S&S ISA or SIPP?

GBY

I'm curious to know people's thoughts on this.



I have a defined benefit pension from a previous employer (starts at 60) and a definied contribution one with my current employer. For the latter I am invested in a low cost world tracker and I salary sacrifice 15-20% each month, my employer contributes 10%.


I have a S&S ISA which contains a few funds and shares and I contribute each month. The main purpose is to supplement my retirement but it's good to know that some of it could be available for any reason. In this case would it be sensible to move the

majority of the funds to a SIPP, keeping a percentage in the ISA, to benefit from the tax relief now? I'm just below the 40% band but sufficient overtime could take me over.



I have cash savings also.



I'm 46 and male.

Bravepants

I think the main considerations as to whether to save in an ISA or a SIPP are:



1. Your current tax band: Are you a 40% tax payer at the moment and will you be a 20% tax payer in retirement? How sufficent and reliable is your overtime? If you are 20% now, then you will not benefit that much from the SIPP tax relief apart from the 25% tax free capability on drawdown.



2. How you intend to draw down your SIPP: Will you retire early and use the SIPP to bridge to your pension at 60? Will you drawdown only up to your tax allowance each year plus the 25% tax free component?

Alexland

If you have access to a salary sacrifice pension this would be a more efficient way of contributing more into a pension than making a direct contribution into a SIPP. If you want the additional SIPP investment choice then ask your current workplace pension provider if you are allowed to partially transfer out lump sums into a SIPP while remaining a contributing member.

GBY

Thanks for the responses.

george4064

How much ISA allowance do you have left for the current tax year?

Afraid_of_Kittens

I have 3 Local Government Pensions - 2 that I will get aged 60 plus a nice lump sum.

With my current employer I have a NEST pension - I have put it into the Sharia fund (High risk but I can afford the risk as I will get generous LGP).

Seperately I have a Stock and Shares ISA - I drip feed in £30 per month per fund (ie £240) into 8 seperate Legal and General funds in a sort of passive invetment https://monevator.com/category/investing/passive-investing-investing/

I want the best of both Worlds - a good pension and a growing stoks and shares ISA. I can afford the risk.

MaxiRobriguez

Bravepants wrote: »

I think the main considerations as to whether to save in an ISA or a SIPP are:



1. Your current tax band: Are you a 40% tax payer at the moment and will you be a 20% tax payer in retirement? How sufficent and reliable is your overtime? If you are 20% now, then you will not benefit that much from the SIPP tax relief apart from the 25% tax free capability on drawdown.



2. How you intend to draw down your SIPP: Will you retire early and use the SIPP to bridge to your pension at 60? Will you drawdown only up to your tax allowance each year plus the 25% tax free component?

This is the correct response.

If 40%+ tax payer, salary sacrifice or SIPP is far better than S+S ISA, but/and if you intend to retire prior to DC crystalisation age (currently 55) you will need to bridge the gap somehow, so a small S+S ISA portfolio may be necessary to tide you over for a handful of years.

GBY

george4064 wrote: »

How much ISA allowance do you have left for the current tax year?

I don't have the exact figure to hand but around £13K including cash ISA.

GBY

Overtime is occasional, but that and company bonus tips me into 40%. I salary sacrifice the bonus into the pension and that takes me back under.


I hold two groups of shares and two funds within my ISA which are not available within my company pension, hence questioning whether they are better held within a SIPP rather than ISA. The quantity is an amount I am prepared to risk in the hope of better returns and prefer to hold these rather than transfer to my work pension. The main pot is in the world tracker within my work pension.


Good points about bridging the gap in my late fifties should retiring before 60 be a realistic option.