SIPP or ISA???

jamesd

guitarman001 wrote: »

However I see that their SIPP also has NO FEES (is that not peculiar?) when buying only funds! If I put £800 a year in (say for now) then am I correct in saying that £200 gets added by Hargreaves (via the government?) to top it up to £1000?

No. 25% is added. Think of £100 gross, pay in &80 after tax, needs 25% of £80 to get back to the full £100. Same if you're higher rate but then you also get to claim back more from HMRC.

guitarman001 wrote: »

So am I not better off actually paying into the SIPP?

Maybe at some point. HL has lower charges in the ISA than in the SIPP. They rebate some of the 0.7-0.8% commission they get from funds out of the annual management charge in the ISA, they rebate none of it in the SIPP. The money goes into the Loyalty Bonus account.

Don't look at fund charges first. Look at fund performance first, then look at the cost to get the funds you want. Lower fees and a fund that has a total return a few percent lower a year isn't a better deal.

It's not common for companies to pay into an employee's own personal pension but can be done. Usually a big company will want payments to go into its own scheme as part of a deal with a pension provider to get buying economies of scale.

Unless you're a higher rate tax payer here's one way to get a first approximation of what to do:

1. Enough into a pension to get the maximum employer match.

2. Enough into a S&S ISA to let you hit your early or contingency unplanned retirement income target, when added to the maximum you can take from the pension after age 55.

3. When you've hit target 2 you can consider shifting more money into a pension if it makes sense from an efficiency perspective. That is more likely to happen as you get close to and over age 55.

This sort of thing gets you to being able to retire accidentally or deliberately as soon as possible and as you continue not to retire you can shift the money into the pension to get the tax relief.

You may need a larger lump sum than a pension can provide, even after tax relief. Say as part of a mortgage repayment plan. Option 2 is a big version of a contingency fund, one that can last for the rest of your life. You might not find that practical but you might like to accumulate enough to live on for several years outside a pension, just to get more security.

kylehp04

ISA all the way, I did look into HL but in the end went with rplan they rebate 50% of the trail commission on all their funds so for me it worked out cheaper.