SIPP Fund Selection Suggestions Sought

ColdIron

shortseller09 said:

ColdIron said:

As well as the £720 basic rate tax rebate HMRC will raise the £50,270 higher rate threshold to £53,870 saving you another £720 higher rate tax. What's not to like?

When you withdraw it you pay £1440 in tax

Not if you are paying basic rate tax in retirement which is the case for the majority

Also you get 25% tax free

I retired 10 years early and have taken my pension as close to the Personal Allowance pa. So when I reach state pension age in a couple of years I will have extracted roughly £120,000 plus the initial 25% entirely tax free

It's a pretty good deal especially for higher rate taxpayers. As I say, what's not to like?

ColdIron

shortseller09 said:

shortseller09 said:

When you withdraw it you pay £1440 in tax

...that is assuming you've used all your 25% tax free

You still wouldn't pay £1,440 (taxed at the higher rate) if you were a basic rate payer in retirement. PCLS has no effect on that

shortseller09

ColdIron said:

You still wouldn't pay £1,440 (taxed at the higher rate) if you were a basic rate payer in retirement. PCLS has no effect on that

The op is a 40% tax payer in retirement, hence my comment

Dazed_and_C0nfused

shortseller09 said:

shortseller09 said:

When you withdraw it you pay £1440 in tax

...that is assuming you've used all your 25% tax free

You can't have used 25% TFLS on new contributions.

In a simple scenario where the contribution does benefit from higher rate relief in full, nothing more nothing less, then the real cost of the £3,600 gross contribution is £2,160.

And then if you withdraw it all incurring 40% tax (nothing more nothing less) on the taxable element you will end up with £2,520.  A 16.66% return.
£3,600 x 25% = £900
£2,700 - 40% = £1,620

shortseller09

Dazed_and_C0nfused said:

You can't have used 25% TFLS on new contributions.

Unless you've already taken the maximum tax free cash, unlikely though it is.

mebu60

Thank you all for your input, hugely appreciated.

@Albermarle – I will investigate HSBC global strategy range, thx.

@El_Torro – I will try to limit myself to 1 (or 2!) funds. Excellent question, what is it I am investing for? I’ve reflected on that for a day and a half. I invest out of habit, because I’ve done it ever since I started to have some spare cash in my 30s, and this SIPP option seems an efficient diversion. I think what I’m investing for is to be comfortable in my retirement and to look after my long-term partner and my daughter. I don’t have a lavish lifestyle by any stretch. Though going to Lanzarote with my partner over Christmas / New Year in an upmarket hotel on our first-ever package holiday, hopefully the springboard to doing more adventurous trips. And my daughter is currently living in Oslo which is very expensive to visit!

@Stargunner – my thoughts exactly! Ditto @ColdIron – what’s not to like. Though I will also be a 40% (at current levels) taxpayer at age 75 when withdrawing.

Again, many thanks to all, most helpful. 

mebu60

Albermarle said:

There are similar alternatives to Vanguard Life Strategy, such as the HSBC global strategy range, which in recent years has performed a bit better and is a bit cheaper.
You also have funds from Fidelity and Blackrock and others.
Although only the Vanguard ones are available on the Vanguard platform.

@Albermarle - HSBC don't appear to offer a SIPP themselves, their funds would have to be bought through another platform. Having a quick look, Fidelity for example charge £7.50pcm for a SIPP <£25k which would work out at 4% for the first year. Even if I have a regular saving plan it's 0.35% but I'd much rather do the first £2880 now then subsequent ones each April. What am I missing that would make having an HSBC global strategy fund a bit cheaper than going the VLS route? Thanks again. 

ColdIron

mebu60 said:

Albermarle said:

There are similar alternatives to Vanguard Life Strategy, such as the HSBC global strategy range, which in recent years has performed a bit better and is a bit cheaper.
You also have funds from Fidelity and Blackrock and others.
Although only the Vanguard ones are available on the Vanguard platform.

What am I missing that would make having an HSBC global strategy fund a bit cheaper than going the VLS route? Thanks again. 

HSBC GS has an OCF of 0.17%, VLS is 0.22%. This is the fund managers fee and would be the same regardless of your platform

Regarding platforms, Fidelity wouldn't be the best for smaller sums without monthly savings. You should look at simple percentage fee providers. HL is surprisingly good for small SIPPs. 0.45% (£16 on £3,600) and no additional fees, even in drawdown. AJ Bell at 0.25% could be worth looking at as well. Vanguard Investor would be even cheaper at 0.15% but obviously only for vanguard funds

I wouldn't base my decision on a few quid on platform charges either way, the fund is more important than where it's held

This platform comparison is worth a look

https://monevator.com/compare-uk-cheapest-online-brokers

Albermarle

mebu60 said:

Albermarle said:

There are similar alternatives to Vanguard Life Strategy, such as the HSBC global strategy range, which in recent years has performed a bit better and is a bit cheaper.
You also have funds from Fidelity and Blackrock and others.
Although only the Vanguard ones are available on the Vanguard platform.

@Albermarle - HSBC don't appear to offer a SIPP themselves, their funds would have to be bought through another platform. Having a quick look, Fidelity for example charge £7.50pcm for a SIPP <£25k which would work out at 4% for the first year. Even if I have a regular saving plan it's 0.35% but I'd much rather do the first £2880 now then subsequent ones each April. What am I missing that would make having an HSBC global strategy fund a bit cheaper than going the VLS route? Thanks again. 

Yes Fidelity have a minimum charge, that HL and AJ Bell do not ( as@ColdIron has already pointed out.)

mebu60

Many thanks @ColdIron and @Albermarle, I will check out HL and AJ Bell, thanks too for the comparison table.

Again, much appreciated :-)