Investment strategy - SIPP vs S&S ISA

Blackavar

I am curious to understand why people have different investments in their SIPP from their S&S ISA.
I have been running both for a few years and many of my choices appear in each.
Now, at 65 I wish it was all in S&S ISA for tax reasons.
Thanks for any input.

Audaxer

Blackavar said:

I am curious to understand why people have different investments in their SIPP from their S&S ISA.
I have been running both for a few years and many of my choices appear in each.
Now, at 65 I wish it was all in S&S ISA for tax reasons.

I guess that younger people may want to put higher risk investments in a SIPP as they can't touch them for years, but they may want more medium risk funds in an S&S ISA if not intended to be invested for so long. However when retired may be better to have the same funds in both, or some investors may have say, an income portfolio in one wrapper and a growth portfolio in another wrapper. I only started a SIPP after I had retired so I only have a small SIPP in cash.

I agree it would probably be better for you to have it all in an S&S ISA now, but you will obviously have benefited from the tax relief on the way in, so overall you should have gained from investing in the SIPP.  

Alistair31

SIPP are tax advantaged so you get compound growth on large amount from early on, of course taxed on the way out but that can be managed efficiently. 

SIPP not considered if you ever need to claim benefits, any significant ISA holding and you’re expected to deplete that before getting any help. 

SIPP locked away so there is no temptation to by the latest iPhone/BMW etc.

People using ISA may allocate what they need for early retirement and load up SIPP for the later part of life.

bowlhead99

ISAs can be accessed earlier in life, and more flexibly (you can take money out of them for spending without risk of needing to pay income tax on a big withdrawal). So some people may prefer to have their less-liquid, more volatile or 'longer term' investments in their SIPP rather than ISA, because it's the ISA that will get called on for occasional planned (or unexpected) spending needs.


However, as retirement approaches if you are holding decent amounts of money in both pots and are comfortable taking ad-hoc withdrawals from the pension pot while keeping within the low or nil rate tax bands when cash is needed, you might prefer to have your relatively lower-returning assets in the pension - because if something is going to grow a lot, you'd prefer it to do that where there is no further tax to pay, rather than in a pension where it gets taxed on withdrawal.

Now, at 65 I wish it was all in S&S ISA for tax reasons

Well yes it would be nice to have it where there is no further tax due when you want to access it, but it was probably worth putting it into the pension to get a higher percentage in tax relief on the way in than you'll pay on the way out, rather than exclusively having used ISAs and avoided pensions.

Blackavar

Okay, understand the difference and benefits between SIPP and S&S ISA but wondered why people invest differently between SIPP and S&S ISA - different investments? 

bowlhead99

Blackavar said:

Okay, understand the difference and benefits between SIPP and S&S ISA but wondered why people invest differently between SIPP and S&S ISA - different investments? 

See my first and second paragraphs of my post before your most recent reply, which explain why people would choose to hold a different mix of assets in their two separate pots due to (a) the timescales on which they may require access to the contents of those pots, and (b) the tax consequences of generating different levels of return in investment accounts which have differing tax rules.

Prism

Blackavar said:

Okay, understand the difference and benefits between SIPP and S&S ISA but wondered why people invest differently between SIPP and S&S ISA - different investments? 

My SIPP is for my retirement which starts sometime between the age of 55-60 (100% equities)
My ISA is for anything else that might come up - kids university costs, pay of the mortgage should the rates ever go up, retire before 55. (50-60% equities)

dunstonh

Now, at 65 I wish it was all in S&S ISA for tax reasons.

Why?  For most people, since 2015, pension trumps ISA on tax efficiency.

Okay, understand the difference and benefits between SIPP and S&S ISA but wondered why people invest differently between SIPP and S&S ISA - different investments? 

"most" people have a different provider for their pension than they do their ISA.   That is for historical reasons.    However, for those on a single platform, I would say most use the same investments in my experience.   Although sometimes we have used our long term spread on one wrapper and medium-term spread on the other wrapper based on the draw rate of their portfolio (one being drawn on and the other not).  So, the same funds but different weightings based on timescale.  And we have used short term a number of times when lump sums are planned to be taken (split portfolios within the same wrapper)

Albermarle

you might prefer to have your relatively lower-returning assets in the pension - because if something is going to grow a lot, you'd prefer it to do that where there is no further tax to pay, rather than in a pension where it gets taxed on withdrawal.

Also if you have a potential LTA issue with pensions , then not much point pursuing a high risk/high growth strategy, as you kind of lose whatever the result. In this case you might also then choose a higher risk/higher growth strategy in the ISA.

AnotherJoe

Blackavar said:

I am curious to understand why people have different investments in their SIPP from their S&S ISA.
I have been running both for a few years and many of my choices appear in each.
Now, at 65 I wish it was all in S&S ISA for tax reasons.
Thanks for any input.

Would you still say that if the SIPP was reduced by 20-40% before it was moved into your ISA ?

Otherwise you are just in cake and eat it territory