Looking to open my first SIPP > Thoughts Please...

scoot65

After reading posts on here and learning, I have recently opened an iWeb S&S ISA and put this financial year's full ISA allowance with VLS60 within the ISA wrapper.

I'm now looking to open my first SIPP.

Here is my back story.....

I'm a male, 52 years old (almost 53), my state retirement age is 67, basic tax payer and I've been in the LGPS for 27 years. Currently in full time, permanent employment with a Local Authority and thus still contributing into the LGPS.


Currently I'm very cash heavy (approx £120k) and I want to address this fact. Previously I've been wary to get into investments due to a lack of knowledge. I now feel (slightly) more knowledgeable and (slightly) more confident.....still reading and learning.

Given my risk profile, I feel that VLS60 / HSBC Global Strategy (Balanced) etc are the type of funds I want to look at.

I will make a lump sum deposit / trade, up to my maximum SIPP allowance each financial year (rather than several smaller trades throughout the year).

Currently I'm looking at using iWeb or going direct to AJBell. However I'm unsure which would be the most cost affective route. iWeb or AJB direct??

I look forward to any thoughts and critique from forum members.....

ValiantSon

scoot65 wrote: »

After reading posts on here and learning, I have recently opened an iWeb S&S ISA and put this financial year's full ISA allowance with VLS60 within the ISA wrapper.

I'm now looking to open my first SIPP.

Here is my back story.....

I'm a male, 52 years old (almost 53), my state retirement age is 67, basic tax payer and I've been in the LGPS for 27 years. Currently in full time, permanent employment with a Local Authority and thus still contributing into the LGPS.


Currently I'm very cash heavy (approx £120k) and I want to address this fact. Previously I've been wary to get into investments due to a lack of knowledge. I now feel (slightly) more knowledgeable and (slightly) more confident.....still reading and learning.

Given my risk profile, I feel that VLS60 / HSBC Global Strategy (Balanced) etc are the type of funds I want to look at.

I will make a lump sum deposit / trade, up to my maximum SIPP allowance each financial year (rather than several smaller trades throughout the year).

Currently I'm looking at using iWeb or going direct to AJBell. However I'm unsure which would be the most cost affective route. iWeb or AJB direct??

I look forward to any thoughts and critique from forum members.....

What would be the value of your annual deposits (as this potentially affects which platform to use)? We don't know how much of your annual allowance is being used in the LGPS.

Thrugelmir

scoot65 wrote: »

Currently in full time, permanent employment with a Local Authority and thus still contributing into the LGPS.

Can you buy additional pension?

Filo25

As you have are holding so much cash personally I would consider higher risk than VLS60 (in reality a small proportion of your cash + ISA is in equities at present), if for instance you started out on VLS 100 you could then move to lower risk investments as you added a greater proportion of your assets to the ISA over time.

ValiantSon

Filo25 wrote: »

As you have are holding so much cash personally I would consider higher risk than VLS60 (in reality a small proportion of your cash + ISA is in equities at present), if for instance you started out on VLS 100 you could then move to lower risk investments as you added a greater proportion of your assets to the ISA over time.

I don't follow your thinking here. VLS100 is a high risk investment and VLS60 is a medium risk investment. The amount of cash you have doesn't change your risk tolerance.

scoot65

Thanks for the replies.
Thrugelmir: Yes I can buy addition pension.

In answer to ValiantSon's question:

I 'phoned HR and was given the following information (I am going to re-confirm the figures):-

Salary is £30,153
My contribution is 6.5% = £1,959
Employer's contribution is 11.4% = £3,437

Therefore if my calculations and my understanding are correct, my annual lump-sum allowance is £19,804 after the 20% tax man's contribution is taken into consideration.

Do these figures look about right?

Filo25

ValiantSon wrote: »

I don't follow your thinking here. VLS100 is a high risk investment and VLS60 is a medium risk investment. The amount of cash you have doesn't change your risk tolerance.

If you view cash as a bond proxy (you could probably make a case for holding cash over bonds at present to be honest) then in year 1 you end up with 100k cash and 20k in VLS100 inside the SIPP, so equities still make up a very low proportion of your total investable funds, your total risk to the 120k pot is actually lower than a VLS20.

Obviously not quite that simple as not all of the cash may be for investment purposes, some may be an emergency pot, but by the sound of the original post much of it is.

EDIT I actually misread the original post as putting into an ISA rather than SIPP, so my post made a bit more sense then! Sorry, the joys of posting after a few drinks in the pub!

ValiantSon

Filo25 wrote: »

If you view cash as a bond proxy (you could probably make a case for holding cash over bonds at present to be honest) then in year 1 you end up with 100k cash and 20k in VLS100 inside the SIPP, so equities still make up a very low proportion of your total investable funds, your total risk to the 120k pot is actually lower than a VLS20.

Cash isn't a bond proxy.

You are still advocating investing above the OP's risk tolerance. This is not a good idea.

Filo25

ValiantSon wrote: »

Cash isn't a bond proxy.

You are still advocating investing above the OP's risk tolerance. This is not a good idea.

Errrrr I already apologised for misreading the post, not sure what else there is to add.

I could make a fair case for cash being a more sensible investment to de risk a portfolio than bonds in the current economic climate however.

kidmugsy

scoot65 wrote: »

Salary is £30,153
My contribution is 6.5% = £1,959
Employer's contribution is 11.4% = £3,437

Therefore if my calculations and my understanding are correct, my annual lump-sum allowance is £19,804 after the 20% tax man's contribution is taken into consideration.

Do these figures look about right?

I don't understand them. (i) What do you mean by "annual lump-sum allowance"? (ii) No taxman's contribution happens because the money went into the scheme avoiding income tax in the first place.

Contribution limits are more complicated for DB pensions than DC. How much you and your employer contributed doesn't matter. What matters is the growth in your pension entitlement over the course of the tax year. You must either master a tricky calculation for this, or ask your pension scheme to tell you the figure.

ValiantSon

scoot65 wrote: »

Thanks for the replies.
Thrugelmir: Yes I can buy addition pension.

In answer to ValiantSon's question:

I 'phoned HR and was given the following information (I am going to re-confirm the figures):-

Salary is £30,153
My contribution is 6.5% = £1,959
Employer's contribution is 11.4% = £3,437

Therefore if my calculations and my understanding are correct, my annual lump-sum allowance is £19,804 after the 20% tax man's contribution is taken into consideration.

Do these figures look about right?

How many funds would you be investing in?

iWeb would cost you £5 for each annual trade plus £90 annual fee for the first two years, then £180 each year after (as your SIPP value will exceed £50,000). That is £95 per year for years 1 and 2, then £185 per year for each subsequent year.

AJ Bell would cost £51.01 in year 1; £99.03 in year 2; £148.54 in year 3; £198.04 in year 4 (N.B. these figures are based on their being no growth, so they could be higher or lower depending on the markets). In this case AJ Bell would be cheaper for the first three years, but they would charge you £115 to transfer out (assuming only one fund - add an extra £25 for each fund).

While AJ Bell's drawdown cost is £60 lower than iWeb's, I reckon that they would work out more expensive overall. Personally, I'd stick with iWeb.

However, you say that you can purchase additional pension in the LGPS. This might be a better deal than a SIPP. As a DB scheme, LGPS will give you a better return (almost certainly) than a market investment. I'd explore buying as much additional pension in the LGPS as possible and only once you've done that, open a SIPP account for any extra you may have.