SIPP or add to Teacher Pension

havingaball74

Hi all,
I'm in the process of investing in a S and S ISA. Is it worth also opening a SIPP or adding to my teaching pension in some way?  I'm 47 and have been paying into my teacher pension for around 20 years. Thank you!

jamjar92

Depends on what you want to do with this pot of money, a S&S ISA could be used/accessed before retirement if needed, but you do not get any tax relief.

SIPP you would get tax relief, and could be used bridge a gap between taking your TP pension without or less actuary reductions. Would have access to more fund selection.

Or you could invest additional money into the TP AVC (https://www.pru.co.uk/choice/) scheme, which you may find the charges are cheaper than a SIPP. This is assuming you are still paying into your TP scheme. Limited fund selection (this maybe a good thing, decide risk level, select fund).

dunstonh

I'm in the process of investing in a S and S ISA. Is it worth also opening a SIPP or adding to my teaching pension in some way? 

Before you look at solutions, you need to know your objectives and how to achieve them.     An S&S ISA, SIPP or additional pension through employer all have pros and cons and may or may not be the best option to achieve your objective.

So, until we know what your objectives and circumstances are, we cannot answer it.

Financially, pension is likely to be better than the ISA assuming the maturity process fits with your timescale.  However, whether you do it with an AVC, SIPP or additional pension will depend on your objectives.  ISA is statistically likely to be the least tax-efficient option but there are scenarios where it may not be (such as how close you will be to the lifetime allowance).

havingaball74

Thank you both. Am I right in thinking that with both a SIPP and AVCs you are taxed when you take it out but you aren't taxed on an ISA? On reflection, I'm thinking may need a chat to Prudential about AVCs. 

kuratowski

Yes, ISAs are funded from after-tax income but the withdrawals are tax-free.  Whereas (within certain limits) pensions are funded from income before tax, and 75% of withdrawals are taxed, although the other 25% can be withdrawn tax-free, which is why pensions are a more tax efficient option for the majority of the time.

jamjar92

havingaball74 said:

Thank you both. Am I right in thinking that with both a SIPP and AVCs you are taxed when you take it out but you aren't taxed on an ISA? On reflection, I'm thinking may need a chat to Prudential about AVCs. 

25% is tax free SIPP/AVC taxed on the way out, but the money you put into an ISA as already been taxed. 

The PRU do not offer financial advice.

zagubov

Can't offer financial advice either. 

Now retired but back working. Have paid into additional TPS and into the Pru's AVC (ISAs and SIPPs weren't available back in the 90s).

It depends on a lot of things: what is the earliest age you'd like to collect, how much can you pass on to your dependants,
 
In my circumstances, I would have found it simpler if I'd just paid into the former. You can take a chunk of your AVC at retirement age tax-free (25%) but, IIRC,  have to talk to an advisor before transferring it to a product where you can drawdown later. Far more complicated than I wanted it to be.

Talk to your union rep / older workmates who are part-time or fully retired.

MaxiRobriguez

The main determinant for choosing which wrapper here is when you plan to access the money (aka, when you want to retire).

If you want to retire older than 57*, then you are better putting the money into AVCs or a SIPP.

If you want to retire younger than 57*, then you need to be funding both a S+S ISA and AVCs or a SIPP. Crucially the money going into AVCs/SIPP should be the same as it would be if you were planning to retire after 57, so the money into the S+S ISA must be in addition to it - ie, you need to save more.

Both of those assume you won't touch the money until you retire. If you think you may need access to the money before you retire, then the AVC/SIPP route is not appropriate. The S+S ISA could be appropriate, if the funds definitely won't be needed in the next 5 years.