Sanity check on investment options

Blackavar

Hi

I am retired with no earned income. I have a S&S ISA, an uncrystallised private pension pot, a small as yet unused drawdown SIPP, receive SP and Premium bonds.

For some time, my living expenses have come from my SP, savings, and UFPLS from private pension pot.
I want to move some (or all) of the premium bond money into investment.
All of the info I research assumes you are a tax payer, which I haven't been for a while so it's a bit confusing.
So my question is:
Can I add this to my Drawdown SIPP, or even open a new Drawdown SIPP? I’m assuming not as it seems you need to be a tax payer although there is no tax advantage to be gained from my Drawdown SIPP.
Or do I need to open a General Investment Account which I think I need to pay Capital Gains Tax on any profit over my tax allowance?
I've only just come across this Investment Account option and assume it's for people who can't have a SIPP.
Any clarity on this would be much appreciated.

Audaxer

If you have no earned income you can only pay £3,600 gross into a SIPP each tax year - that is you contribute £2,880 into the SIPP and HMRC adds £720 tax relief. To move all of your PB money into investment you would be best investing it within an S&S ISA as you can contribute up to £20k per tax year.  So even if you have the maximum £50k in Premium Bonds, it shouldn't take that long to get it all invested in an S&S ISA.

Blackavar

Thanks but me and Mrs already have maxed S&S Isa’s. I guess the general investment account is my only option 

Linton

Blackavar said:

Thanks but me and Mrs already have maxed S&S Isa’s. I guess the general investment account is my only option 

Or pay into SIPPs for yourself and the Mrs and wait 4 months til the next tax year,  Then you can repeat the SIPPs and put 2X£20K into S&S ISAs.

Blackavar

Thanks for input.
Got to admit I was hoping I had misunderstood SIPP rules and I could just pay into my drawdown SIPP as I will pay tax when withdrawn.
 If I want to put more cash into investment now would my only option be an 'investment account'. Can anyone explain what this is and why it is used please? 

gm0

General Investment Account is just jargon for a stocks bonds and shares account which doesn't have a special tax wrapper like a pension a SIPP or an ISA.  (The US versions have different names and rules but the concept is the same).  Funds or individual things held in it. Vanguard VLS60 units, a share of Tesla Stock.  A bond.

In an investment account - in practical terms you will have to care about acquisition and disposal values and Capital Gains Tax (which doesn't apply to SIPP, Pension or ISA. This happens on your tax return. Every year.  Welcome to CGT.  

And you work the assets and disposals out to manage your Capital Gains tax allowances and liabilities.  So its a nice problem to have but it generates a chunk of additional admin and disposal planning.  So worth avoiding if you can flex consumption, ISA and pension to do so and avoid having one.

Upon death - GIA's are like ISA's in that they are counted as assets inside your estate for inheritance (IHT). 
Pensions get a bit of special handling w.r.t IHT.  This gets a bit more complex at probate for your executor.

So an investment account is just another name for an old fashioned stockbroker trading account with access to funds, markets, or individual stocks shares and bonds or tradeable derivatives thereof.   If it is properly implemented it will provide the reporting that makes the CGT tax reporting less traumatic.  Seek consumer feedback in choosing your provider.

Linton

Better to use an S&S ISA than a GIA as apart from complete protection against tax you don’t have to keep records to cover the unlikely situation that HMRC ask for them. There is little point in using ISAS for cash at the moment.

Blackavar

gm0 said:

General Investment Account is just jargon for a stocks bonds and shares account which doesn't have a special tax wrapper like a pension a SIPP or an ISA.  (The US versions have different names and rules but the concept is the same).  Funds or individual things held in it. Vanguard VLS60 units, a share of Tesla Stock.  A bond.

In an investment account - in practical terms you will have to care about acquisition and disposal values and Capital Gains Tax (which doesn't apply to SIPP, Pension or ISA. This happens on your tax return. Every year.  Welcome to CGT.  

And you work the assets and disposals out to manage your Capital Gains tax allowances and liabilities.  So its a nice problem to have but it generates a chunk of additional admin and disposal planning.  So worth avoiding if you can flex consumption, ISA and pension to do so and avoid having one.

Upon death - GIA's are like ISA's in that they are counted as assets inside your estate for inheritance (IHT). 
Pensions get a bit of special handling w.r.t IHT.  This gets a bit more complex at probate for your executor.

So an investment account is just another name for an old fashioned stockbroker trading account with access to funds, markets, or individual stocks shares and bonds or tradeable derivatives thereof.   If it is properly implemented it will provide the reporting that makes the CGT tax reporting less traumatic.  Seek consumer feedback in choosing your provider.

Thanks so much for taking the time. This is a great explanation and just echoes the fact that I should have started my pension and S&S ISA so much earlier in life.  

Blackavar

Okay, my last question on this is: I have a small and bigger pension pot. The small pot is about £35K. Can I take 25% and put into my/our S&S ISA and put the rest into my existing drawdown SIPP or would the remains have to go into a new drawdown SIPP? I am (too late) trying to maximise our SIPP's  as our best withdrawal option in retirement. 

Dazed_and_C0nfused

The maximum you can pay into a SIPP is £3,600 (inclusive of the £720 basic rate tax relief).

Is that the amount you meant or were you thinking of something larger?

green_man

Blackavar said:

Okay, my last question on this is: I have a small and bigger pension pot. The small pot is about £35K. Can I take 25% and put into my/our S&S ISA and put the rest into my existing drawdown SIPP or would the remains have to go into a new drawdown SIPP? I am (too late) trying to maximise our SIPP's  as our best withdrawal option in retirement. 

In theory you could withdraw 25% and put into an ISA, but I thought you had no ISA headroom?, what advantage would this be? Unless you actually need the cash leave it in the pension.  As for taking it out and putting in another SIPP this might fall foul of pension recycling rules, so may not be allowed (depending on other income you might get away with it).