open a SIPP at 69yrs with £2880 a year, worth doing?

shaz4473

Hoping to get some easy to understand advice as I am looking at my mums finances with her over the holidays (not much else to do!!) and I have a SIPP  (age 47) and wonder if it is worth my mum opening one?
She is retired, aged 69 and has income from a state pension of around £500 per month.  She also has a personal pension that she is not drawing from yet and it has 2022 as the retirement  date.    She has invested her yearly allowance in stocks and shares isa for this year and has decided to close a monthly saver early to invest the amount of £2500 elsewhere as the interest rate has plummeted.  I wonder if it is worth opening a SIPP to put away £2880 this financial year and then the same in April in the new tax year and subsequent years up to her reaching age 75.  Would this be a good idea instead of investing the money in a dealing account online which would be invested in the same shares but just within a different wrapper?

I want my mums money to work the best for her but also want to do the right thing

Audaxer

Yes, it's better than putting it in a general investment account. If her pension income is within her personal tax allowance, she may even be able to get even more benefit as the £720 tax relief added may not be subject to any tax when withdrawn, or most of it could possibly be taken out tax free. She doesn't even need to invest it within the SIPP as she could leave it as cash to be withdrawn each year after the tax relief is added, and repeat the same in subsequent years up to age 75. There is a very long thread about that in this Forum, which may be worth a read if you are interested.

NottinghamKnight

Yes, almost certainly worth paying £2880 into the sipp and gaining the increase to £3600. The one consideration may be whether and what to invest in, any equity investment gas the potential to lose money especially over the short term so if she is looking to draw in only a few years then some may say it's best to hold in cash. 
If she has spare cash to live off then it may be worth looking at state pension deferral which gives a guaranteed 5.8% uplift for every year deferred. 

shaz4473

thank you both for your input which has been easy to understand and I think that I will find the thread that you suggest Audaxer and have a read over it.  
NottinghamKnight, I think that my mum did defer her state pension and I do appreciate you pointing out about the potential to lose money as well and we hope that this money can be invested for the next 5 years with yearly deposits of the £2880 being added.

dunstonh

 She also has a personal pension that she is not drawing from yet and it has 2022 as the retirement  date

The retirement date is just an indication.  It doesn't mean it needs to be taken then.

  I wonder if it is worth opening a SIPP to put away £2880 this financial year and then the same in April in the new tax year and subsequent years up to her reaching age 75. 

If the money is available then the answer would be yes most of the time (but not all of the time).

 Would this be a good idea instead of investing the money in a dealing account online which would be invested in the same shares but just within a different wrapper?

Whilst a small amount in GIA would not be taxable (due to CGT allowance and dividend allowance), the pension wrapper would be more advantageous in most scenarios.

RetSol

Reading this thread is making me wonder (yet again) whether I ought to be doing this.  I am a BR taxpayer in receipt of a DB pension.  I have no earned income at present but intend to start earning a modest income from self-employment in 2121. I am dripping money into an S+S ISA this tax year and investing it (probably won't hit 20k).  I may invest more next tax year but probably less than 20k.  I intend to leave the money invested for at least 5 years.  I had decided against using a SIPP because (a) it seemed like unnecessary additional complexity for little reward and (b) there seem to be charges for withdrawing from a SIPP (although I may be wrong about this and perhaps it depends on the provider).  From an admin point of view, having a SIPP open might be useful as a home for future earned income.  I have a modest dc pot from a former job (tfls taken but MPAA not triggered) which could presumably be moved to the SIPP although I am happy with it where it is for the time being.   Any thoughts, wise ones? 

Dazed_and_C0nfused

As an existing basic rate taxpayer you are likely to be limited to the standard 6.25% benefit (before investment returns/losses) from doing this but that is a good point to be starting from.

If your business profits exceed £3,600 in any tax year then you can contribute 100% into the SIPP (you pay 80% and the pension company adds the basic rate tax relief) if you wish.

Others will no doubt comment on the fees but I think Hargreaves Lansdown are often mentioned as good for this type of situation.

Albermarle

As a general comment the SIPPs with the lowest overall charges tend to also charge for things like withdrawals.
HL are expensive for larger investors but are probably the best bet for these smaller amounts and they have good customer service.
I have a modest dc pot from a former job (tfls taken but MPAA not triggered) which could presumably be moved to the SIPP although I am happy with it where it is for the time being.   
It is possible you could use this pension , rather than opening a new SIPP. You would need to check with them first though if it was possible.

Fuzzie

Am I right in thinking that pensions are not included in your assets for inheritance tax liabilities? In which case why not open a SIPP adding up to £2800 / £3600 a tax year up to the age of 75, adding a nominated name to the pension. Upon your mother’s demise, the pension is transferred to the nominee who can either a) cash in the pension subject to 55% tax: b) draw down the pension: or c) use it for their own pension. I am sure someone can correct me if necessary, but this may be a way to save with tax benefits.

Albermarle

You are correct ,  DC pensions ( like a SIPP) are held in trust so are not legally yours . They can not be included in a will or in IHT calculations. The trustees of the pension will normally always follow your instructions for the nominated beneficiary .

RetSol

Albermarle said:

As a general comment the SIPPs with the lowest overall charges tend to also charge for things like withdrawals.
HL are expensive for larger investors but are probably the best bet for these smaller amounts and they have good customer service.
I have a modest dc pot from a former job (tfls taken but MPAA not triggered) which could presumably be moved to the SIPP although I am happy with it where it is for the time being.   
It is possible you could use this pension , rather than opening a new SIPP. You would need to check with them first though if it was possible.

I spoke to my dc pension provider today and their SIPP deal seems OK for my needs so I may go with them.  Makes things slightly simpler.  Thank you, @Albermarle!