SIPP help please for a nervous novice

Audaxer

Albermarle said:

macman said:

As above. Do this and it effectively becomes a savings account paying 20% p.a. with no risk to the capital.
Investments in the stock market should be seen as long term, and you should not be considering withdrawing the funds in less than 5 years. If you are twitchy every time the FTSE drops a few points, then investing is not for you.

Not really accurate to say it is like a savings account, where you gain interest on the whole amount in there each year.

You gain 25% on the initial contribution, but zero ( or close to zero) in subsequent years if you leave it in there. So if you left it there 5 years, you would get on average 5% pa.

What I and others were meaning was putting the £2,880 in the SIPP each year and then withdrawing the whole £3,600 a few months later after the tax relief is added. In subsequent years you repeat by putting the £2,880 back in to get 25% added each tax year. So it is like getting 25% interest each year on £2,880 in a savings account. 

c'est_moi

I opted out of the auto enrol because I really don't think I will be earning very much at all. I know I miss out on the employers contribution, but it is all just very short term zero hours contract work. I may never do it again, I may just do a few weeks here any there - who knows?

It is however very interesting that even earning just 6K a year allows me to build up more in a SIPP. It certainly makes working just a few weeks a year much more worthwhile.

I think I will open a SIPP now with probably a 3K lump sum and then top it up to my max allowance after Christmas. I then plan on adding to it each year for the next 4 or 5 years - if I do manage to get some more temp work and exam invigilation I can use that to fund it.

Albermarle

c'est_moi said:

I opted out of the auto enrol because I really don't think I will be earning very much at all. I know I miss out on the employers contribution, but it is all just very short term zero hours contract work. I may never do it again, I may just do a few weeks here any there - who knows?

It is however very interesting that even earning just 6K a year allows me to build up more in a SIPP. It certainly makes working just a few weeks a year much more worthwhile.

I think I will open a SIPP now with probably a 3K lump sum and then top it up to my max allowance after Christmas. I then plan on adding to it each year for the next 4 or 5 years - if I do manage to get some more temp work and exam invigilation I can use that to fund it.

Looks like a plan. You will get tax relief, even though you have not paid any tax . What's not to like !

Dazed_and_C0nfused

c'est_moi said:

Thank you all so much - that's very, very helpful. I am 51, so I would be looking at four years until I can access my DB pension.

Regarding the NI - I am five years short and yes, I have contributed some NI this year through PAYE and hope to make up the shortfall with voluntary class 3 contributions as I worked very briefly as an exam invigilator and as I understand it I can make contributions without having to register as self employed. I think I only need to make about £100 contributions this year to make up the difference.

I didn't realise I could put more into a SIPP this year as I have some earnings - I will certainly do that. Who knows if I will earn anything after this year, but going to the max I can this year would be a great start. I am not contributing into any pension scheme at all currently - I opted out of the auto enrol as I just don't think I would be earning enough to build up any kind of a useful pot there.

I also didn't understand that I could have an entirely cash SIPP - that sounds ideal for me.

All of this has given me a lot to think about. Many thanks.

You've misunderstood regarding being an exam invigilator.

The vast majority of people can make voluntary class 3 contributions.  Being an invigilator can open up the opportunity to pay the much cheaper Class 2 NI.

https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim74100

And you are effectively volunteering for a pay cut by not auto enrolling.  Free money is free money whether it be a few pounds of a few hundred.

c'est_moi

Sorry, typing error - I meant class 2 - £3.15 for each of my missing weeks I think.

Mr_blibby

Just if of use to anyone - I was looking to move my SIPP to at least generate some income from the cash that is sat there.

Had this latest reply from Vanguard re interest currently paid

"I hope you are well and thank you for your message!

With the Bank of England rate at 1.75%, Vanguard does currently pay 1.50% interest on cash held, this accrues daily and is paid monthly to your Vanguard account in arrears.

You will be able to see any interest under 'Transactions' > 'Cash statement'.

Please note that all holdings in your Vanguard account are subject to our 0.15% account fee, and this includes any cash that you hold. The account fee is calculated daily and charged quarterly.

On top of this charge, we also have the fund ongoing charges (OCF). This is paid to Vanguard for managing the individual fund and its associated costs. This ranges from 0.06% to 0.78% depending on which funds you invest into and are displayed on the website. As well as the OCF, funds have transaction and incidental costs. You’ll see the total cost of the fund in the costs and charges document which is produced at the final stage of the investment process. "


I guess with further expected increases in base rate through rest of this year at least, then would expect this to go up further...