SIPP Advice

LookingForTheSun

Hi,
I'm after a bit of advice on pensions. My understanding of SIPPs is that:

1. They're a pension vehicle which can't be touched until you're at least 55.
2. You get tax back, 20%-40% depending on your tax bracket.

I'm in my late 30's and due to retire around 2048. My state pension forecast is around £9k and I've got a work place pension which is forecast to provide around £29k per annum. With a bit of luck, my annual pension will be at least be £38k in 2048.

I'm looking at investing in a SIPP as I like dabbling with shares and the 20% tax back seems like a good option on the face of it. I have a couple of questions:

1. If my pension is already £38k per annum, but I haven't opted to withdraw a large lump sum from my work place pension, can I still use the 25% allowance to withdraw a lump from the SIPP?
2. Will SIPP pension providers allow a gradual draw down? My father in law has a SIPP, the pension provider will only allow a full withdrawal or transfer, which of course has significant tax implications. The provider will also allow transfer to another provider and has offered to do so with a £1500 "advice fee" for their services.

The second point makes me wary, if SIPP providers only allow full withdrawals, that's a hefty tax bill and I'm not sure having money tied away until 55 is worth the limitations...

Advice appreciated.

Thanks

Brynsam

Masses of clear, helpful info available if you google on 'SIPP' e.g. https://www.hl.co.uk/pensions/sipp/what-is-a-sipp?theSource=PCHLS&Override=1&sitelink=C&gclid=CjwKCAiA9JbwBRAAEiwAnWa4Q_klVQufBsIyVjfPJixLRCPyf4sNqfVQK7HxB26GZ6QI63k46qfELRoCx6kQAvD_BwE and https://www.youinvest.co.uk/faq/sipp

Albermarle

I'm after a bit of advice on pensions. My understanding of SIPPs is that

All DC pensions are governed by the same rules , whether they are a SIPP; personal pension; stakeholder pension or a typical DC workplace pension ( it sounds like your workplace pension is a DB scheme )

Will SIPP pension providers allow a gradual draw down? My father in law has a SIPP, the pension provider will only allow a full withdrawal or transfer, which of course has significant tax implications.

All modern pensions will allow a drawdown . Many older pensions do not due to legacy IT issues.

The provider will also allow transfer to another provider and has offered to do so with a £1500 "advice fee" for their services.

Your FIL should choose a new pensions provider and then ask them to transfer the old pension into it .
No need for an advice fee , although the old pension provider may charge an exit charge.
Some providers will refund this charge and/or give cashback if you transfer a pension to them.

SonOf

The provider will also allow transfer to another provider and has offered to do so with a £1500 "advice fee" for their services.

It is rarely a good idea to get restricted advice from the company that is also retailed the financial product. Whenever advice is needed, then it should be an IFA. Not a restricted FA.

The second point makes me wary, if SIPP providers only allow full withdrawals, that's a hefty tax bill and I'm not sure having money tied away until 55 is worth the limitations...

There are multiple ways to drawdown. Phasing being one of them. Full UFPLS is not generally regarded as a drawdown strategy as its an instant one-off. Drawdown is more generally regarded as a process over a period.

My father in law has a SIPP, the pension provider will only allow a full withdrawal or transfer,

That doesnt sound SIPP like. That is more in line with a stakeholder pension or a legacy personal pension.

Brynsam

Albermarle wrote: »

All DC pensions are governed by the same rules , whether they are a SIPP; personal pension; stakeholder pension or a typical DC workplace pension ( it sounds like your workplace pension is a DB scheme )

All modern pensions will allow a drawdown . Many older pensions do not due to legacy IT issues.

Big differences in 'rules' depending on whether the DC arrangement is set up under trust or under contract.

Stakeholder legislation has some significant differences from other types of DC arrangement. Not sure that any stakeholder allows drawdown, however 'modern' it might be in terms of when it was set up.

Dazed_and_confused

I'm after a bit of advice on pensions. My understanding of SIPPs is that:

1. They're a pension vehicle which can't be touched until you're at least 55.
2. You get tax back, 20%-40% depending on your tax bracket.

It isn't as simple as that.

There are three mainstream methods of contributing to a pension. Plus salary sacrifice.

The two commonest work in totally different ways tax wise.

With "net pay" you pay less tax as a result of contributing to the pension (unless you are a low earner). For example your salary is say £25,000 and you contribute 5% via a net pay scheme so you are only taxed on £23,750 (and this is the pay figure which goes on your P60).

With "relief at source" the basic rate tax relief is added to the pension fund and for most people there is no personal tax saving. For example you contribute £400 and the pension company, courtesy of HMRC, add the 25% uplift so you have £500 in your pension fund but your personal tax liability won't be any different.

LookingForTheSun

OK, thanks for the advice, what I think has been said is that:

1. My total income will be considered as income, so there's no guarantee of a 25% lump sum tax free (assuming my other income puts me above a tax threshold).

2. Most modern SIPP providers should allow a gradual draw down.

Dazed_and_confused

1. My total income will be considered as income, so there's no guarantee of a 25% lump sum tax free (assuming my other income puts me above a tax threshold).

Where are you getting that impression from?