Thoughts on best way to invest in sipp

Marko125

Hi everyone this is my first post and wanted some opinions.
I was made redundant few months ago like many other people have been this year.
Im 49yrs old and have a DB pension payable when im 55yrs old but its not a great amount.

Im looking to put some of my redundancy money into a sipp 45k and then 10k each year so i can get to around 100k by the time im 55.

My thinking right now is a vanguard sipp with passive trackers ( global and lifestratergy 60 with a little bit in emerging markets  ) but im also thinking of maybe taking a little more risk on another platform to give me more options with shares and funds and investment trusts possible giving me a better return over next 5 to 10yrs.

So my question is what would you do in my position?

Dazed_and_C0nfused

So my question is what would you do in my position?

I was made redundant few months ago like many other people have been this year.

Check whether I am actually able to add £45k (is this your actual contribution or inclusive of the basic rate tax relief?) in the current tax year and more than £2,880 (net) in future tax years.

Marko125

Dazed_and_C0nfused said:

So my question is what would you do in my position?

I was made redundant few months ago like many other people have been this year.

Check whether I am actually able to add £45k (is this your actual contribution or inclusive of the basic rate tax relief?) in the current tax year and more than £2,880 (net) in future tax years.

Yes i can go back 3yrs with pension contributions on top of this years contributions, i have all the paper work for all pension contributions over this period and can add more than 45k 

So yes can add 45k into sipp at higher rate of tax by claiming back this amount in 40% tax band. In future years will be a basic tax payer.

This wasn't my question though but thanks for your reply.

Mutton_Geoff

Marko125 said:

Hi everyone this is my first post and wanted some opinions.
I was made redundant few months ago like many other people have been this year.
Im 49yrs old and have a DB pension payable when im 55yrs old but its not a great amount.

Im looking to put some of my redundancy money into a sipp 45k and then 10k each year so i can get to around 100k by the time im 55.

My thinking right now is a vanguard sipp with passive trackers ( global and lifestratergy 60 with a little bit in emerging markets  ) but im also thinking of maybe taking a little more risk on another platform to give me more options with shares and funds and investment trusts possible giving me a better return over next 5 to 10yrs.

So my question is what would you do in my position?

As D&C said, you'll be limited by your taxable salary limit on SIPP input. You could put this tax year's total in (allowing for the 25% uplift) and then match your next years salary (assuming you will work again before retirement?) but watch the tax liability when you drawdown since with your DB scheme & state pension you may use up all your personal tax allowance and be paying tax on money that was once free of tax (net redundancy pay). Since the redundancy money is tax paid, you could achieve the same in a S&S ISA with the benefit that withdrawal will be tax free.

You could try to save costs by using a single platform (like Interactive Investor). You don't need to sign up to Vanguard to hold their funds, most every platform will sell them. Also your strategy seems too complex, if you want a higher risk element, then why not VLS80 instead? What if the other "options" produce a loss over the next 5 to 10 years?

Dazed_and_C0nfused

Marko125 said:

Dazed_and_C0nfused said:

So my question is what would you do in my position?

I was made redundant few months ago like many other people have been this year.

Check whether I am actually able to add £45k (is this your actual contribution or inclusive of the basic rate tax relief?) in the current tax year and more than £2,880 (net) in future tax years.

Yes i can go back 3yrs with pension contributions on top of this years contributions, i have all the paper work for all pension contributions over this period and can add more than 45k 

So yes can add 45k into sipp at higher rate of tax by claiming back this amount in 40% tax band. In future years will be a basic tax payer.

This wasn't my question though but thanks for your reply.

Previous years are only relevant though if you have sufficient pensionable earnings to be able to utilise carry forward.
And upto now you haven't posted anything to suggest you have.

Linton

1) You seem to be implying you would have two separate platforms.  Better just to have one platform - any of the general mainstream platforms will let you hold a very wide range of funds including those from Vanguard.  The Vanguard platform only lets you buy Vanguard funds.
2) I would put some money aside to cover the needs for the first 5 years, and not bother with VLS60.  Just put the lot into a global equity fund with some extras as you are proposing..  However you would need to be prepared for a bumpy ride and it is quite likely that at some point in the next few years you will have less than you started off with.

Marko125

Mutton_Geoff said:

Marko125 said:

Hi everyone this is my first post and wanted some opinions.
I was made redundant few months ago like many other people have been this year.
Im 49yrs old and have a DB pension payable when im 55yrs old but its not a great amount.

Im looking to put some of my redundancy money into a sipp 45k and then 10k each year so i can get to around 100k by the time im 55.

My thinking right now is a vanguard sipp with passive trackers ( global and lifestratergy 60 with a little bit in emerging markets  ) but im also thinking of maybe taking a little more risk on another platform to give me more options with shares and funds and investment trusts possible giving me a better return over next 5 to 10yrs.

So my question is what would you do in my position?

As D&C said, you'll be limited by your taxable salary limit on SIPP input. You could put this tax year's total in (allowing for the 25% uplift) and then match your next years salary (assuming you will work again before retirement?) but watch the tax liability when you drawdown since with your DB scheme & state pension you may use up all your personal tax allowance and be paying tax on money that was once free of tax (net redundancy pay). Since the redundancy money is tax paid, you could achieve the same in a S&S ISA with the benefit that withdrawal will be tax free.

You could try to save costs by using a single platform (like Interactive Investor). You don't need to sign up to Vanguard to hold their funds, most every platform will sell them. Also your strategy seems too complex, if you want a higher risk element, then why not VLS80 instead? What if the other "options" produce a loss over the next 5 to 10 years?

Thanks maybe as I've just said in previous reply to D.C. and should have said in my initial message and on the advice of an IFA i can put this redundancy money into sipp utilising my previously unused pension contributions going back 3yrs.

The problem is that the IFA wanted to put into his managed sipp but the returns were lower than i expected and fees higher than i wanted to pay hense controlling my own sipp. 

I've looked at ii and a few other platforms depending on my investments so yet to decide on which one to use.

I already have a substantial amount in stocks and shares isa maxed out this year and will be adding another 20k after april so thats why im looking to a sipp.

Marko125

Dazed_and_C0nfused said:

Marko125 said:

Dazed_and_C0nfused said:

So my question is what would you do in my position?

I was made redundant few months ago like many other people have been this year.

Check whether I am actually able to add £45k (is this your actual contribution or inclusive of the basic rate tax relief?) in the current tax year and more than £2,880 (net) in future tax years.

Yes i can go back 3yrs with pension contributions on top of this years contributions, i have all the paper work for all pension contributions over this period and can add more than 45k 

So yes can add 45k into sipp at higher rate of tax by claiming back this amount in 40% tax band. In future years will be a basic tax payer.

This wasn't my question though but thanks for your reply.

Previous years are only relevant though if you have sufficient pensionable earnings to be able to utilise carry forward.
And upto now you haven't posted anything to suggest you have.

Ok understand what your saying but just to clarify ive spoken to an IFA and my own research into contributions into sipp and workplace contributions and have all relevant paper work for all pension contributions going back 3yrs and i have 70k left to contribute so my pension contributions over last 3yrs was 50k hope this helps to clarify the situation.

Dazed_and_C0nfused

You have told us lots about your ability to carry forward but nothing about whether you are actually able to use carry forward or even contribute more than £2,880 (net).

What pensionable earnings do you expect to have in this tax year and future tax years?

Until you know this carry forward is of no use.

zagfles

Marko125 said:

Dazed_and_C0nfused said:

Marko125 said:

Dazed_and_C0nfused said:

So my question is what would you do in my position?

I was made redundant few months ago like many other people have been this year.

Check whether I am actually able to add £45k (is this your actual contribution or inclusive of the basic rate tax relief?) in the current tax year and more than £2,880 (net) in future tax years.

Yes i can go back 3yrs with pension contributions on top of this years contributions, i have all the paper work for all pension contributions over this period and can add more than 45k 

So yes can add 45k into sipp at higher rate of tax by claiming back this amount in 40% tax band. In future years will be a basic tax payer.

This wasn't my question though but thanks for your reply.

Previous years are only relevant though if you have sufficient pensionable earnings to be able to utilise carry forward.
And upto now you haven't posted anything to suggest you have.

Ok understand what your saying but just to clarify ive spoken to an IFA and my own research into contributions into sipp and workplace contributions and have all relevant paper work for all pension contributions going back 3yrs and i have 70k left to contribute so my pension contributions over last 3yrs was 50k hope this helps to clarify the situation.

Firstly, don't take anything an IFA tells you as gospel. There are a lot of rubbish ones out there. 

What you're referring to above is the annual allowance rules, so you may well have loads of spare annual allowance and might well be able to contribute £70k without exceeding it.

However there's also a limit on the amount you can get tax relief on, and that's 100% of your relevent earnings (or £3600 if more) and there is no ability to carry forwards for this. It's strictly the tax year of the contribution that counts. Pension income and the tax free part of redundancy payments do not count as "relevant earnings". See here for details https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

Virtually all SIPP providers refuse to accept contributions that aren't eligible for tax relief, and it's probably not a good idea anyway as you get no tax relief but usually liable for tax on the way out.

Marko125

Dazed_and_C0nfused said:

You have told us lots about your ability to carry forward but nothing about whether you are actually able to use carry forward or even contribute more than £2,880 (net).

What pensionable earnings do you expect to have in this tax year and future tax years?

Until you know this carry forward is of no use.

How is it of no use im confused by what you are saying....

Currently out of work and hopefully start working after this tax year so future pension sipp payments of up to 40k a year but im only going to put 10k per annum into sipp.

DB pension contributions this year 8k as made redundant so now a deferred pension until 55yrs old.

Can utilise this years and last 3yrs of pension contributions which i didnt pay up to 40k so basically can add these years which equates to 70k

My original question was what are people's opinions on what sipp platform to use vanguard for its low fees and use passive trackers with flexible drawdown when take pension or another platform where i can invest in a range of other diverse funds etc.

Thats the only answer i was looking for rather than can i do this and that as i know from advice from an IFA it can be done in my situation.