Should I set up a SIPP?

MDMD

Hi

I recently left a job where I was receiving an employer contribution of 1.5x my contribution up to 8% employee salary sacrifice amount (I.e. total 20%). I now work for a company where the pension on offer is much worse, with high charges, no employer contributions and no salary sacrifice.

I'm thinking of ignoring the new employer scheme and doing my own thing. I'm higher rate now so ideally would be paying around £8000 in this tax year to bring me back down to basic rate again.

It is possible I may change jobs again ( potentially back to my old employer) in the next 12-15 months or so, so ideally I just want somewhere where I can transfer out again at no or very low cost, with low ongoing charges (I paid 0.25% where I was before, the new one is 0.95%).

Clearly the tax relief is very beneficial so don't want to lose it but am aware that these should be long term things. I've looked at the fidelity SIPP which seems OK (0.35% platform charge with 0.1% trackers) and I can't see anything in the T&Cs that stops me keeping the funds uninvested given the potential short term.

Just wondered if I am missing another option here.

kidmugsy

The Telegraph carried a SIPP comparison on Saturday. I don't suppose it covered the cost of transferring out after a year or so, but the best one for a small sum was Bestinvest followed by Close Brothers, and Hargreaves Lansdown. (The latter certainly exacts a penalty if you leave within a year.) If you don't trade (i.e. just leave the money as cash) you might find you pay almost nothing. For reasons unknown to me Cavendish wasn't included in the comparison - maybe because it does a personal pension rather than a SIPP.

Maelwys

The Moneyweek table or the Monevator comparison are good places to start.

Cavendish or BestInvest (both at 0.3% platform charge with low-cost tracker funds available) are worth a look if you're going to deal in funds, but note that BestInvest has exit fees if you close the account up within 3 years.

(I can't say how Cavendish are other than by word-of-mouth, but I've got a SIPP with BestInvest at the moment. I went with them over Cavendish for the ETF option but so far I've just stuck to funds)

atush

How is your employer getting around the law in not giving you an employers contribution (they have to if now now very soon).

When this comes online (or if they are remiss against the rules) do join just to get the max they will pay in.

xylophone

https://www.gov.uk/workplace-pensions

What is your new employer's staging date?

MDMD

Thanks for your replies, it's given me a few things to consider.

What is your new employer's staging date?

Unfortunately the employer is very small so the staging date isn't until 1 October 2016. To be honest this surprised me a little as I was under the impression that auto enrolment was further advanced than it actually is.

FatherAbraham

MDMD wrote: »

Just wondered if I am missing another option here.

Well, you haven't explained why you aren't considering making your contributions to the existing fund you have from your time with the previous employer.

I'm presuming that it was a group personal pension, now transformed into a simple personal pension, and probably happy for you to set up a regular contribution arrangement. That way you don't need to transfer anything back to the old employer's fund, because it will be there already.


Warmest regards,
FA

MDMD

FatherAbraham wrote: »

Well, you haven't explained why you aren't considering making your contributions to the existing fund you have from your time with the previous employer.

I'm presuming that it was a group personal pension, now transformed into a simple personal pension, and probably happy for you to set up a regular contribution arrangement. That way you don't need to transfer anything back to the old employer's fund, because it will be there already.

That was my first thought, too. I did raise it with the pension provider, and they said because it is a "master trust pension" (run by Standard Life) rather than a simple group pension, the rules that the scheme was set up with prohibit payments unless you are currently employed.

Of course, the error I made was not to make a lump sum payment before I left. I even tried calling them to make a sneaky lump sum payment last week but to no avail.

xylophone

http://www.standardlife.co.uk/1/content/resources/uk_internet/PDFs/Retail/gsip20r.pdf

If you are happy with Standard Life....

jamesd

If you haven't done it already you might also start the process of explaining to your employer how pension salary sacrifice can save them some of the costs of pension contributions, or even make them extra profit from the saved employer NI of employees who make high pension contributions.

EdSwippet

jamesd wrote: »

If you haven't done it already you might also start the process of explaining to your employer how pension salary sacrifice can save them some of the costs ...

... although you might want to wait until after the next budget before expending too much energy on this. Salary sacrifice is poorly understood by most people, and therefore a tempting target for governments to apply stealth taxes under cover of "simplification".