To SIPP or not to SIPP at age 40 ?

smileaf

Hi, i wonder if it's worthwhile to start saving in SIPP now as i will be 40 years old next year.

I'm in the company pension scheme but the pot is small so don't think it's enough to transfer to a SIPP. Anyway i will want to keep it going to get tax/NI relief and contribution from my employer.

I have also maxed out my S&S ISA for this year.

My biggest gripe with SIPP is you can't withdraw money until you reach retirement age. So for my age i will have about 15/20yrs to save in SIPP - not sure if the pot will be big enough when i retire ...

If i start a SIPP, i intend to save about £100 a month, with the intentions of buying funds and/or FTSE 100 shares.

I'm thinking whether to SIPP, or use that money to open a share account and build up a portfolio little by little.

Your input on this will be much appreciated and thoroughly researched !!!

Thrugelmir

smileaf wrote: »

My biggest gripe with SIPP is you can't withdraw money until you reach retirement age.

Retirement age isn't necessarily the same as state retirement age.

Long term saving should be part of everyone's life plan.

Do you have dependents?

gadgetmind

Putting more into your company pension (via salary sacrifice?) probably makes far more sense than starting a SIPP.

Are you paying higher rate tax? If so, consider upping your pension contribution. Your answer to this question may also suggest other non-ISA ways you can invest.

Oh, and is this all retirement planning or may you need to draw on this earlier?

smileaf

Thrugelmir wrote: »

Do you have dependents?

I have no dependents

gadgetmind wrote: »

Putting more into your company pension (via salary sacrifice?) probably makes far more sense than starting a SIPP.
Are you paying higher rate tax? If so, consider upping your pension contribution. Your answer to this question may also suggest other non-ISA ways you can invest.
Oh, and is this all retirement planning or may you need to draw on this earlier?

I'm only a basic rate tax payer. I don't need to draw on this earlier. Yes i intend to keep up with salary sacrifice but not sure if i will put more rather than the minimum required

bigadaj

smileaf wrote: »

I'm only a basic rate tax payer. I don't need to draw on this earlier. Yes i intend to keep up with salary sacrifice but not sure if i will put more rather than the minimum required

Salary sacrifice is of far more benefit to a basic rate taxpayer than a higher rate one. You get at least an additional 12% effective tax relief which can be 20% or more dependent on whether the employer shares his savings and how much.

At the end of the day you'll have to live on something in your old age so may as well take the best option which will allows the largest amount to go in to hopefully get the most out.

Always a good idea to have different plans so as well as pensions a cash emergency fund and ideally isa savings are good if possible.

Blackdog

Great idea to start a SIPP at 40, even better to do it before 40. You can't access it until you are 55 but at least you don't have to wait until state retirement age.

gadgetmind

As a bridge between retirement and state pension, SIPPs (and other such) have the problem that you can't draw more heavily to start with and then back off when SP kicks in. Yes, you get 25% tax free, and can phase drawing it, but it's still limiting.

Despite the tax advantages, some other investments such as S&S ISAs alongside make sense for many people.

WatsonNimrod

Some good replies already, my view comes from my own experience in running my SIPP.

I started my SIPP pretty much when they came in, I would have been a few years younger than you are right now, but coming into it from a relatively similar angle, other than I was putting in a bit more into my work pension, but similarly was maxing out my ISA each year.

My view (and its only an opinion) is despite the advice you receive, I think you have to have a genuine interest in the markets. I had a long history in purchasing shares and trusts, so had already knew the basics, and it was more of a hobby to me.

It can also be time consuming.

You can of course passively just invest in a plethora of funds, but if you are going down the road of FTSE shares then the costs of dealing (based on the contributions you mention) probably wouldn't give you the return just sticking the £100 into your work pension would.

Saying that running my SIPP is one of the most rewarding things I have ever done, my returns are not astronomical, but i'm happy with them and at the end of the day thats the whole point I guess.

smileaf

WatsonNimrod wrote: »

Saying that running my SIPP is one of the most rewarding things I have ever done, my returns are not astronomical, but i'm happy with them and at the end of the day thats the whole point I guess.

Thank you so much WatsonNimrod for sharing your experience and thoughts. i think you've convinced me (99% !!) to start a SIPP.

As you said it's something rewarding, and i do like to study the market although my knowledge at the moment is still very basic.

At the end of the day, i'd like to think i have some sort of control over my own pension fund rather than just let someone else to decide my fate.

Blackdog

smileaf wrote: »

Thank you so much WatsonNimrod for sharing your experience and thoughts. i think you've convinced me (99% !!) to start a SIPP.

As you said it's something rewarding, and i do like to study the market although my knowledge at the moment is still very basic.

At the end of the day, i'd like to think i have some sort of control over my own pension fund rather than just let someone else to decide my fate.

Good for you, if you are happy to take the risks involved then it is a good way forward, but don't forget if your investments go down you only have yourself to blame. I agree with WatsonNimrod that it can be a rewarding experience.
Good luck!

planteria

investing in a pension at 40 is a very good idea.
whether doing so via increases to your company pension and/or a SIPP and/or other investments depends upon your circumstances.
maximise the benefit you can obtain from your company pension, and then look at other options.