Regular Saver or SIPP?

Aquamarina

Hi,

Each year I pay £300/month into First Direct's Regular Saver. This is due to mature later this month, at which point I would usually reopen another one and repeat.

I just got to thinking that maybe I would be better to pay this regular amount into my (small) SIPP for the 25% uplift and potentially better investment returns.

I already have a cash emergency pot and a S&S ISA. DH and I hope to retire in 4 years. I am 49. I have a DB pension that kicks in at 60 so I thought that paying into a SIPP rather than a Regular Saver would give me a larger pot of cash to access from 55.

Does this sound sensible?

Many thanks,

Aquamarina x

AlanP_2

The key statement there is "potentially better" - If you are 49 and want to access SIPP at 55 then that is a maximum 6 years of growth with maybe a stock market fall or two thrown in as well.

The FD Reg Saver is "safe" and it's current 5% rate is not that different to what you could reasonably expect as the returns from S&S investing (historically ~5% after inflation).

So it depends on how much RISK you are prepared to accept as well as your tax situation.

If you are a BR taxpayer now and will be in retirement then you only "profit" by the 25% tax free lump sum you can withdraw = 6.25% of the overall pot.

If you will be a non-taxpayer in retirement then you will "profit" by the 25% uplift as you pay in.

Might be worth investigating your State Pension situation as it could be a better option to buy any missing years of NI contributions to get the full amount at SP age.

Aquamarina

Many thanks for your helpful reply AlanP. There is some food for thought.

I have just checked my SP record online and I currently have 29 years so I will be one year short by April 2021 (when I retire). So I need to fill that gap nearer the time presumably?

I am currently a basic rate tax payer and will be a non-taxpayer when I retire.

Maybe I should continue the Regular Saver and then put a portion of the money into a SIPP once a year?

Aquamarina x

AlanP_2

I would apply to them for a State Pension statement for you and your other half to see what the full situation is.

PeacefulWaters

How about saving for a year in the FD regular saver and then investing the annual proceeds, with tax relief, into a lower risk SIPP fund?

[Deleted User]

AlanP wrote: »

The key statement there is "potentially better" - If you are 49 and want to access SIPP at 55 then that is a maximum 6 years of growth with maybe a stock market fall or two thrown in as well.

The SIPP could exist sometime into retirement using drawdown so money will have far longer than the headline six years to grow.


Based on the opening post the OP already has a SIPP.


Cheers


PS I bung all stoozing profits/bank account bonuses/cash back/interest/even a phase of matched betting/FITs/RHI etc into our SIPPs for the tax relief uplift and looking back over the last year it's nuts how it all adds up and grows

OldBeanz

You can withdraw £16,666 pa tax free from any pension you set up as by that time the annual allowance will be £12k. I would be filling my boots in a SIPP.

Aquamarina

Thanks for all the helpful replies.

I'm now thinking that SIPP is the way to go. The 25% uplift (plus any investment returns) just seems to me to be better 'value' than the £100-odd quid I would get from First Direct each year (especially as I will be a non-taxpayer in retirement). I also may not have to access it straightaway at 55 so there could potentially be more time for growth (or recovery).

Aquamarina x

AlanP_2

jeepjunkie wrote: »

The SIPP could exist sometime into retirement using drawdown so money will have far longer than the headline six years to grow.

True, but as they state in their opening post "access from 55" so maximum of 6 years until the OP anticipates accessing it.