Is a sipp ok for me.

SeeMe

kidmugsy wrote: »

I've thought of two possible refinements/simplifications.

A: avoid the trading costs for VLS40 as follows.

(i) Choose a provider who will charge only a little for your closing a pension soon after opening it (or you could even leave some minimal sum behind and thus not close it). You could ask for suggestions on this board for suitable providers.

(ii) Contribute the £2880 as discussed and wait a couple of months. Then as discussed withdraw a £100. Then once they've received the right tax code for you withdraw all the rest, closing the pension (or even leaving some minimal sum behind and thus not closing it).

You should receive £900 tax-free, £1500 tax-exposed drawdown taxed at 0%, and the rest - £1200 - taxed at 20%.

So your profit = £900 + £1500 + 1200 x 0.8 - £2880 = £480.

In other words your profit is unchanged but you will have avoided the charges for buying and selling VLS40. Would that save you money compared to any charge for closing the pension? You must do the sums.


B: here is what I think I'd fancy in your shoes.

(i) Year 1, do what I suggested in my earlier post: Contribute £2880, and wait a couple of months until HMRC have paid their £720 tax relief to your provider. Withdraw £900 tax-free lump sum and make a small drawdown at first (say £100) and then drawdown the other £1400 once your provider has received your non-emergency tax code from HMRC.)

This leaves you with £1200 in the SIPP to invest in the VLS40 fund [actually I'd leave a small sum as cash, say £20, to cover any charges that will arise over the year. You can check for yourself how much cash to leave]. I'd simultaneously sell about £960 of that fund in your S&S ISA, and withdraw it. (£960 because that's the after-tax value of the £1200 in the SIPP when you draw it down some day in the future.)

(ii) Year 2 and subsequently: contribute another £2880 and wait a couple of months. Then as discussed withdraw a £100. Then once they've received the non-emergency tax code for you withdraw all the rest, except for the £1200 left in VLS40 from year 1, and, say, £20 or whatever to cover you for charges during the year.


The point of Refinement B is that you could use it with the provider I am familiar with, Hargreaves Lansdown, whose service is excellent and whose charges are OK for small SIPPs. As long as you leave behind more than £1000 (I think it is) you won't have to pay charges for closing the SIPP. Note that after year1 you are avoiding the buying and selling costs for VLS40.

Other people might be prepared to suggest other providers but our SIPPs are with HL so I am not personally familiar with the others.

Thanks for the detailed info kidmugsy.
Its still sounds a bit complicted as i just wanted to put the money away in a cash sipp for a few years and get tax relief each year, do not want to add any more to VLS40 if i'm honest.
Maybe its just not worth it for me to have just a cash sipp.