Stocks and Shares ISA investments vs Pensions

munkee_saver

At the moment I mix between my SIPP, S&S ISA, Cash ISA and my Wifes ISA. I think its probably worth setting out your planned contributions based on what you realistically can save personally and what can be contributed towards by your employer. I've set out a rough retirement age along with expected contributions into each of the above pots. For the SIPP and S&S ISA I've gone with a nominal 5% expected growth (I know this will fluctuate a lot but it gives me a baseline figure to monitor against). End of the day putting money into any of these avenues is only going to be doing you good so I'd think of them as levers you can pull on to funnel funds in dependent on what works for tax.

My main contributions will always drop into my SIPP, backed up by my S&S ISA (70-80% of my yearly allowance), backed up by my cash ISA (30-20% of my yearly allowance). I look on my ISAs as a smoothing effect for any bumps I hit along the way with my pension but who knows what that will look like in another 35 years.

ArmyDilllo

darkidoe wrote: »

What kind of company pension do you have? DB, DC?? Isn't the performance of the ISA/pension dependant on the underlying investment, and not whether it is in the ISA wrapper or pension wrapper? I think SIPPs might work this way

Sorry, not sure what you mean darkidoe.

I have several pension pots, not including the state pension I can't draw until I'm 66.

I have no final salary pensions as I have changed jobs and companies so often in my career.
I have two company pensions left (these are the two smallest), both of these are forms of pre-purchase guaranteeing a level of income and future rates of increase.
The largest is my SIPP and after that is a former company pension,n of which I have taken over the management and it now operates like a SIPP (and irritatingly is outperforming my original SIPP, to the degree that it's about to overtake it and become the largest, lolol).

Performance on all my investments is based on combinations of what they are; what they're invested in, and the additional benefits of the different tax laws surrounding them.
Despite a discussion I'm involved in on another thread (which has taken quite a surreal turn in which saving money no longer seems to be a primary objective, lolol), I probably don't fully exploit HMRC tax laws to the max. as I should, but I am still tax efficient and take pride in the levels I expect to take that to in future years.

darkidoe

ArmyDilllo wrote: »

Sorry, not sure what you mean darkidoe.

I have several pension pots, not including the state pension I can't draw until I'm 66.

I have no final salary pensions as I have changed jobs and companies so often in my career.
I have two company pensions left (these are the two smallest), both of these are forms of pre-purchase guaranteeing a level of income and future rates of increase.
The largest is my SIPP and after that is a former company pension,n of which I have taken over the management and it now operates like a SIPP (and irritatingly is outperforming my original SIPP, to the degree that it's about to overtake it and become the largest, lolol).

Performance on all my investments is based on combinations of what they are; what they're invested in, and the additional benefits of the different tax laws surrounding them.
Despite a discussion I'm involved in on another thread (which has taken quite a surreal turn in which saving money no longer seems to be a primary objective, lolol), I probably don't fully exploit HMRC tax laws to the max. as I should, but I am still tax efficient and take pride in the levels I expect to take that to in future years.

Can I ask if the SIPP operates like a traditional investment wrapper in that what you have in the wrapper is what you own and will get ultimately get except you have rules on withdrawal based on pension rules as opposed to money purchase (DB) schemes where you are effectively buying a pension, ie you contributions will get you a pre-agreed value.

I am tempted to start a SIPP, but I need to figure more about the rule before doing it.

colsten

By this I mean that, in my experience (obviously "may go up/down", etc etc blah blah), my pensions have grown at a slower rate than other investments.

You can hold the same investments in ISAs and in pensions. The investments will perform the same, regardless of the wrapper you hold them in. The charges of the wrapper are likely to differ.

bowlhead99

darkidoe wrote: »

Can I ask if the SIPP operates like a traditional investment wrapper in that what you have in the wrapper is what you own and will get ultimately get except you have rules on withdrawal based on pension rules as opposed to money purchase (DB) schemes where you are effectively buying a pension, ie you contributions will get you a pre-agreed value.

I am tempted to start a SIPP, but I need to figure more about the rule before doing it.

Defined Benefit is where you are not buying a pot of assets whose value to you changes all the time, you are defining what benefits you will be allowed to take in the future. Whereas Defined Contribution you are defining what you or an employer is contributing into the pension which when combined with investment growth is what will determine what benefits you can afford to buy (or what cash you can afford to draw out) with the proceeds in the future.

A self invested personal pension is as the name suggests a personal pot of assets (where you decide what contributions you put in, but don't know what they will be worth in future until you get there). You are the beneficial owner of that specific pot of assets and can direct the pension fund trustee to buy and sell assets according to your personal plan.

The cheap ones allow you to buy investment funds and shares and bonds and maybe some other holdings from the retail marketplace such as structured products. The more expensive ones will allow you to hold more exotic assets allowable under the HMRC rules, e.g. commercial property such as land and buildings and take a mortgage on it, all within the pension wrapper. But the assets are legally owned by the pension trustee so they have to approve your transactions. 99% of the people on here are just using the simple ones and operating them like they operate their ISA.

As you suggest, a SIPP is just a tax wrapper that gives you your own pot of assets with protection against income and gains taxes and also offers tax relief on your contributions; it is subject to the pension rules on how much can be contributed each year and how big your overall pension assets can be without attracting tax ( life time allowance) , and the timing of when you can take out money from it (25% of tax free lump sum, and the balance as taxable income). You can transfer to or from a SIPP from other registered pension plans (albeit transferring between DC and DB is more complex).

darkidoe

bowlhead99 wrote: »

Defined Benefit is where you are not buying a pot of assets whose value to you changes all the time, you are defining what benefits you will be allowed to take in the future. Whereas Defined Contribution you are defining what you or an employer is contributing into the pension which when combined with investment growth is what will determine what benefits you can afford to buy (or what cash you can afford to draw out) with the proceeds in the future.

A self invested personal pension is as the name suggests a personal pot of assets (where you decide what contributions you put in, but don't know what they will be worth in future until you get there). You are the beneficial owner of that specific pot of assets and can direct the pension fund trustee to buy and sell assets according to your personal plan.

The cheap ones allow you to buy investment funds and shares and bonds and maybe some other holdings from the retail marketplace such as structured products. The more expensive ones will allow you to hold more exotic assets allowable under the HMRC rules, e.g. commercial property such as land and buildings and take a mortgage on it, all within the pension wrapper. But the assets are legally owned by the pension trustee so they have to approve your transactions. 99% of the people on here are just using the simple ones and operating them like they operate their ISA.

As you suggest, a SIPP is just a tax wrapper that gives you your own pot of assets with protection against income and gains taxes and also offers tax relief on your contributions; it is subject to the pension rules on how much can be contributed each year and how big your overall pension assets can be without attracting tax ( life time allowance) , and the timing of when you can take out money from it (25% of tax free lump sum, and the balance as taxable income). You can transfer to or from a SIPP from other registered pension plans (albeit transferring between DC and DB is more complex).

Thanks for the succint summary!

I take it from just the general feel from the various posts and feedback i get is that DB pensions are just that bit more valuable given it's 'guaranteed' pension value. The other pensions are basically you live to the market's whims at the point when you retire.

ColdIron

More than just that bit more valuable. These are gold plated, diamond encrusted pensions which is why they are so scarce these days

darkidoe

ColdIron wrote: »

More than just that bit more valuable. These are gold plated, diamond encrusted pensions which is why they are so scarce these days

Problem is I can't physically see the 'gold' and 'diamonds', just that based on my probably overly simplified calculations, I am paying more as contributions then the yearly equivalent benefits, but I now know it's not that simple.

bowlhead99

darkidoe wrote: »

Problem is I can't physically see the 'gold' and 'diamonds', just that based on my probably overly simplified calculations, I am paying more as contributions then the yearly equivalent benefits, but I now know it's not that simple.

Yes, you have probably overly simplified it.

What percentage per year of your expected career average salary are you currently paying into the scheme? And what percentage of your career average salary will you be able to take out, inflation proofed and potentially with a spouses pension after you die, etc etc, for the 40 years after you retire? What percentage of your salary would you have to commit to putting into some alternative investment now to buy that level of benefits on the open market, relatively risk-free?

darkidoe

bowlhead99 wrote: »

Yes, you have probably overly simplified it.

What percentage per year of your expected career average salary are you currently paying into the scheme? And what percentage of your career average salary will you be able to take out, inflation proofed and potentially with a spouses pension after you die, etc etc, for the 40 years after you retire? What percentage of your salary would you have to commit to putting into some alternative investment now to buy that level of benefits on the open market, relatively risk-free?

It's being discussed here. I am still quite young to think in such complicated terms tbh. I am ruminating on it.. but don't mind the 'tough' questions now. I need to be planning ahead...

Answer to the last question, possibly up to 25-30% based on another thread.