Start SIPP?

jicms

I'm planning to add this year's 20k to my S&S ISA.  I'm late sixties working minimal part-time hours.  I have a tiny workplace pension and some investment income so a standard rate taxpayer.  Should I consider starting a SIPP or is it too late to bother?

Albermarle

The max you can  add to a pension is = gross taxable earnings in the relevant tax year.. Investment and pension income do not count .
So for example if you are earning £16k pa , you can add £12,800 and the pension provider will add £3200 in tax relief.
Or if you only earn £6K , you can add £4800 and £1200 in tax relief will be added.

When you take the pension , 25% is tax free and the rest taxable , although whether you will pay any tax will depend on how much you take and your other taxable income . 
The tax advantage of a SIPP vs ISA is a minimum 6.25% and normally you can hold the same investments in either depending on which providers you use.

MallyGirl

can you still contribute to your workplace pension? Some tax relief is probably better than no tax relief - at any point.

jicms

MallyGirl said:

can you still contribute to your workplace pension? Some tax relief is probably better than no tax relief - at any point.

No unfortunately I only work minimal hours so employer will not contribute.

jicms

Albermarle said:

The max you can  add to a pension is = gross taxable earnings in the relevant tax year.. Investment and pension income do not count .
So for example if you are earning £16k pa , you can add £12,800 and the pension provider will add £3200 in tax relief.
Or if you only earn £6K , you can add £4800 and £1200 in tax relief will be added.

Does this mean you have to wait for an end of year P60 to know your annual income and funds at the end of a financial year?
Maybe it's easier just to invest the maximum unearned annual amount.
I'm even more confused having considered a Vanguard SIPP.  I hold Vanguard funds in my iWeb S&S ISA but their only SIPP is with AJ Bell.

MallyGirl

Most people can predict their salary for the year based on what they earn from month to month. If your salary is really variable then you might have to wait I guess.

jamesd

It's OK to guess. When you know the final number tell the pension scheme if it was too high, what it turned out to be, and ask them to pay you a "refund of excess contributions lump sum". It's routine and you have a few years to get it done. The refund doesn't include any tax relief and there are no penalties.

If your guess was too low and the tax year is over it's too late to make more pension contributions for the ended year, so erring a bit high if guessing may be wise.

Albermarle

jicms said:

Albermarle said:

The max you can  add to a pension is = gross taxable earnings in the relevant tax year.. Investment and pension income do not count .
So for example if you are earning £16k pa , you can add £12,800 and the pension provider will add £3200 in tax relief.
Or if you only earn £6K , you can add £4800 and £1200 in tax relief will be added.

Does this mean you have to wait for an end of year P60 to know your annual income and funds at the end of a financial year?
Maybe it's easier just to invest the maximum unearned annual amount.
I'm even more confused having considered a Vanguard SIPP.  I hold Vanguard funds in my iWeb S&S ISA but their only SIPP is with AJ Bell.

AS far as I know you deal with I web for the SIPP but they use AJ Bell's software /have some kind of working relationship with them .

jicms

jamesd said:

It's OK to guess. When you know the final number tell the pension scheme if it was too high, what it turned out to be, and ask them to pay you a "refund of excess contributions lump sum". It's routine and you have a few years to get it done. The refund doesn't include any tax relief and there are no penalties.

If your guess was too low and the tax year is over it's too late to make more pension contributions for the ended year, so erring a bit high if guessing may be wise.

Thanks for the explanation.

Albermarle said:

AS far as I know you deal with I web for the SIPP but they use AJ Bell's software /have some kind of working relationship with them .

Would this mean iWeb's charges for an AJ Bell SIPP would be the same as going directly with AJ Bell?

AlanP_2

jicms said:

MallyGirl said:

can you still contribute to your workplace pension? Some tax relief is probably better than no tax relief - at any point.

No unfortunately I only work minimal hours so employer will not contribute.

That need not stop you contributing though, so don't discount it entirely.

Depending on your income level and current pension contributions, and how the workplace scheme handles the tax relief aspects this may not be as good an option as a SIPP.

Albermarle

Would this mean iWeb's charges for an AJ Bell SIPP would be the same as going directly with AJ Bell?

No- I web have a fixed fee charging system regardless of fund size , whilst AJ Bell have a % charging system.

You can see the different charging structure in this comparison site .

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