SIPP at age 54

RobieTheRobot

This may be a really stupid question and if so, my apologies in advance.
A particular person has about £150k in ISA with iWeb. She is 54. She *never* set up SIPP and just contributed to ISA all this time. She is not working anymore but hasn't yet taken any money out of the ISA. Her husband is running the house on his money (also not working).
Should she set up a SIPP or is it too late? Are there any advantages to having a SIPP instead of an ISA? If SIPP is the correct option, can she transfer her ISA to SIPP?
Thanks and apologies for lot of (stupid) questions.

eskbanker

If she's not working, then she'll be constrained to paying no more than £2,880 into a pension in any tax year (grossed up to £3,600 by tax relief) - this may be worth doing if it can later be accessed without paying too much tax on it, but unlikely to be a game-changer at this stage.  There's no facility to transfer an ISA to a SIPP....

dunstonh

Should she set up a SIPP or is it too late?

Its not to late to have a pension (SIPP or other type aside)

Are there any advantages to having a SIPP instead of an ISA?

Yes.  When anyone makes investments they should be looking at all the tax wrappers and deciding which is best.  Its likely that the pension wrapper is more tax efficient than the ISA wrapper.

If SIPP is the correct option, can she transfer her ISA to SIPP?

As a non-earner, she is limited to £3600 pension contributions a year.

Albermarle

The advantage of a pension over a Stocks and shares ISA , is that you get tax relief on your contributions .
Even though you may have to pay some tax when you take income from the pension , it still works out a positive benefit .
However when you are not working you are limited to what you can add ( see above ) She should have been adding more  to a pension when she was working but too late now.
Did she ( or her husband) not have a pension connected to their employment?

eskbanker

Albermarle said:

The advantage of a pension over a Stocks and shares ISA , is that you get tax relief on your contributions .
Even though you may have to pay some tax when you take income from the pension , it still works out a positive benefit

It's usually positive, but not always - anyone in the fortunate position of paying higher rate tax in retirement could lose out by using an additional pension rather than an ISA in this situation (i.e. when not currently paying higher rate tax at the time of the contributions).  We obviously don't know the details of OP's friend/relative but someone who's been able to stash £150K into ISAs is probably closer than most to that scenario....

Dazed_and_C0nfused

She *never* set up SIPP and just contributed to ISA all this time. She is not working anymore 

As it stands she can make an easy £720 each tax year by contributing her maximum £2,880 into a pension and if she wants to keep things simple just mirror whatever her ISA is invested in (assuming it's a S&S ISA and she picks a pension wrapper with access to the same funds).

eskbanker

Dazed_and_C0nfused said:

She *never* set up SIPP and just contributed to ISA all this time. She is not working anymore 

As it stands she can make an easy £720 each tax year by contributing her maximum £2,880 into a pension and if she wants to keep things simple just mirror whatever her ISA is invested in (assuming it's a S&S ISA and she picks a pension wrapper with access to the same funds).

But again, this is dependent on circumstances rather than a universal truth - it only applies if she's able to access it later without paying tax on it, although if she's not working at 54, chances are there should be such opportunities....

colsten

How much of her pension lifetime allowance has she used?

ivormonee

colsten said:

How much of her pension lifetime allowance has she used?

None, it would appear, as "She is 54. She *never* set up SIPP". By never having made any contribution to a SIPP it means she has never taken any money out of a SIPP and, as she is 54, would not ordinarily have had any access to any other pension - drawdown or withdrawal - either; so I'd conclude zero usage of PLA to date.

Her world is her oyster or at least, she has many more years in which she can contribute to pension schemes, of the SIPP/ DC variety, as she is "not working anymore", thereby ruling out any DB flavours whilst that remains the case, temporarily or permanently.

csgohan4

ivormonee said:

colsten said:

How much of her pension lifetime allowance has she used?

None, it would appear, as "She is 54. She *never* set up SIPP". By never having made any contribution to a SIPP it means she has never taken any money out of a SIPP and, as she is 54, would not ordinarily have had any access to any other pension - drawdown or withdrawal - either; so I'd conclude zero usage of PLA to date.

Her world is her oyster or at least, she has many more years in which she can contribute to pension schemes, of the SIPP/ DC variety, as she is "not working anymore", thereby ruling out any DB flavours whilst that remains the case, temporarily or permanently.

as above, as their not working, their contributions to SIPPs will be limited severely. 150k will this be enough for retirement plus state pension? maybe, maybe not. But not contributing to a pension will have financial consequence for them and is the most tax efficient way of ensuring financial stability on retirement

colsten

ivormonee said:

colsten said:

How much of her pension lifetime allowance has she used?

None, it would appear, as "She is 54. She *never* set up SIPP". 

Never having had a SIPP doesn't automatically mean she never made any pension provision in her life. She may not have any at all, but OTOH, she might.

Not drawing any pension yet doesn't mean you should ignore the LTA, either.