USS invest builder vs SIPP

thegentleway

Hi,

I'm trying to decide whether I'm better off increasing my contributions (currently 1%) to my USS investment builder or setting up a SIPP. As far as I can tell

USS investment builder:
- limited to 10 USS funds
- my employer subsidies the fees

SIPP:
- more choice for investment
- I pay the fees

So assuming the USS funds are decent, it's better to pay into it rather than a SIPP? Is the "do it for me" option good or should I select my own funds?

"Do it for me"
100% USS Growth Fund until you approach retirement age then it gradually reduces risk. I like this tapering option at you approach retirement but I think I can change back to this later?

"Do it yourself"
I could pick a riskier fund like USS Global Equity Fund. I'm 34 so won't be retiring for a while!

Thanks for the help and advice.

System

I would (I do) use the USS investment builder and choose the USS Global Equity Fund (and use salary sacrifice).

thegentleway

Economic wrote: »

I would (I do) use the USS investment builder and choose the USS Global Equity Fund (and use salary sacrifice).

great minds :beer:

Something else I've just thought of. My PAYE income is basic rate but my rental income takes me into higher rate. Does that mean I would be missing out on tax savings if I use the USS investment builder instead of SIPP? i.e. I'll only get 20% tax saving if I pay into USS but will get 40% paying into SIPP?

System

If you use USS then the higher rate tax relief is indirect as the pension contributions will reduce the amount of income on which you have to pay the higher rate (ideally to zero).

thegentleway

Economic wrote: »

If you use USS then the higher rate tax relief is indirect as the pension contributions will reduce the amount of income on which you have to pay the higher rate (ideally to zero).

Good point - thanks!

kidmugsy

So if you sal sac £1, say, you will avoid 12% NIC and (indirectly, as Ec says) avoid 40% income tax. Why would you not do it?

thegentleway

kidmugsy wrote: »

So if you sal sac £1, say, you will avoid 12% NIC and (indirectly, as Ec says) avoid 40% income tax. Why would you not do it?

lol - good question! I haven't done it up until now because:
- I'm young/stupid and didn't realise there were tax/NI savings
- I haven't really thought about retirement a lot up until now
- My "plan" was to buy lots of properties and live on the rental income

kidmugsy

thegentleway wrote: »

My "plan" was to buy lots of properties and live on the rental income

If ever you leave uni employment you could transfer your Investment Builder to a SIPP and invest in funds or companies that invest in residential accommodation e.g. Hearthstone, Grainger, ....