Sipp

oxford_yellow

Hi, just after opinions on SIPP v Share's with "normal" pension scheme

so, im a 31yr old IT Contractor working through my limited company. i have a an existing pension with FriendsLife through my old employer (no further contributions being made).

im looking at advantages/disadvantages of starting a SIPP (with or without transfering existing pension pot) with say £150 p/month contributions.

i already have some stocks/shares on HL, mixture of funds and company, what benefit does doing this through a SIPP have rather than myself - is it just doing it myself i can get hold of profit/loss instantly rather than waiting?

can i have multiple, so a SIPP with HL, a "normal" pension with say friends life?

sorry for the jumbled up message

thanks
andy

AnotherJoe

A SIPP is a "normal" pension !!!

The benefit to you of putting contributions into a pension, such as a SIPP, is the tax relief. Put £1 into shares or an ISA and it costs £1. Every £1 you put into a pension costs 80p or even 60p or maybe even less.
As a contractor with your own company there will be additional tax benefits from doing this that you'd need advice from an account to help with.

Best case lets say you have £20k of shares in HL, you transfer those into your SIPP and can buy up to an extra £20k of shares. Free money !! Downside is how long they are locked up for. Until you are probably near to 60. So dont put stuff in you might want sooner, lets say for buying a house.

Fermion

I was in the same position as you a number of years ago.

The key question with your company is whether (a) you simply pay yourself a LEL salary (hence no employer/employee NI) and take the rest as dividends or(b) do you get paid via a salary from your company. My accountant advised the former so I was only paid a small amount each tax year. The problem then is that you can only pay employee SIPP contributions(and 20% HMRC contributions) up to your max employee salary.

However you can make gross employer contributions into your SIPP although these don't get the 20% HMRC contributions but they will reduce your Corporation Tax (and so can be tax efficient)

dunstonh

Hi, just after opinions on SIPP v Share's with "normal" pension scheme

What do you mean by normal? A stakeholder pension is normal. A personal pension is normal. A SIPP is normal. A n auto-enrolment scheme is normal (and so on for the other types of pension).

that said, a SIPP is aimed at the more experienced investor who wants access to more specialist investment options compared to those on personal pensions and stakeholder pensions. Because of that you get lower FSCS protection and the due diligence has to be carried out by you and not the pension provider.

i already have some stocks/shares on HL, mixture of funds and company, what benefit does doing this through a SIPP have rather than myself - is it just doing it myself i can get hold of profit/loss instantly rather than waiting?

Trading is a mugs game. You will neither have the knowledge, experience or access to information to successfully trade. Even those that do, cannot continuously pull it off.

As a company director of "own" company, employer contributions are almost certainly the best option as you save on the 20% CT and avoid the 7.5% dividend tax (if you were to draw out the money to yourself.

greenglide

As an IT Contractor are you caught by IR35 or should you be caught by IR35. If so you have much less choice of what you can do with the company's money as you must take most of it as PAYE income. Pension payments are still allowed though IIRC.

jamesd

You can have as many pensions as you like. No limit.

If you want to hold shares in a pension you have no choice but to use a SIPP or the similar small self-administered scheme (SSAS) that is available to business owners. Traditional pensions can't hold shares directly, just funds that invest in shares.

One advantage of pensions is that they are at your age protected from insolvency and benefits means tests. So if your business was to fail and you be called on for a personal guarantee, your pension pot couldn't be touched unless you put the money in just before failure as a dodge.