SIPP (& LISA) Question

toothdoctor

Hi all

Just wondering if you knowledgeable lot could help me answer these two (hopefully) basic questions regarding SIPPs and LISA’s. I have both a SIPP and a LISA to hopefully fund a comfortable retirement at around 60 (40 at the moment)

SIPP Question

I am relatively new to SIPP’s and my question is to do with reporting contributions and basic rate tax relief to HMRC on my self- assessment form.  When I make a contribution to my SIPP, my contribution is added to my account immediately but the tax relief takes about 6-8 weeks to reach the account. So, say I make a contribution of £1000 in March (20/21 tax year) the basic rate tax relief of £250 will register as pending but won’t be credited to my account until sometime in May (21/22 tax year). The question is, do I put my pension contribution as £1000 on my 20/21 tax return or do I add the tax relief of £250 (although it is only pending) and put the full £1250 as my contribution? I am a self-employed higher rate tax payer so understand that I claim the additional 20% tax relief via my SA form.

LISA Question

What happens to LISA’s after the age of 60? Do they remain as LISAs or are they converted to normal ISAs? Hypothetically say you had a LISA with AJ Bell that just contained Vanguard funds and you maxed out your contributions each year you would have a substantial pot. At 60 you may want to transfer your AJ Bell (Vanguard) pot to Vanguard’s own platform to take advantage of no dealing fees to sell funds and reduced platform costs (I know things can change over the next 20-30 years in terms of dealing costs and platform charges). If LISAs remained LISAs then this wouldn’t be possible as Vanguard don’t offer a LISA but they do offer an ISA.

 

Thank you

Dazed_and_C0nfused

You enter the gross amount for the year the contribution was paid by you.

So in your example you would include the £1,250 irrespective of when the pension company adds the basic rate relief to your pension fund.

There is no additional 20% claim to be made on a Self Assessment return.  You enter the contribution in the relevant box and this means your basic rate tax band is increased (by £1,250 using your example).  This can mean you pay less tax at 40% and more at 20% bit the benefit depends on your overall tax position, there is no automatic extra 20%.

In very straightforward cases if enough higher rate tax has been paid it could work out at 20% but that is not always the case.

Alexland

toothdoctor said:

LISA Question

What happens to LISA’s after the age of 60? Do they remain as LISAs or are they converted to normal ISAs? Hypothetically say you had a LISA with AJ Bell that just contained Vanguard funds and you maxed out your contributions each year you would have a substantial pot. At 60 you may want to transfer your AJ Bell (Vanguard) pot to Vanguard’s own platform to take advantage of no dealing fees to sell funds and reduced platform costs (I know things can change over the next 20-30 years in terms of dealing costs and platform charges). If LISAs remained LISAs then this wouldn’t be possible as Vanguard don’t offer a LISA but they do offer an ISA.

At 60 the withdrawal penalty ceases to apply but the account would continue with your LISA provider unless you moved it elsewhere but yes there is no reason you could not transfer it to another type of ISA. However under current charges if you have a substantial account it would be cheaper to leave it with AJ Bell who have a lower cap on holding exchange traded investments (£42 pa) than the Vanguard Investor cap (£375 pa). Vanguard Investor's pricing is only cheap on small accounts. We are already benefiting from the AJ Bell cap on holding an ETF in our LISAs although yes it would be cheaper to consolidate into our iWeb S&S ISAs. Still it will all be different by then.