Trying to get my head around SIPP

russetred

Hi all,

DH is 56 he used to work for LG and has a DB pension and an AVC pension. When he was made redundant he could no longer make contributions to either. The AVC has about £1800 in it and we cant figure out what's in the other one it just shows a forecast of what he will get on retirement. He works part time about 6.5K pa with a company that does not offer a pension. I was thinking would he be better off going down the SIPP route. Putting £2880 in each year to gain the Gov £720. Also can he access any of the LGP pots either by cashout or transfer to say Virgin Money? This would obviously help to fund the initial SIPP but we would be trying not to incur any tax charges. Hope you can point us in the right direction. Thanks.

AnotherJoe

He could put more than £2880 in. Up to his earnings each year gross, which means £5,200 if earns £6500 (essentially whatever 80% of his earnings are) HMRC will then add back the rest up to his earnings.

Ask the other providers if the money can be transferred to a SIPP.

russetred

Thanks I had no idea he could put more in. Is there a particular type of SIPP he should be looking at or would any pension do? He would want to be able to access some of the money to recycle the SIPP and possibly put into any interest paying ISA.

kidmugsy

russetred wrote: »

DH is 56 he used to work for LG and has a DB pension ... we cant figure out what's in [it]... it just shows a forecast of what he will get on retirement.

That's as it should be. The LG pension is what's called a Defined Benefit scheme so it's the eventual "benefit" to your DH that's "defined" i.e. the annual/monthly pension he'll eventually get.

He could get a quotation for a CETV (Cash Equivalent Transfer Value) for transferring out to, say, a SIPP. The wisdom of such a transfer depends on how long he can reasonably expect to live himself, how long he can reasonably expect you to live, how much secure income you can expect from other sources in retirement, how confident you'd be about managing the investments in a SIPP, how optimistic you feel about stock markets, how much comfort you'd feel at getting a steady, guaranteed, inflation-linked income from the LG scheme, and so on.

If you've got good health records, are from long-lived families, expect to be on rather modest incomes in retirement, don't expect to have much capital, don't know anything much about investment management, and are prone to worry, transferring out is unlikely to be a good move unless the sum offered is quite astonishingly high. In the DB scheme all the risk is on the shoulders of the taxpayers; if you transfer out all the risk is on your shoulders.

Transferring out is not allowed without taking advice from an IFA which might be a bit costly.

AnotherJoe

russetred wrote: »

Thanks I had no idea he could put more in. Is there a particular type of SIPP he should be looking at or would any pension do? He would want to be able to access some of the money to recycle the SIPP and possibly put into any interest paying ISA.

The £2880 is for people not earning.if you are earning you can claim up to what you earn, gross.

Virgin and HL are the two often mentioned here for this purpose. HL (I understand) like you to keep £1,000 in the SIPP, eg if you open one up, put money in, take it all out in year one they may well charge.

russetred

Thanks for explaining that kidmugsy.
DH can access one pension in 2020 of £2082 pa with a TF lump sum of £6246
The other he can access in 2025 with £345 pa and TF lump sum of £1036
We think he can then get the AVC of £1835ish

Not huge sums and we just wondered if it would be a more cost effective idea to put 80% of his earnings(£5280) into a SIPP with the GOV top up each year till he retires in 2027 then continue with the £2880 contribution till he gets to 75.

We weren't sure if we could get the cash from these pensions to start the first 80% contribution to a SIPP.
Thanks for your thoughts on this. It's all new to us but we thought we really need to start getting a grip on our best options.

russetred

Actually having written this down has made things clearer. We shall leave the 2 LGP alone and use some savings to start a separate SIPP for DH. Thanks for all advice given.

dunstonh

He would want to be able to access some of the money to recycle the SIPP and possibly put into any interest paying ISA.

Why would you want to take it out the most tax free wrapper to put into the ISA (which is less tax efficient) and then put it into savings?

xylophone

He works part time about 6.5K pa with a company that does not offer a pension.

https://www.gov.uk/workplace-pensions/joining-a-workplace-pension

russetred

He doesn't earn enough for an employer to contribute to a pension.

xylophone

Is a pension scheme available through the employer ( even though the firm is not compelled to enrol him automatically)?

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

He does earn more than

£486 per month
£112 per week
£448 per 4 weeks