advice on regular payments into a SIPP please

sadexpunk

hi

following excellent advice on here regarding an old DB pension, im now ready to leave that alone and start regular investments into an existing SIPP for the next 5 years when i retire (im 60 now, planning to retire at 65).

i have a Hargreaves Lansdown SIPP, its around 7 years old and has grown from £80,000 initially to £130,000 now, and the overview says its a 56% growth.  i took advice back in the day and invested in 6 different 'funds' (?) to diversify the investment, only 1 of them actually losing me money (scottish mortgage).

ive procrastinated too long on setting up a direct debit, as i just havent known how to do it properly, so i feel its time to ask about the logistics of setting up regular DD payments and how to actually invest it efficiently.

1.  firstly, do you think HL is the best SIPP provider?  im told its more expensive than others but that its still a good company, but...... if ive invested in these 6 funds anyway, does it matter who the SIPP is actually with?  i could just invest in those with a cheaper company couldnt i?
ive just been into the account and seen that HL look like theyve charged me £125, £82, £86 and £50 for the last 4 quarters for managing the funds.  does this seem reasonable, or on the expensive side?
so..... leave with HL or transfer it to another provider such as vanguard, fidelity etc?

2.  it would appear to be easy enough to set up a DD to pay into my account,im thinking say £100pm.  but then itll sit there until i give instructions on where to invest it yes?  reading the t's & c's, it looks like they charge £1.50 per deal.  so do you think id be better off saying to them one month invest it in fund 1, the next month fund 2 and so on and so on?  so theres just one £1.50 payment?  i assume if i ask them to 'spread it across the 6' then itd be 6 x £1.50 each month?
or.... just leave those alone and set up a new 'fund' such as a LifeStrategy jobbie and just invest in that one continually?

3. its set up to auto pay these fees by selling a few shares each time.  i obviously dont decide which ones and i wouldnt know anyway, i just assume they choose one in my best interests?  or should i set up something to pay these fees straight from my bank?

i also have a S&S ISA but i was advised that SIPP is slightly more return than ISA, so im happy to keep investing in one of these.

bottom line is....id like to make regular monthly payments in the most effective way to have the most growth for the next 5 years and wont touch it until then.
at that point ill have a couple of moderate DB pensions to take and aim to top up my income by taking amounts from the SIPP too, either monthly or annually, not sure.

thank you very much

EDIT:  ooh nearly forgot.  i also made about £18,000 from matched betting of which i want to invest at least £10,000 maybe £12,000.  so same place as the regular payments you think?

thanks

Marcon

sadexpunk said:

3. its set up to auto pay these fees by selling a few shares each time.  i obviously dont decide which ones and i wouldnt know anyway, i just assume they choose one in my best interests?  or should i set up something to pay these fees straight from my bank?



EDIT:  ooh nearly forgot.  i also made about £18,000 from matched betting of which i want to invest at least £10,000 maybe £12,000.  so same place as the regular payments you think?

thanks

No. If they are paid from the SIPP, they are being paid out of money you've contributed and on which you've had tax relief, so effectively 'cheaper' that way.

Not quite answering your question, but just checking - do you have sufficient earned income to make a contribution of that size in one go, if that's what you are planning to do?

sadexpunk

"No. If they are paid from the SIPP, they are being paid out of money you've contributed and on which you've had tax relief, so effectively 'cheaper' that way."

lovely, thats that ticked off then.

"Not quite answering your question, but just checking - do you have sufficient earned income to make a contribution of that size in one go, if that's what you are planning to do?"

i didnt know there were any earnings specifications for investing, but i think id be ok, i earn close to £50,000.  so if i was a low earner i wouldnt be allowed to chuck £10,000 into a SIPP?
and yes, thats the plan at the minute unless im advised there are better options?

thanks

MallyGirl

you cannot get tax relief on more than either 1. £60k or 2. your income - whichever is the lower.

sadexpunk

"you cannot get tax relief on more than either 1. £60k or 2. your income - whichever is the lower."

apologies for not being financially knowledgeable, it takes me a bit of time to understand these matters.  to put it simply, are you saying that if i eaned say £60,000, and invested £10,000 into a SIPP, then the government wouldnt add that extra 25%?
so id need to look at what i actually earned and only invest the difference between that and £60,000?
and would it be based on my final income from last year, or a guess at how much id earn at the end of this financial year?

thank you :-)

EDIT:  told you it takes time to sink in.  just read that again and think im wrong.  does it purely mean that if my incomes £50,000, then i can invest another £50,000 and get the governments 25% added?
but if i invested £100,000 then id still only get that 25% on the first £50,000?

MallyGirl

sadexpunk said:

"you cannot get tax relief on more than either 1. £60k or 2. your income - whichever is the lower."

apologies for not being financially knowledgeable, it takes me a bit of time to understand these matters.  to put it simply, are you saying that if i eaned say £60,000, and invested £10,000 into a SIPP, then the government wouldnt add that extra 25%?
so id need to look at what i actually earned and only invest the difference between that and £60,000?
and would it be based on my final income from last year, or a guess at how much id earn at the end of this financial year?

thank you :-)

EDIT:  told you it takes time to sink in.  just read that again and think im wrong.  does it purely mean that if my incomes £50,000, then i can invest another £50,000 and get the governments 25% added?
but if i invested £100,000 then id still only get that 25% on the first £50,000?

Yes - the latter, although the SIPP provider may well not be happy. They expect all contributions to be eligible for the basic rate tax relief and will claim that back from HMRC automatically. They don't know your salary. 

squirrelpie

What you wrote about HL and their charges isn't all correct. I suggest you take the time to reread and understand everything before posting. In particular, pay attention to the difference between "funds" and "shares".

FIREDreamer

squirrelpie said:

What you wrote about HL and their charges isn't all correct. I suggest you take the time to reread and understand everything before posting. In particular, pay attention to the difference between "funds" and "shares".

Exactly, that’s why I only use ETFs and investment trusts, not OEICS. Platform fee is too high for the latter in any decent quantity.

Kynthia

Hargreaves Lansdown is a good company, and I find their app really user-friendly. However, you can have most of the same investments in a different provider and pay much less per year in charges. I recently moved to Interactive Investor for that reason.

I used to leave enough in cash within the SIPP to pay the charges, which meant HL didn't need to sell any of my investments. I don't know if that's better or not.

Putting your money into a pension makes it eligible for tax relief, whether you then invest it or not. There are two limits for this. One limits you to £60k a year and includes employers contributions to your pension, and allows you to go back and use previous year's leftover allowance in some circumstances. Where as the relevant earnings limit cannot be breached and is just for your contributions. 

sadexpunk

"What you wrote about HL and their charges isn't all correct. I suggest you take the time to reread and understand everything before posting. In particular, pay attention to the difference between "funds" and "shares"."

yes, im ignorant of the difference, but.... does it matter?  its just what ive invested in following advice a few years ago and i may have called them by the wrong name.  and what isnt correct about the charges?  theyre the fees that theyve told me theyve taken from it?
if it matters, theyre 'fidelity index US', 'IFSL marlborough UK Micro-gap growth', legal & general UK index', 'scottish mortgage investment trust plc', 'vanguard ftse developed europe ex-uk equity' and vanguard japan stock index'.
funds?  shares?  youve probably discovered how financially ignorant i am :-)
youll understand these better than i, but im still not sure what the mistake is in what ive written about HL and their fees?

thanks

EDIT:  just been googling the difference between funds and shares and am none the wiser as to what ive actually invested in but like i said.....does it really matter?

EDIT EDIT:  i now think theyre funds, but still not 100% sure, and still dont know what the difference is for the uninitiated.

Somebody

HL have now agreed to be taken over by a private equity consortium.  How it would impact clients remains to be seen.  Like Kynthia I also moved to II for the lower fees (........plus cashback incentive).