We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

Starting a sipp

chucknorris
chucknorris Posts: 10,793 Forumite
Part of the Furniture 10,000 Posts Name Dropper
I intend to invest in a SIPP before the end of this tax year. I have requested details of my pension input for previous years because I should be able to carry forward unused allowances from the tax years ending April 2011 to April 2013.

While I am waiting on the TPS to provide me with details of my pension input (I am aware of what they are approximately) I need to decide upon who I invest with and what fund. I already have ftse trackers with fidelity so I was thinking of going with them.

But obviously I am interested to see what others have to say as I don't know much about the alternatives.


If I start a SIPP with one provider, can I later invest in another SIPP with another provider and still keep the original SIPP?


If I wanted to invest £35k this tax year (it will be about that) do I invest £28k and my provider claims the basic pension tax relief of 20% taking it up to £35k, then at the end of the tax year I claim another £7k relief as a higher rate tax payer? I believe that this additional £7k is added to my personal allowance?
Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop

Comments

  • Linton
    Linton Posts: 17,929 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    I am not clear what TPS has to do with this, but it doesnt seem to matter so to answer your questions....

    Yes - you can have multiple SIPPs if you want with different providers, or I guess the same provider. I dont know why you might want to do this as you can always transfer an existing SIPP to a better provider. It seems just like extra hassle to me. You realise that you can continue to pay into your SIPP year after year, its not just a one year scheme?

    Yes - the SIPP provider will reclaim the standard rate tax from HMRC, so you pay in the net amount. Higher rate tax rebate may be paid as a cheque or by adjustment of the tax code for subsequent years.
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    If I start a SIPP with one provider, can I later invest in another SIPP with another provider and still keep the original SIPP?

    Yes, you can have as many as you like and contribute to more than one per tax year, but working out pension inputs can be interesting.
    If I wanted to invest £35k this tax year (it will be about that) do I invest £28k and my provider claims the basic pension tax relief of 20% taking it up to £35k, then at the end of the tax year I claim another £7k relief as a higher rate tax payer? I believe that this additional £7k is added to my personal allowance?

    Yes, those sums look right. You will probably need confirmation from your SIPP provider for HMRC at those levels before they'll part with the money.

    Note that SIPPs can be quite expensive if you don't need the bells and whistles. You could always just go for a Personal Pension with a major
    provider via Cavendish?

    For instance, here is their page regards Friends Life.

    http://www.cavendishonline.co.uk/pensions/personal-pensions/friends-provident/

    My group personal pension is with FL and I'm very happy with the fund range. I mainly use their Balanced Index Enhanced Fund of Funds but you can also access Blackrock trackers and much more.

    http://www.friendslife.co.uk/doclib/mpen11bi.pdf

    Another option is to use an IFA as they might be able to beat the 0.6% (0.5% once over £50k) via an IFA-only platform.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • jem16
    jem16 Posts: 19,494 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    If I wanted to invest £35k this tax year (it will be about that) do I invest £28k and my provider claims the basic pension tax relief of 20% taking it up to £35k, then at the end of the tax year I claim another £7k relief as a higher rate tax payer? I believe that this additional £7k is added to my personal allowance?

    Are you earning £76,450?

    That's what you would need to be earning after you take off your normal TPS contributions for you to be able to claim higher rate tax on the full £35k.
  • chucknorris
    chucknorris Posts: 10,793 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    jem16 wrote: »
    Are you earning £76,450?

    That's what you would need to be earning after you take off your normal TPS contributions for you to be able to claim higher rate tax on the full £35k.

    I am earning more than that, but my taxable earnings are lowered to around £78/79k (£35k is the rounded down figure) by buying additional pension in the TPS, I am currently purchasing £5.6k over 3 years in the TPS scheme.
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
  • chucknorris
    chucknorris Posts: 10,793 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Linton wrote: »
    I am not clear what TPS has to do with this


    I need the TPS to confirm to me what my pension input was for my previous tax years so that I can calculate what allowances I can carry forward. I need to carry forward because I only have about £9k left out of this year's annual allowance and about £6k left in next year's annual allowance (yes I know it drops to £40k).


    Obviously I know roughly what it will be i.e. salary/60 x 16 plus additional purchased pension x 16. I just need to know what they have added for growth/inflation for each year, I don't imagine it will be much but I might as well ask as I have plenty time before the end of the tax year (even allowing for their usual slow response).
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
  • chucknorris
    chucknorris Posts: 10,793 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    jem16 wrote: »
    Are you earning £76,450?

    That's what you would need to be earning after you take off your normal TPS contributions for you to be able to claim higher rate tax on the full £35k.


    I've just realised the full implication of your question, i.e. 'earnings' yes my income is more than £76,450 but not my 'earned income'. I can now see what you meant (it suddenly dawned on me and I remembered your post). I was confusing earnings with total income.


    Most of my income comes from investment property, interest and dividends, which I think is not eligible to receive pension tax relief. So although I can carry forward unused pension allowance from previous years, because I am already using most of my earned income to buy additional pension from the TPS I do not have enough 'earned income' to take advantage of previously unused allowance from earlier years.


    So unless I have misunderstood something I can't use my non earned income, because I am capped by my earned income total, which unfortunately means that I can only invest about £9k in a SIPP this year (and receive pension tax relief) and even less next year (when the annual allowance reduces to £40K).


    Someone please tell me that I am wrong.
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
  • Linton
    Linton Posts: 17,929 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!


    So unless I have misunderstood something I can't use my non earned income, because I am capped by my earned income total, which unfortunately means that I can only invest about £9k in a SIPP this year (and receive pension tax relief) and even less next year (when the annual allowance reduces to £40K).


    Someone please tell me that I am wrong.

    Wish I could, but I cant - you are now correct in your understanding.
  • chucknorris
    chucknorris Posts: 10,793 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Linton wrote: »
    Wish I could, but I cant - you are now correct in your understanding.


    Thanks, unfortunately I was a bit slow to realize the tax advantage of contributing to a pension, especially when you are only a few years away from retirement.
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
  • jamesd
    jamesd Posts: 26,103 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    All income that is subject to income tax counts for pension tax relief. However, there are some caps on the amount that can be paid in each year:

    1. Earned income, mainly PAYE income. No tax relief for more than your earned income.
    2. The £50,000 a year cap, dropping to £40,000 next year, can carry forward unused allowances from past three years if you were in a pension scheme.

    The lower of the two limits applies.

    So in your case you have plenty of income to get higher rate relief but the earned income cap might prevent you from paying in that much.

    You don't have to wait until next year to tell HMRC. If you tell them what you plan they can adjust your tax code if that will be sufficient to give you all of the tax relief. There are limits on this and you might exceed them, though.

    While it won't apply to you, it's possible for someone to do salary sacrifice into a work pension and get basic rate NI savings while also receiving higher rate income tax saving if their other income outside that job pushes them into higher rate.
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.3K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 240.9K Work, Benefits & Business
  • 617.1K Mortgages, Homes & Bills
  • 175.6K Life & Family
  • 254.1K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.