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

ValiantSon

Filo25 wrote: »

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.

I was commenting on the strategy as a whole. I wouldn't advise someone to invest above their risk tolerance.

scoot65

kidmugsy wrote: »

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.

Kidmugsy This is what I was trying to say.....

In response to a question I'd asked a while ago

quote "I've read that 100% of current salary can be placed into a SIPP, does this figure take into account my current LGPS monthly contributions?"

and the reply I received was the following:-

That's 100% gross into ALL pensions, so deduct what is being paid into your LGPS and the 20% the taxman will contribute to your SIPP.

This is what I was trying to indicate with the figures I gave.

scoot65

ValiantSon wrote: »

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.

I was intending to buy only HSBC GS (Balanced) Acc.

Regarding my choice of a SIPP.
I do not intend to work until I'm 67. I currently have elderly parents 88yo / 91yo and when they are no longer here I intend to leave my job, and then my wife and I are to spend approx 6 months of the year in SE Asia.

(Although elderly, my parents are reasonably well, no major illnesses, and therefore it can't be predicted when they'll be no longer around....)


It had been suggested to me that a SIPP would be a good option to cover the period of time from leaving work until I receive my retirement pension at 67.

(If I take my LGPS pension early I get a reduced amount, so was intending on leaving it until I reach pension age)

I will look into buying additional LGPS pension and see if I can take this early without penalty.

The Additional Voluntary Contributions (AVCs) offered by my Local Authority are from Prudential or Standard Life

I can also buy Additional Pension Contributions (APCs)

I need to know that if I purchase any of the above options, that I can withdraw them before my pension age of 67.

kidmugsy

scoot65 wrote: »

In response to a question I'd asked a while ago

quote "I've read that 100% of current salary can be placed into a SIPP, does this figure take into account my current LGPS monthly contributions?"

and the reply I received was the following:-

That's 100% gross into ALL pensions, so deduct what is being paid into your LGPS and the 20% the taxman will contribute to your SIPP

Ah, the answer you got was misleading. As I said above the calculation for DB schemes is not done by adding the two contributions to the DB pension and subtracting the total from your salary. If nobody comes along to explain the calculation in detail, then to attract the experts to your case you could always start a new thread with the title "Unused annual allowance for DB scheme member".

scoot65

kidmugsy wrote: »

Ah, the answer you got was misleading. As I said above the calculation for DB schemes is not done by adding the two contributions to the DB pension and subtracting the total from your salary. If nobody comes along to explain the calculation in detail, then to attract the experts to your case you could always start a new thread with the title "Unused annual allowance for DB scheme member".

Thanks for the reply. Action duly noted!

AlanP_2

Your annual pension statement from your employer / scheme admins could show your Annual Allowance value, ours does - have you got one from last year?

It is a complicated calculation, with many variables particularly if you have pre-2014 (FS pension) and CARE which you probably have.

My wife and I are both in LGPS and what we do is wait until we get the statement for previous year and then work out how much "carry forward" that gives us to play with on top of the £40k AA for that year.

Then "guesstimate" the likely AA (based on say the 1 or 2% national pay award - more complicated if you have local awards and/or promotions etc).

Then use a combination of AVCs and SIPPs up to a bit below what we have available.

Repeat next year. NOTE - If you go down AVC route then our LGPS statements include that in the AA figure so we don't need to count it again, worth checking if yours do or don't.

AVCs attached to LGPS are great for taking a larger Tax Free Lump Sum but only at point of starting main scheme benefits. SIPPs are great for the post 55 and before main scheme time period.

Mix & Match possibly?

ValiantSon

scoot65 wrote: »

I was intending to buy only HSBC GS (Balanced) Acc.

Regarding my choice of a SIPP.
I do not intend to work until I'm 67. I currently have elderly parents 88yo / 91yo and when they are no longer here I intend to leave my job and my wife and I are to spend approx 6 months of the year in SE Asia.

(Although elderly, my parents are reasonably well, no major illnesses, and therefore it can't be predicted when they'll be no longer around....)


It had been suggested to me that a SIPP would be a good option to cover the period of time from leaving work until I receive my retirement pension at 67.

(If I take my LGPS pension early I get a reduced amount, so was intending on leaving it until I reach pension age)

I will look into buying additional LGPS pension and see if I can take this early without penalty.

The Additional Voluntary Contributions (AVCs) offered by my Local Authority are from Prudential or Standard Life

I can also buy Additional Pension Contributions (APCs)

I need to know that if I purchase any of the above options, that I can withdraw them before my pension age of 67.

I wouldn't bother with AVCs. They tend not to perform brilliantly. Buying additional pension is a better route. You will have to take an actuarial reduction if you draw your pension before your NPA (67), but this may not necessarily be as bad as you think. If you can work out what the LGPS pension would pay (with additional pension bought) at your desired retirement age, then you can compare that with likely income from a SIPP invested in HSBC Global Balanced. Assume moderate growth for the SIPP. You can then make some decisions about which route is best.

Prism

scoot65 wrote: »

I do not intend to work until I'm 67. I currently have elderly parents 88yo / 91yo and when they are no longer here I intend to leave my job and my wife and ....... spend approx 6 months of the year in SE Asia. .

Thats what I read on first glance and thought way to commit!

scoot65

AlanP wrote: »

Your annual pension statement from your employer / scheme admins could show your Annual Allowance value, ours does - have you got one from last year?

It is a complicated calculation, with many variables particularly if you have pre-2014 (FS pension) and CARE which you probably have.

My wife and I are both in LGPS and what we do is wait until we get the statement for previous year and then work out how much "carry forward" that gives us to play with on top of the £40k AA for that year.

Then "guesstimate" the likely AA (based on say the 1 or 2% national pay award - more complicated if you have local awards and/or promotions etc).

Then use a combination of AVCs and SIPPs up to a bit below what we have available.

Repeat next year. NOTE - If you go down AVC route then our LGPS statements include that in the AA figure so we don't need to count it again, worth checking if yours do or don't.

AVCs attached to LGPS are great for taking a larger Tax Free Lump Sum but only at point of starting main scheme benefits. SIPPs are great for the post 55 and before main scheme time period.

Mix & Match possibly?

Thanks the information, much appreciated.


It is the comment regarding SIPPs in your last paragraph which I was giving thought to.

scoot65

ValiantSon wrote: »

I wouldn't bother with AVCs. They tend not to perform brilliantly. Buying additional pension is a better route. You will have to take an actuarial reduction if you draw your pension before your NPA (67), but this may not necessarily be as bad as you think. If you can work out what the LGPS pension would pay (with additional pension bought) at your desired retirement age, then you can compare that with likely income from a SIPP invested in HSBC Global Balanced. Assume moderate growth for the SIPP. You can then make some decisions about which route is best.

Thanks again for your input.


The problem I have is that I do not know the date of my desired retirement age. It will only be when my elderly parents are sadly no longer here.....As I mentioned previously, although elderly, 88yo / 91yo my parents are reasonably physically well, no major illnesses, and therefore it can't really be predicted when they'll be no longer around....could be next year, could be several years' time...


This is another reason why I thought a SIPP may be the simplest option