Can I take out a sipp?

markmarkmark

I'm 61 and already drawing a pension (was a final salary scheme but now taken over by an insurance company). I'm maxed out on isas and current accounts and have some cash left over.


Can I take out a sipp if already drawing a pension, looking to a 10 or more year timescale and is there any income tax advantage apart from the £3600 a year tax reclaim limit (if I've understood that correctly)? Or do I just buy some accumulation investment trusts and have the hassle of working out the income every year?

atush

Do you have any earned income? Not pension income.

If so you can put that much in, If no earned income you can only put in 2880 each year which is grossed up to 3600.

markmarkmark

Thanks, no earned income, so that is the max I can put in a pension? I am perplexed by the complexity of trying to work out which income to declare from an accumulation investment trust outside an isa.

atush

Still that is not earned income- it is investment income. Only earned income can be put into a pension.

The income you are talking about is taxable, but not pensionable.

markmarkmark

Thank you, I understand now. The investment trust idea is the alternative to sipp pension for parking too much cash compared to existing isa investments, but I understand working out the income to declare from accumulation funds can be very complicated (looking at a decade or longer timescale)

atush

Have you thought of VCTs?

they save tax(30%), but are high in risk and take some time.

kidmugsy

markmarkmark wrote: »

Or do I just buy some accumulation investment trusts and have the hassle of working out the income every year?

You probably mean "Unit Trusts" rather than Investment Trusts.

What you could do is buy Investment Trusts in a Trust management company's Investment Scheme, ask for DRIP (i.e. Dividend Reinvestment) and just note each year what the dividends had been.

Scroll down to p44.
http://www.theaic.co.uk/sites/default/files/statistics/attachment/AICStats31Jan15.pdf

jamesd

If you use unit trusts outside a pension, ISA or investment trust just pick income units and reinvest the income whenever you feel like it. That way you'll have control of all of the fewer buying times and know clearly which records you need to keep.

markmarkmark

Thanks all. I think VCTs are probably outside my risk tolerance, even on a decade or more timescale, though I can see the tax advantages.


I think I'll start with a sipp now for 2880 and the same amount after Apr6. Any suggestions for a low cost provider please? Probably going to go for a stable fund like City of London. Bank on the growth now and pay tax on the way out after lump sum.


Then consider either an unwrapped trust, income units or drip, maybe after the election when things have calmed down a bit. I think a correction can't be far away.