New Member SIPP query

Dh6

What do you refer to in relation to inheritance tax and or benefits, cloud dog?

fronty

Dh6 wrote: »

Hi all,

Im looking to start saving for retirement by opening a SIPP and investing in the HSBC FTSE all world index tracker to begin with.

Take a look at the HSBC Global Strategy funds - they are similar to VLS but have less weighting in the UK. They more accurately reflect the size of the global economies.

cloud_dog

Dh6 wrote: »

What do you refer to in relation to inheritance tax and or benefits, cloud dog?

The caveat (downside) for using or maximising a LISA for actual retirement planning is that if you ever needed to rely on means tested benefits then the monies in a LISA would be counted, or you would be expected to use whilst unable to earn (even with the associated penalty for early withdrawal). Pension monies / accounts are excluded from consideration; so a plus for using a pension

Re IHT, monies in a pension are excluded from IHT considerations up to age 75, I believe, and DC pensions are transferable on death up to 75 (one of the pension experts will correct me if that is not quite correct).

Dh6

Would it be more beneficial to pay into my wife's LISA rather than pay into a pension fund?

Albermarle

Re IHT, monies in a pension are excluded from IHT considerations up to age 75, I believe,

Money left in a DC pot when you die is not included as part of your estate , so is never subject to IHT regardless of the age you die .
Beneficiaries of the pot will pay normal income tax when they draw on the pot if you die after 75 , but no tax payable before that.

Sheriff_Fatmen

Dazed_and_confused wrote: »

Where are you resident for tax purposes?

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.

Excuse my ignorance but would they not add 20% (basic rate tax at 20%) rather than 25% ??

lisyloo

Sheriff_Fatmen wrote: »

Excuse my ignorance but would they not add 20% (basic rate tax at 20%) rather than 25% ??

20 is 25% of 80.

So if you put £80 in net you get £20 tax
20/80 is a 25% uplift.

Albermarle

Excuse my ignorance but would they not add 20% (basic rate tax at 20%) rather than 25% ??

Let's say you earn £1000 and you pay 20% tax on it , so leaving £800 net . You add £800 to your pension and HMRC adds 20% ( as you suggest ) . Now you have £960 , so you are not getting the full tax relief.
If you add 25% to £800 , you get back to a £1000.
Another way to look at it is that you need to earn £1250 to get a net/after tax £1000 .

cloud_dog

Dh6 wrote: »

Would it be more beneficial to pay into my wife's LISA rather than pay into a pension fund?

Bareing in mind the same caveats previously mentioned and if your wife is similarly not a HRT payer or is paid via Salary Sacrifice, and is happy to access the money from age 60 then from a purely financial perspective, yes.

But, supposing you want to draw your pension from 55 and you have no other taxable income you could each draw £16666pa based on current allowance and taxation rules using UFPLS and pay no income tax.

It usually makes sense to make use of partners allowances.

EDIT: I see there is a useful comparison page on MSE (thanks masonic)
https://www.moneysavingexpert.com/savings/lifetime-isas/#pension-2

Dh6

If my wife and I were able to save more than the 4K a year each into our Lisa's, would it then become logical to open up our own SIPP's?