To SIPP or not to SIPP? That is the question

Elmer_BeFuddled

Thinking of taking out short term a SIPP to stick some (£2880p.a.?) savings in as interest rates are abysmal at the moment and liking the tax relief angle. Some thoughts appreciated.

Current circumstances:

Just passed 63rd birthday. SP age is 66.

At the age of 59 a long-lost pension caught up with me (from 25yrs ago) that I had tried to find unsuccessfully and I decided to draw it from age 60 so I at least had my hands on it.
This currently pays £187 gross (£156 nett) and I had a £14.25k lump sum which, by various methods, now stands at c £22k. Some through switches, some in regular savers, some in easy access, some in Nutmeg, some through end of month no spend on salary (Think this pension is DB as goes up annually).

Working and salary currently stands at £36k+ gross.

I’ve been working at current company since June 2015. Latest pension forecast for 2020 is less than for 2019 which is worrying as contributions nearly a 1/3rd higher, so I’m inclined not to add to this with VC’s (You may know better!).

L&G pension pot at 66 (projected):

   Year        Contributed        Pot Value           Lump Sum           Pension P.A.
11/2019       £12357.80            £26200                  £6560                    £508      (YES!! per annum!)
11/2020       £16404.48            £25700                  £6420                    £478      (YES!! per annum!)

I think this is a DC pension where I pay 4% and the company now pays its 6% max match. If I look on my L&G pension page it says “company contribution of £xxx” and no mention of mine so it could be SS? It’s taken before Tax and N.I from my salary, so not sure.

When I hit 66, I plan to take 25% as a lump sum (SIPP) and possibly set up the remainder as a drawdown over 3 years. Same with the present company pension as £400 or £500pa isn’t going to set my world on fire!
SP projected at (as of April 2020) £215.67pw

So here is the rub. In march 2020 diagnosed with T4 prostate cancer that has spread.
Given 3 to 6 years on a good day and treatment I’m on could give me an extra 10 months ish so really don’t want any of my pretty poor private pensions to go to waste. I suppose in reality all family will be better off financially if I keel over while employed as company life insurance is quite generous.
But sod ‘em all! My money!

So, would a SIPP be a good idea for a short 3or4 year punt? Or what else?

Sorry for long post. Think I’ve got everything in there.

Brynsam

Elmer_BeFuddled said:

So here is the rub. In march 2020 diagnosed with T4 prostate cancer that has spread.

Given 3 to 6 years on a good day and treatment I’m on could give me an extra 10 months ish so really don’t want any of my pretty poor private pensions to go to waste. I suppose in reality all family will be better off financially if I keel over while employed as company life insurance is quite generous.
But sod ‘em all! My money!

I'm sorry to read this. I hate going into print with this sort of comment, but just in case it is relevant to your thought/planning process at some point in the future...hopefully a point which will prove to be further away than you think....

Someone who is classed as being in 'serious ill health' (a registered medical practitioner certifies they have a life expectancy of no more than 12 months) may be able to take the whole of any pension savings as tax free lump sums. You can do this while still in employment; you don't actually have to 'retire'.

NB: this does not apply to your DB scheme because that is already in payment; nor does it apply to state pension benefits. 

Elmer_BeFuddled

Thanks Brynsam for your kind words.
That I didn't know. Might get that Harley I've always wanted after all!

Reminds me (pre covid). DD phones me up.

DD "What you up to Dad?"
Moi "Spending your inheritance".

shinytop

Elmer, sorry to hear of your diagnosis and good luck.  You might be better contributing more to your employers's pension if you are salary sacrificing. As well as the tax break you also save NI. You also might want to look at what the pension is invested in.  Knowledgeable people on here will be able to help.

As for the Harley (other motorcycles and toys available); why not?   It's your money now and I'm sure your kids will enjoy seeing you ride around on their inheritance for a few years

AlanP_2

Sorry to hear of your diagnosis and echo the suggestion above about using your employer's scheme if you get SS.

Your numbers show your employer's pension down in value for 2020 even though ~£4k has been contributed. If the comparisons are being done as at April then certainly possible as markets fell when Covid came on the scene around that time but if say December it raises alarms as the falls had generally been recovered. Have you checked the latest valuation on the portal?

Also, what are the investments within that pension as that could be a factor?

Elmer_BeFuddled

AlanP_2 said:

Your numbers show your employer's pension down in value for 2020 even though ~£4k has been contributed. If the comparisons are being done as at April then certainly possible as markets fell when Covid came on the scene around that time but if say December it raises alarms as the falls had generally been recovered.

Thanks both for above posts. The annual statements above are issued in November. I've edited 1st post to show this.

Elmer_BeFuddled

Here are the current investment plans though I haven't got a clue on how to change anything/change my risk attitude or level!

L&G PMC Cash 3 17.40%
L&G PMC Over 15 Year Gilts Index 3  50.68%
L&G PMC Multi-Asset 3 31.92% The last statement also gives a funds growth assumption (based on 2.5% inflation) of: Cash 3 -1.8% 15 years Gilts -1.8% Multi-Asset 1.0% I find it odd that 2 of the 3 "investment" funds are a negative. Surely they (L&G) should be shifting them into something that gives a positive percentage increase? Looking at previous statements ('18,'19,'20) the top 2 above have been negative. Also have to admit this whole pension/investment malarkey is way over my head!

NedS

Elmer_BeFuddled said:

I find it odd that 2 of the 3 "investment" funds are a negative. Surely they (L&G) should be shifting them into something that gives a positive percentage increase?

Yes, investing would be so much easier if any of us (including L&G) could know what's going to give a positive return in the future.

Elmer_BeFuddled

NedS said:
Yes, investing would be so much easier if any of us (including L&G) could know what's going to give a positive return in the future.

Very true, I suppose. That's why I didn't win the Lotto jackpot last week (or any other week TBH).

atush

For your DC pension, your chld can inherit tax free should you die.  DB pensions are different, look into your scheme rules and make sure your have chosen who you want to inherit.

Brynsam

atush said:

For your DC pension, your chld can inherit tax free should you die.  DB pensions are different, look into your scheme rules and make sure your have chosen who you want to inherit.

With a DC pension, anyone nominated by the pension plan holder could inherit tax free, not just a child. You can't normally bind the managers/trustees, but completing a nomination form should ensure your preferred recipients benefit.

With a DB scheme, the rules specify who will inherit. You can't choose, although if you are not married/in a civil partnership you can sometimes nominate someone if you 'live with them in a relationship akin to marriage' (or similar wording).

If there's a death in service lump sum, completing an Expression of Wish (aka Nomination) Form isn't binding, but will help the Trustees or managers of the scheme to decide on the recipient(s).