Any reason to have a SIPP in addition to workplace DC pension?

smulx

So I have around £80k in investments but I'm conscious that my pension is lacking quite a bit. I'm considering moving a lumpsum into my existing workplace pension. I also pay monthly into a general investment account, but I might also switch this to go into my pension instead. I've already maxed out the amount my employer contributes to my workplace pension, but I can still increase my own contributions. 

For someone in my circumstances, is there any reason to open a SIPP, rather than just increase the contributions to my existing plan? I guess if I start paying into a SIPP, I'd need to start filing a tax return to claim the tax back from my contributions (I think that's how it'd work) which would be more hassle. 

Probably a stupid question, but it's only something I've recently started looking into so I'm not completely sure how it'd work yet.

Thanks in advance for any advice. 

Dazed_and_C0nfused

I guess if I start paying into a SIPP, I'd need to start filing a tax return to claim the tax back from my contributions (I think that's how it'd work) which would be more hassle. 

You guess incorrectly.

Basic rate tax relief (25% of your net contribution) is automatically added by the pension company.

Claiming higher (or intermediate) rate tax relief on pension contributions isn't in itself a reason to complete a tax return.

Do you pay tax above the basic rate?

TheBanker

Are you a higher rate taxpayer? If not you wouldn't need to do a tax return, the basic rate tax relief is dealt with by the SIPP provider. If you're a higher rate taxpayer you need to either do a tax return or tell HMRC how much you contributed to get the higher rate relief.

For me there is no advantage to contributing to a SIPP instead of my workplace DC pension. A SIPP would mean I'd miss out on the NI Savings because my workplace scheme uses salary sacrifice whereas a SIPP wouldn't. A SIPP would mean extra admin claiming tax relief (although I do a tax return anyway so not that much extra). And crucially the charges my employer's scheme applies are lower than those I would pay for a SIPP.

There may be an advantage to a SIPP if you're confident with investing and want access to different funds, but for most people this is not necessary (and is actually unwise).

Having said all of that, I do have a small SIPP which holds pension contributions from an old job. It just sits there doing its thing and I look at a couple of times a year to check it's still there. Last tax year I made a contribution to my SIPP, because I decided I wanted to make a pension contribution to reduce my tax liability but I'd left it too late to change my workplace contribution amount. But that's just due to me being in an unusual position of receiving more pay in March than I expected and won't be relevent to most people. 

kuratowski

If you were to increase your contributions to your workplace pension, would they be made by salary sacrifice?  That would have the advantage of saving NI.

Charges and fees may be differently structured, so hard to compare between workplace vs SIPP, but often workplace pensions have a good deal on charges, if you can stomach the reduced investment choice.

As you already have a GIA you're already venturing into far more adventurous territory tax-wise than a SIPP!  As Dazed already pointed out, self-assessment wouldn't be needed just because of that.  (You can tell HMRC about any SIPP contributions through your personal tax account, and they will adjust your tax code if necessary.)

Albermarle

If you were to increase your contributions to your workplace pension, would they be made by salary sacrifice?

OP - This is the key point . How does your employer organise your pension contributions? If it is by salary sacrifice, then best just to increase workplace contributions.

smulx

Thanks for the input, everyone. I’m a basic rate tax payer, so it’s good to know I wouldn’t need to worry about the tax issue. That’s something I couldn’t find details of when I looked myself, so I’m glad I asked.

My current scheme is done via salary sacrifice. I hadn’t considered the NI savings, so it sounds like increasing my contributions to my employer scheme will be the best way to go.

Thanks again!

Dazed_and_C0nfused

smulx said:

Thanks for the input, everyone. I’m a basic rate tax payer, so it’s good to know I wouldn’t need to worry about the tax issue. That’s something I couldn’t find details of when I looked myself, so I’m glad I asked.

My current scheme is done via salary sacrifice. I hadn’t considered the NI savings, so it sounds like increasing my contributions to my employer scheme will be the best way to go.

Thanks again!

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief