12k to invest into funds

Lama_glama

Thank you so much!
£50 per month I can do it. Also with Fidelity I think I could also invest some money into funds like the ones Davidquizer was saying I think. If I go with Fidelity I might as well open the stocks and shares with them as well to keep both things under one platform.

Anyway I think the priority now is to put money onto the SIPP to avoid the 40% and then to put money on to the stock and shares ISA. Once I have done that we will think how to invest it One thing at the time I am trying to fix things up. Thank again for the help.

Alexland

Fidelity often run cashback incentives for new customers signing up via Quidco or Topcashback for example:

https://www.quidco.com/fidelity-stocks-and-shares-isa/

Beware that both Scottish Mortgage (leveraged) investment trust and the Lindsell Train funds are concentrated active investments with a risk profile unsuitable for most retail investors. It is so tempting to buy into what has been hot recently but I prefer a more passive approach with the majority of my investments so they are less vulnerable to style rotation.

Alex

Lama_glama

Thanks a lot for the guidance. I have just make a £3000 payment into a Fidelity SIPP.
Everything should have gone well as I paid with debit card and money was taken from my bank account. I guess I will receive a confirmation e-mail once the account will be effectively opened (hopefully in a week time?). So we made another step (to avoid the 40% taxation on higher earnings - unless they take almost one month to open it and I end up in the next fiscal year!). I have left the money as cash at the moment as I have not looked into the funds available yet.

Now the other next step should be to open a stock and shares ISA, put some money in and transfer my Nationwide cash ISA into the Fidelity stocks and shares.

I am unsure if it is better to open the stocks and shares now or to wait for the SIPP to be opened first, then log is with an username and open the stock and shares ISA. Basically it would be nice to have both SIPP and stocks and shares under the same account/username.

The other thing is I have the Nationwide 1.3% cash ISA that on the 10th of April is 1 year old. I am wondering if it is better to wait until the 10th of April for the year to cash in the 1.3% interest (little I know), or to open the stocks and shares straight away and begin the transfer as I would like to kill the Nationwide account (I am not sure if I am going to lose the 1.3% interest in this way though).

Any advice would be really appreciated. Thanks again!

Mr.Saver

Lama_glama wrote: »

...the £1500 should become £1875 into my pension fund immediately after I make the contribution.

This isn't always true.

With some platforms the £1,500 does become £1,875 immediately, but with many other platforms (including Fidelity) it takes some time. In some cases, it can take up to two months for the £1,500 to become £1,875.

But this doesn't affect you to claim tax relief for this tax year. HMRC only cares on which day did the pension provider receive the initial £1,500. They don't care on which day did you receive the £375 tax relief.

Lama_glama

Thanks for the advice (which is particularly welcomed as I should receive from Fidelity hopefully soon that my SIPP has been opened).

Just to understand how it works £1,875 is £1500 x 1.25 so it means the HMRC adds up 25%.

When I call the HMRC to claim pension tax relief (as I went into the 40% tax bracket) which number are they looking for? £1500 or £1875? Which calculation do they run to give the refund? Do they add again 25%, which means if I transferred £1500 I am going to have another £350 tax refund?

Of course I am going to explain everything to the HMRC, this is more my curiosity to understand how it works (as part of my learning curve), but also to avoid potential mistakes in the future.


Thanks a lot.

Mr.Saver

Lama_glama wrote: »

Thanks for the advice (which is particularly welcomed as I should receive from Fidelity hopefully soon that my SIPP has been opened).

Just to understand how it works £1,875 is £1500 x 1.25 so it means the HMRC adds up 25%.

When I call the HMRC to claim pension tax relief (as I went into the 40% tax bracket) which number are they looking for? £1500 or £1875? Which calculation do they run to give the refund? Do they add again 25%, which means if I transferred £1500 I am going to have another £350 tax refund?

Of course I am going to explain everything to the HMRC, this is more my curiosity to understand how it works (as part of my learning curve), but also to avoid potential mistakes in the future.


Thanks a lot.

In short, HMRC will use the total gross amount that you've paid into your pension, and then work out the tax relief as 20% of the lesser of your income in the 40% tax band or the gross amount paid into your pension.

So for £1,875 gross pension contribution, you will get £1,875 * 20% = £375 tax relief, given that your income in the 40% tax band is no less than £1,875.

To give you an idea how does this work, assuming you have £1,000 income in the 40% tax band, which means you will have to pay £400 tax on that. If you pay £800 (net) from your back account into your pension, you will get £200 tax relief (25% of the net, or 20% of the gross) added to your pension automatically. This then becomes £1,000 gross in your pension. After that, you claim tax relief from HMRC, and they will give you 20% of the £1,000 gross contribution - £200, paid via tax code change or into your bank account. So at the end, you paid £400 tax, get £200 tax relief in pension, and £200 outside pension, you effectively did not pay any tax. You earned after tax income £600 from the £1,000 in the 40% band, paid £800 into your pension but get £200 back to your bank account, so it only costs you £600.

Lama_glama

Thank you very much Mr.Saver, I have finally understood!


Now to keep you updated I have phoned Fidelity. They confirmed they opened my SIPP account and I should receive a confirmation letter early next week.


I have also opened a stocks and shares ISA where I will move the money on my cash ISA (transaction went through, I do not have onlice access yet).


Once I will get online access I will decide what funds to invest in. Also I need to change the way the money on my Aegon workplace pension is invest, and choose something better than what I have at the moment as the "Aegon Scottish Equitable Cautious Lifestyle" looks really like a bad choice.



They have got an investment list:
https://secure.aegonretirementchoices.co.uk/InvestmentsList/fund_list.aspx?page=25



Any suggestions are more than welcome. Thanks again for all the support received.

Mr.Saver

Lama_glama wrote: »

Thank you very much Mr.Saver, I have finally understood!


Now to keep you updated I have phoned Fidelity. They confirmed they opened my SIPP account and I should receive a confirmation letter early next week.


I have also opened a stocks and shares ISA where I will move the money on my cash ISA (transaction went through, I do not have onlice access yet).


Once I will get online access I will decide what funds to invest in. Also I need to change the way the money on my Aegon workplace pension is invest, and choose something better than what I have at the moment as the "Aegon Scottish Equitable Cautious Lifestyle" looks really like a bad choice.



They have got an investment list:
https://secure.aegonretirementchoices.co.uk/InvestmentsList/fund_list.aspx?page=25



Any suggestions are more than welcome. Thanks again for all the support received.

I'm surprised that you've gone to page 25 on the investments list.

You should think about your time frame, goal and risk attitude before searching for investments.

If you are unsure, stick with the default fund might be a good idea, because those default funds are default funds for reasons.

It's hard for us to recommend investments for you, because we don't know much about you. The recommendation I'd give you is to educate yourself. Nobody is born with the knowledge of investment and the ability to pick the best ones, everyone has to start from somewhere. It's never too late to learn.