thought about together. When doing your research you will probably come across accounts of how re-invested dividends form a large proportion of the return on equities over longer time periods. This is basically treating income-yielding securities as growth shares, i.e. what value they might have had if the income had not been paid out. But within your pension fund, that is what you will/would be doing with any income generated - even though the income might be re-invested into a different share!

So how do you think that things will pan out in Europe over the next year? And what effect will that have elsewhere? Does the 2012 US Presidential election figure at all? What about property and credit bubbles in a few FE and EM countries? You will probably gather that I am rather fond of black swans, it's the white variety that cause the sleepless nights! But as you have around 28 years before you are able to use the pension (assuming age 55, still), you do have a few years to go before the answers might be worrisome rather than problematic [edit: or should that be the other way round...? I think that it should!], from an investment point-of-view.

Whichever route you decide to take for your investments, understand what is involved and what the consequences might be: there are pitfalls with all of them. At the end of the day (or investment term...), it is your money so you need to choose a method with which you are comfortable - regardless of other views which might be expressed.

JoeCrystal

stringer_bell wrote: »

I check them everyday, I just can't help myself. Always curious to see how they are doing.

I can understand that. I just have to check my portfolio and pension fund every day so I can input them in my spreadsheet. It is in some way quite fun to compare different pension funds' returns rise and fall depending on the world events. Sometime I feel that I am very sad man for dong so.

Cheers

Joe

stringer_bell

This probably is a simple question but I just want to make sure. As I'm a sole trader, I put 50 percent of my earnings into a tax savings account, I have quite a considerable amount in there. Would it be okay to take money from the tax savings account and put it in my pension? I presume pension contributions give tax relief anyway, so would this be okay?

qpop

stringer_bell wrote: »

This probably is a simple question but I just want to make sure. As I'm a sole trader, I put 50 percent of my earnings into a tax savings account, I have quite a considerable amount in there. Would it be okay to take money from the tax savings account and put it in my pension? I presume pension contributions give tax relief anyway, so would this be okay?

As long as your total annual pension contribution is lower than the lowest of:
Your annual relevant earnings (google for definition)
£50,000 (the annual tax-relief input limit for 2011/12) (aka annual allowance)

gadgetmind

qpop wrote: »

£55,000 (the annual tax-relief input limit for 2011/12)

I thought it was called "annual allowance" and is £50,000, or are we talking about different things?

qpop

gadgetmind wrote: »

I thought it was called "annual allowance" and is £50,000, or are we talking about different things?

Good call - edited for clarity.

Was £255,000 last year, thus the random £5k. (oops)

And I don't think "annual allowance" is particularly descriptive, it implies you can't contribute more past that, where-as in fact you can, you just won't receive tax relief on it.

gadgetmind

qpop wrote: »

And I don't think "annual allowance" is particularly descriptive, it implies you can't contribute more past that, where-as in fact you can, you just won't receive tax relief on it.

Yup, and if you contribute via sal sac, it can still *just* be worth doing, as long as the 25% PCLS doesn't go away AND you won't be a higher rate tax payer in retirement OR you avoid a band where personal allowance is clawed back. It's complicated!

Of course, you can also use carry forward IF you had a pension scheme for that year and you contributed less than £50k back then.

BTW, I agree regards the naming of "annual allowance". Even worse was "special annual allowance"; what was special about it was that it was a teeny allowance and it was announced in December but backdated for the whole tax year.