Transferring a SIPP into a company scheme

dunstonh

My current SIPP management charges are 1%.

That is high for a SIPP.  Are you sure that isnt the total charges rather than the SIPP charges?

SIPP charges tend to around 0.15-0.45%.   I have never seen one charge as much as 1%.

Would it be wise to transfer my SIPP into the scheme?  I was thinking it's a no-brainer as I will be starting off with a larger amount for compunding purposes.

Compounding doesnt apply.   Whether you have one pension of £10,000 or ten pensions of £1,000 then outcome would be the same bar charges and investment returns.

As a follow up, assuming I stayed with two pensions, would it be an idea to pay into my SIPP from my salary, or better to invest in a stocks and shares ISA?

Your employer cannot pay into your ISA.   They are also unlikely to pay into your SIPP as they would mean you need to opt out of the workplace pension and your employer wont have access to your individual pension to make the contribution.

Would you go for the pension rather than ISA, and would that investment be in the company pension or  the SIPP? 

You should do what is best for you. Not what may be best for someone else whose circumstances will be different to you.

Pension trumps ISA in most scenarios.   Workplace pension may be more tax efficient than an individual pension depending on whether there is salary sacrifice or not.

cmonwigan

dunstonh said:

That is high for a SIPP.  Are you sure that isnt the total charges rather than the SIPP charges?  SIPP charges tend to around 0.15-0.45%.   I have never seen one charge as much as 1%.

dunstonh said:

Your employer cannot pay into your ISA.   They are also unlikely to pay into your SIPP as they would mean you need to opt out of the workplace pension and your employer wont have access to your individual pension to make the contribution

Apologies, I haven't been clear.

I use a Financial Advisory firm who manage the SIPP on my behalf.  Their 1% fee is broken down as follows:
Advisor Fee 0.4%, Investment  Charges 0.5% and Platform Fees of 0.15%.   If I decide not to transfer the SIPP to my company pension, then I would be paying two sets of fees, as the company pensions has similar fees.   Therefore I think it's better to consolidate into the company scheme.

The company pension receives 20% of my gross salary - my salary sacrifice of 12% and the company contribution of 8%.

If I decide not to consolidate, and keep my SIPP,  then I have to pay into it from my NET income. 

I am struggling to see why I would pay into a SIPP from NET income,  as it will also be taxed when I take it out, unlike the tax free ISA.  In terms of the amount, we are looking at £300 pcm.

I think I should get rid of the SIPP, and consolidate into the company scheme, and then use an ISA for any additional investments.

dunstonh

I use a Financial Advisory firm who manage the SIPP on my behalf.  Their 1% fee is broken down as follows:
Advisor Fee 0.4%, Investment  Charges 0.5% and Platform Fees of 0.15%.   If I decide not to transfer the SIPP to my company pension, then I would be paying two sets of fees, as the company pensions has similar fees.   Therefore I think it's better to consolidate into the company scheme.

0.15% is good as a platform charge.   Adviser charge is optional and can be turned off.  And being a SIPP, it means you have whole of market access.   So, that means using investments that can cost from 0.06% upwards.

So, its likely, that if you are cost focused, the existing SIPP is cheaper than the workplace pension.

I am struggling to see why I would pay into a SIPP from NET income,  as it will also be taxed when I take it out, unlike the tax free ISA.  In terms of the amount, we are looking at £300 pcm.

ISA is tax free because you have already paid tax on it from your income.  Pension gets tax relief to give you that tax back.  And you pay less tax when you draw it out as only 75% of it is taxed.  Plus, on earlier retirement than state pension age, you can draw against your personal allowance fully.  Pension will give you a higher net outcome than ISA in all scenarios unless you are in a higher rate tax band in retirement than during your working life.

I think I should get rid of the SIPP, and consolidate into the company scheme, and then use an ISA for any additional investments.

It may be right for you but based on what you have told us, it could also cost you more and be less tax efficient than using the pension wrapper.

cmonwigan

How would I claim the tax relief on future payments into the SIPP? 

Prism

cmonwigan said:

dunstonh said:

That is high for a SIPP.  Are you sure that isnt the total charges rather than the SIPP charges?  SIPP charges tend to around 0.15-0.45%.   I have never seen one charge as much as 1%.

dunstonh said:

Your employer cannot pay into your ISA.   They are also unlikely to pay into your SIPP as they would mean you need to opt out of the workplace pension and your employer wont have access to your individual pension to make the contribution

Apologies, I haven't been clear.

I use a Financial Advisory firm who manage the SIPP on my behalf.  Their 1% fee is broken down as follows:
Advisor Fee 0.4%, Investment  Charges 0.5% and Platform Fees of 0.15%.   If I decide not to transfer the SIPP to my company pension, then I would be paying two sets of fees, as the company pensions has similar fees.   Therefore I think it's better to consolidate into the company scheme.

The company pension receives 20% of my gross salary - my salary sacrifice of 12% and the company contribution of 8%.

If I decide not to consolidate, and keep my SIPP,  then I have to pay into it from my NET income. 

I am struggling to see why I would pay into a SIPP from NET income,  as it will also be taxed when I take it out, unlike the tax free ISA.  In terms of the amount, we are looking at £300 pcm.

I think I should get rid of the SIPP, and consolidate into the company scheme, and then use an ISA for any additional investments.

The fees are percentages, not fixed amounts so don't think of it as two sets of fees, more a fee that happens to be split between two providers.

I am in a similar situation to you. I have a SIPP which currently has no extra contributions going into it. I also have a workplace salary sacrifice pension with all of my contributions going into it at around a similar level. I have kept both as the salary sacrifice provides the most tax efficient method of contribution, while the SIPP has the lower fees and better options.

If you do end up paying extra lump sums into the SIPP then 25% tax relief as added by the provider and your yearly self assessment covers any higher rate tax rebates.

cmonwigan

Many thanks Prism, I now understand. Is your SIPP also managed? Do you use an ISA?

Prism

cmonwigan said:

Many thanks Prism, I now understand. Is your SIPP also managed? Do you use an ISA?

I do have any ISA but I only put money into once a year if I have any surplus left at the end. Most of my plans are around the two pensions. The SIPP is not managed.

Dazed_and_C0nfused

cmonwigan said:

How would I claim the tax relief on future payments into the SIPP? 

With relief at source contributions to a SIPP or personal pension most people don't need to claim any tax relief as the pension company, courtesy of HMRC, automatically adds 25% to your contribution giving the basic rate relief.

If you remain a higher rate taxpayer after your salary sacrifice then you can claim any higher rate relief due from HMRC.  This comes back to you, it isn't added to your pension fund.  You don't get a fixed extra 20%, the amount depends on your overall tax position.

If you complete Self Assessment returns for any reason then you simply include the RAS pension contributions on that.  You don't include salary sacrifice contributions as they are actually employer contributions.

Albermarle

Advisor Fee 0.4%, Investment  Charges 0.5% and Platform Fees of 0.15%.   If I decide not to transfer the SIPP to my company pension, then I would be paying two sets of fees, as the company pensions has similar fees

As an example lets say you have £100K in both pensions.

SIPP - £100K @ 1% charges = £1000 per year

Workplace pension - £100K @1 % charges = £1000 per year

Combine them together - £200K at 1 % charges = £2000 per year

Saving zero 

Otherwise the advised SIPP seems relatively cheap at 1% considering you are getting professional advice.

On the other hand a workplace pension at 1% seems expensive. Are you sure there are no discounts ?