The difference between SIPPs and Company pensions

theshortstack

Hi there,

I was hoping whether someone would be able to give me a better understanding of the benefits and differences of a SIPP over a company pension.

Is it worth having both or do people generally tend to focus on one or the other?

Thanks,

kidmugsy

theshortstack wrote: »

...the benefits and differences of a SIPP over a company pension.

Is it worth having both or do people generally tend to focus on one or the other?

You'd expect to use a company pension so that you harvest the maximum employer contribution. Past that level, you might contribute more if you could take advantage of Salary Sacrifice. If not, many people might prefer the extra flexibility of a Personal Pension of some kind, which might indeed be a SIPP.

zagfles

Company (money purchase) pensions tend to have far less investment options than a SIPP, but the charges are usually lower and the company usually makes a contribution too.

A lot of people have both, they use the company pension to get the max company contributions (sometimes company contributions depend how much you put in), and put any extra into a SIPP so they have a wider choice of investments.

atush

Free money and lower taxes/nics

theshortstack

Thanks all!

dunstonh

Is it worth having both or do people generally tend to focus on one or the other?

SIPPs are also a niche product held by very small numbers of people (albeit growing).

Company schemes can vary in set up and be very different. In some cases, barely have anything in common with individual schemes in the accumulation stage.

gadgetmind

theshortstack wrote: »

Is it worth having both or do people generally tend to focus on one or the other?

I have both for three reasons -
1) I had existing pots from earlier pensions and it was easier to combine these into a SIPP than transfer into my Group Personal Pension.
2) My SIPP has slightly lower fees than my GPP, but this is only because I do a bit of fancy footwork and most people pay much higher fees for their SIPPs. Many of them think they get better returns as a result, but clearly I don't agree.
3) My SIPP has more flexibility if I want to slosh some extra in towards the end of the tax year whereas with my GPP this always takes ages and involves numerous forms.

When people ask here and elsewhere about SIPPs I usually respond by asking my a Personal Pension won't suit them better.