Self employed to employed pension

mountaindreams

I was self employed for about 10 years and for some of that time was paying into a SIPP. I have recently started part time employment and have enrolled in the pension scheme putting in 7% of my salary so I get the maximum amount the company will put in of 6.5%.
If I want to pay more into a pension is it better to pay it into the workplace one rather than the SIPP? Would both have approx the same tax advantage but the workplace one also save NI?

Dazed_and_C0nfused

Which method is being used to make the workplace contributions?

It sounds like you are putting in 7% so there won't be any NI saving. 

The usual methods are relief at source or net pay.

But it could be salary sacrifice however you don't pay anything with that.

mountaindreams

It’s salary sacrifice. Yes, I put
in 7% the company 6.5%

mountaindreams

I presume It makes sense to pay the 7% into the company pension so I get the 6.5%.

But if I decided I wanted to put some extra into a pension there wouldn’t be any advantage putting it in the work one? And with the work one I’d be limited what funds they invest in so if I wanted to choose I’d be better using my SIPP?

Dazed_and_C0nfused

mountaindreams said:

It’s salary sacrifice. Yes, I put
in 7% the company 6.5%

If it's salary sacrifice you put zero in and your employer puts 13.5% in.

If you check your pension account you will see there is no pension tax relief being added.

But you are avoiding paying tax and NI on the amount you have agreed to sacrifice.

Because of the NI saving its usually the best way to get money into your pension.  Low earners can be better with "relief at source" which is where the pension company add basic rate tax relief to your contribution.

If you are still paying tax and NI after the 6.5% you currently sacrifice then additional salary sacrifice is likely to be the most tax and NI efficient option for additional contributions.

mountaindreams

Thanks for the explanation. It’s only just being set up so I don’t have the details for the pension account yet but will check it out when I do.

Albermarle

mountaindreams said:

I presume It makes sense to pay the 7% into the company pension so I get the 6.5%.

But if I decided I wanted to put some extra into a pension there wouldn’t be any advantage putting it in the work one? And with the work one I’d be limited what funds they invest in so if I wanted to choose I’d be better using my SIPP?

For the large majority, having limited funds to invest in is actually a benefit. In fact the large majority of people in workplace pensions never choose any fund, and are in the default fund. Many ( most ?) would not even know what a fund is, or how to choose one.
A SIPP is only potentially better if you have a better understanding of investing and if it is cheaper ( that is for sure not always the case and some workplace pensions have low charges ) 
Also by increasing your workplace contributions you will have the NI gain, which you will not have by contributing to your SIPP.
In some cases it is possible to make partial transfers out of a workplace pension, if you really think the SIPP is a better option.

Brie

check how much each costs to run.  

If you have a SIPP you are paying a % on the total value in there every year.  So the more that's in it the more you pay to the company holding the funds.  Likely you are not paying anything for holding funds as many OPS the employer foots this.  If so putting ££ in to the work pension would be a better option.  But best to check in case there is a charge.

Marcon

Brie said:

check how much each costs to run.  

If you have a SIPP you are paying a % on the total value in there every year.  So the more that's in it the more you pay to the company holding the funds.  Likely you are not paying anything for holding funds as many OPS the employer foots this.  If so putting ££ in to the work pension would be a better option.  But best to check in case there is a charge.

These days it's unlikely to be an occupational DC arrangement - more likely to be a group personal pension. Even occupational DC schemes normally have fund charges payable by members (the employer typically pays admin costs such as running the trustee board, producing communications etc).

Albermarle

Marcon said:

Brie said:

check how much each costs to run.  

If you have a SIPP you are paying a % on the total value in there every year.  So the more that's in it the more you pay to the company holding the funds.  Likely you are not paying anything for holding funds as many OPS the employer foots this.  If so putting ££ in to the work pension would be a better option.  But best to check in case there is a charge.

These days it's unlikely to be an occupational DC arrangement - more likely to be a group personal pension. Even occupational DC schemes normally have fund charges payable by members (the employer typically pays admin costs such as running the trustee board, producing communications etc).

Plus ( hopefully) the employer has negotiated low fund/platform charges on behalf of the employees. It seems some large employers/good negotiators can get the total cost down as low as 0.25% as long as standard funds are used.