Is SIPP best route?

djjd70

I’m 49 and hoping to retire at 60. I will get a small portion of my teaching pension including lump sum at 60, then will have another small pension added to that at 63 from a previous company pension. I’ll then have my full teaching pension together with state pension at 67. On current projections, the amount I’ll receive at 67 is looking like a good enough sum to live off.

What I’m trying to plan for (a bit late probably, but better late than never) is to have a bit more money between 60 and 67. I'm not averse to doing some part time hours in my 60s, but don’t want to be pressured into having to do lots.

Until very recently I thought investing was complicated, extremely risky and something I’d need to do a lot of reading about and spend a lot of time monitoring, and I didn’t want to do that. Read an article that changed that perspective and I’ve recently started a stocks and shares ISA after years of saving in relatively low interest easy access and fixed term accounts. My thinking when opening this ISA would be to pay into it for 10 to 15 years to boost retirement funds.

I always thought that because I am paying into my teaching pension I couldn’t take out another private pension at the same time. The reading I’ve been doing while looking into S&S ISAs has shown me this isn’t the case.

Now I’m thinking I should be starting a SIPP as even though 75% of it will be taxable on exit, the tax benefits when paying in means it’s better value than a S&S ISA. (I’m a basic rate tax payer.)

I’ve looked into AVCs before, but heard from retired colleagues their disappointment about amount of return compared to what they paid in and also as they’re taken from salary, it would mean remaining as a teacher for the next 11 years which I probably won’t do.

Just looking for peoples’ thoughts...does SIPP sound like best route at the moment?

tacpot12

Yes, a SIPP does sound like a good route for you. You should check that the charges for a SIPP are not going to make it more expensive than the AVC route, and that you cannot invest in the sort of funds you want to be able to invest in via AVCs.

djjd70

Thanks tacpot12. Have heard that the Prudential AVC charges aren't particularly clear and transparent. Also, I'm assuming if I left teaching at 55 I could no longer pay into AVCs?

Albermarle

The benefit of paying into a pension rather than a stock and shares ISA is 6.25% for a basic rate taxpayer . The only downside is that you can not access the money until you are 55.

You should be aware that you have to actively manage a SIPP to some extent, and the huge choice of investments can be daunting to some. Although there usually some ready made portfolios available but these tend to be expensive.
Here is some research material on the platforms ( but not the actual investment funds)
https://monevator.com/compare-uk-cheapest-online-brokers/

You should also look at a more traditional personal pension as a possibility. These need less managing, although have a more restricted range of investments ( which for many people is an advantage )
https://www.standardlife.co.uk/c1/pensions-and-retirement.page
https://www.nutmeg.com/pensions
https://www.cavendishonline.co.uk/stakeholder-pension

Linton

One adavantage of AVCs with a DB pension is that you may be able to take the DB pension lump sum from the AVC so possibly leaving you with the full DB pension and accessing the whole of the AVC tax free.. I dont know whether this is the case with the teachers pension. It may be worth looking into, assuming you could take advanatage of this as well as accumulating sufficient for a early reitement.

SonOf

I’ve looked into AVCs before, but heard from retired colleagues their disappointment about amount of return compared to what they paid in and also as they’re taken from salary, it would mean remaining as a teacher for the next 11 years which I probably won’t do.

AVCs do the same job as a SIPP. Indeed, for many people, the in-house AVC has provided regular steady returns at the same level that similar funds in a SIPP has given.

If the retired colleagues are disappointed about the amount then it suggests it has more to do with either not paying enough in..... if you pay in peanuts, you get back peanuts or they had an unrealistic expectation and a SIPP would not change that.

Just looking for peoples’ thoughts...does SIPP sound like best route at the moment?

Not possible to say at this stage. SIPPs are the advanced investor option. There are also stakeholder pensions, personal pensions and master trust pensions (robo-guidance style).

Have heard that the Prudential AVC charges aren't particularly clear and transparent.

That is old fashioned, out-of-date rubbish talk. Whoever told you that is carrying bias and incorrect info.

djjd70

Thanks all. More to look into. I'm kicking myself that I didn't start this process at least 10 years ago and thought I was being clever just moving savings around each year to benefit from dismal rates!

These boards are great for getting your head around some complex issues. Should be taught in schools (says the teacher with enough workload already!) Thanks again.

xylophone

See

https://www.pru.co.uk/rz/teachers/#apply

Thrugelmir

djjd70 wrote: »

Thanks all. More to look into. I'm kicking myself that I didn't start this process at least 10 years ago and thought I was being clever just moving savings around each year to benefit from dismal rates!

Investing isn't always a one way street. The longest market bull run in history isn't going to last forever.

Albermarle

What I like about them, HL

Not everyone would agree with you it seems- news from Monday:

Among a sea of red in the blue-chip index today Hargreaves Lansdown stands out after slumping almost 7%.