New Member SIPP query

Dh6

Hi all,

I've been a member on here for a short while and have picked up on some great information. Im looking to start saving for retirement by opening a SIPP and investing in the HSBC FTSE all world index tracker to begin with. I will only be starting with a £2k lump sum and would like to pay in around £260 per month via a direct debit.

A little bit of info about myself;

I'm 32, married, kids, I own my own home worth around £240k. I've been self employed for around 10 years and I'm a basic rate tax payer. My only other investment as it stands is a LISA which I opened this year with 4K in.

I'd very much appreciate some advice on whether you agree with my above plans and it'd be great if you could point me towards an online platform which would work out the cheapest ( or best value for money ) for paying in monthly.

Kind regards

Dh6

[Deleted User]

For someone who is just starting Vanguard will provide the cheapest SIPP option - once it is set up early in the New Year.

They only give access to Vanguard products.

Dazed_and_confused

I've been self employed for around 10 years and I'm a basic rate tax payer

Where are you resident for tax purposes?

Remember that at the moment although you will need to include the pension payments on your Self Assessment return they won't save you any personal tax.

In your situation the tax benefit will all come from the basic rate tax relief added to the pension fund. So if you hand over £2,000 then the pension company, courtesy of HMRC, will add the 25% uplift. Same with your £260/month. They will add £65 giving you £325 in your pension fund.

I own my own home worth around £240k

Outright or with a mortgage?

Dh6

U.K. Resident. Self employed as sole trader and own house outright.

Dazed_and_confused

Ok, if you'd been Scottish resident there would be a chance the contributions would have saved you a tiny bit off your personal tax bill.

Paying off a mortgage early in favour of pension contributions tends to be (usually for valid reasons) unpopular on here so at least you don't have that quandary to worry about.

I suspect other posters may suggest you increase your contributions if possible but as being a "basic rate tax payer" is so vague that may not be possible. Profit of £11,251 could make you a basic rate payer this tax year. Profit of £50,000 would also make you a basic rate payer.

Albermarle

towards an online platform which would work out the cheapest ( or best value for money )

When you start out on your 'SIPP journey' the platform charges are not such a big issue.
0.1 or 0.2% here or there will have little effect on your pot , considering an index tracker could be very volatile ( up and down ) .
As your pot grows it is very simple to transfer it to another cheaper/better provider if you want to .
Have a look at this link :
http://www.comparefundplatforms.com/
The aforementioned Vanguard SIPP is not included as it is not actually available yet .

[Deleted User]

Extra 0.1% annual cost on a 10,000 balance = 100 quid over 10 years, assuming the balance is static (which it won’t be, so the cost will be higher). The effect of compounding escalates the cost, so long term cost is in thousands of pounds, even if you change to a different platform.

I agree that extra 0.1% isn’t life changing (unlike 1 or 2% as paid by some poor sods) but see no reason to pay it unless there is no other option.

Index fluctuations are irrelevant here. Indices fluctuate whether you pay more or less and you have no control. The costs are under your control.

Dh6

I've looked at AJ Bell and Charles Stanley as platforms but I'm a little confused as to the charges for paying in monthly rather than in lump sums.

I'm interested in the vanguard sipp depending on what it has to offer, but as far as I can divulge, I'm unable to hold the HSBC FTSE all world fund via vanguard.

I'd maybe look at investing in the vanguard LS60 once their sipp becomes available and would start paying in around the same amount as I would be into my HSBC tracker ( £260 p/m )

I'm looking at a long term strategy and would be looking to work for around another 30 ish years before I aim to slow down or retire altogether.

[Deleted User]

Dh6 wrote: »

I've looked at AJ Bell and Charles Stanley as platforms but I'm a little confused as to the charges for paying in monthly rather than in lump sums.

I'm interested in the vanguard sipp depending on what it has to offer, but as far as I can divulge, I'm unable to hold the HSBC FTSE all world fund via vanguard.

I'd maybe look at investing in the vanguard LS60 once their sipp becomes available and would start paying in around the same amount as I would be into my HSBC tracker ( £260 p/m )

I'm looking at a long term strategy and would be looking to work for around another 30 ish years before I aim to slow down or retire altogether.

If you click “compare” in the link provided above and enter your parameters, you can remove any confusion. Total costs will be provided for every platform, except Vanguard which won’t be opened until early in the new year. Vanguard will be the cheapest option for you but you can’t buy HSBC funds. VLS 100 is likely more appropriate for you than VLS 60 - and will provide returns similar to FTSE All World.

Dh6

Halifax share dealing and cavendish online via funds network are the top two. From my research up to now I'd rather hold the HSBC over the VLS 100 due to the weighting of the VLS towards the UK.

I aim to start off with 100 % invested in equities to begin with until I can build up a decent sized pot before I look at investing elsewhere maybe a vanguard multi asset fund.

cloud_dog

OP, in your situation I would ensure I maximise the LISA each year over pension contributions. The reason is that LISA withdrawals are tax free after age 60.

Considerations are around possible need for benefits or IHT considerations.