Confused

peter8888

Hi I'm 52 and recently left my job as a bus driver as I couldn't take it no more, I had a pension where the company matched my contributions, I am now a lorry driver but it is only small franchise that is poorly run, I have not even been auto enrolled into a pension yet, I started working their in February and was furloughed for the month of April too. I get paid £120 a day or 600 a week so it's about 30k a year, my bus was wage was 22k basic so it's better paid but as a company it's a shambles. I currently have 31k in my ig isa share trading account and 5k in premium bonds, I also have a final salary pension(Littlewoods) from one of my old jobs that I left in 2005 and I have just under 11 years in that scheme. I'm thinking of starting a sipp with vanguard or would I be better putting it into another shares isa but one that does the investing for me? And just keep my trading account aswell? 

Linton

I cant see any good reason to use an ISA  as a SIPP is more tax efficient and you will be able to access the money in 3 years time if you really need to.  As you are drip feeding into a relatively small pot I suggest you use a general well diversified fund such as is available from Vanguard and many other providers.

Personally I do not see the point in trading other than for enjoyment.  Is it making you a decent return?  If not, you could add some of your money from your trading ISA to your SIPP.

peter8888

Linton said:

I cant see any good reason to use an ISA  as a SIPP is more tax efficient and you will be able to access the money in 3 years time if you really need to.  As you are drip feeding into a relatively small pot I suggest you use a general well diversified fund such as is available from Vanguard and many other providers.

Personally I do not see the point in trading other than for enjoyment.  Is it making you a decent return?  If not, you could add some of your money from your trading ISA to your SIPP.

The charges on sipp and the time you draw the money down you then get taxed on it is that correct? So why is the isa not a better option at my age? 

Linton

peter8888 said:

Linton said:

I cant see any good reason to use an ISA  as a SIPP is more tax efficient and you will be able to access the money in 3 years time if you really need to.  As you are drip feeding into a relatively small pot I suggest you use a general well diversified fund such as is available from Vanguard and many other providers.

Personally I do not see the point in trading other than for enjoyment.  Is it making you a decent return?  If not, you could add some of your money from your trading ISA to your SIPP.

The charges on sipp and the time you draw the money down you then get taxed on it is that correct? So why is the isa not a better option at my age? 

When you put money into a SIPP it receives a 25% uplift from HMRC as a basic rate tax refund even if you did not actually pay any tax on it in the first place.  When you take the money out you get 25% tax free and then taxed on the rest.  So if you are a basic rate tax payer when you withdraw the money it works out you make a 6.5% tax gain on your original contribution.  If you are a non tax payer when you withdraw, the original 25% uplift is all gain.  

With an ISA you get no tax refund and no tax on withdrawal so you gain nothing from the tax system.

As regards charges, depending on the platform, holding a SIPP is generally the same as an S&S ISA.  Though the SIPP may have charges for withdrawal, again platform dependent.

Albermarle

One drawback of a SIPP compared to an ISA for a young person is that they can not access the money until they are 55.
However as you are 52 , this is not a big issue ( although you may not wish to take it out at that age but you have the choice)
So the SIPP wins due to the tax benefits outlined above.

Ceme3000

peter8888 said:

The charges on sipp and the time you draw the money down you then get taxed on it is that correct? So why is the isa not a better option at my age? 

Depending on when you want to retire and how much you need to live on it is possible to take the SIPP without paying any tax at all. So that's tax relief on contributions going in and tax free coming out!

If you retire early, have no other income and use the SIPP as a bridging pension then you can take £16666 per annum, the first 25% is tax free leaving £12500 taxable, but no tax is paid as it is covered by your personal allowance.  

MEM62

Whilst all the above advice is sound, you first approach should be to push your employer. They have a legal obligation to auto-enrol you.  You are currently missing out of the tax benefits and employers contribution.    

peter8888

My employer is a joke