advice on regular payments into a SIPP please

Sarahspangles

2024 to 2025	£60,000
2023 to 2024	£60,000
2022 to 2023	£40,000
2021 to 2022	£40,000

These are the current and recent Annual Allowance limits. Your Pension Input Amount isn’t likely to be £40k, that sounds like the limit a couple of years ago.

£10k sounds okay as you can carry forward unused allowance from the three previous tax years (earliest first). But it would be prudent to check. Particularly if (say) you wanted to pay in more in a future year. As an NHS manager my PIA has used nearly half my AA some years so I have needed to use carry forward for last year and this year’s larger SIPP contributions.

sadexpunk

"£10k sounds okay as you can carry forward unused allowance from the three previous tax years (earliest first)."

isnt it just ok anyway?  id be nowhere near needing to carry anything forward would i?  if i paid in 13k each year say, then id have another 47k before id need to start looking at previous years wouldnt i?  or am i missing something?  (again.  as usual )

thanks

Sarahspangles

sadexpunk said:

"£10k sounds okay as you can carry forward unused allowance from the three previous tax years (earliest first)."

isnt it just ok anyway?  id be nowhere near needing to carry anything forward would i?  if i paid in 13k each year say, then id have another 47k before id need to start looking at previous years wouldnt i?  or am i missing something?  (again.  as usual )

thanks

It’s the fact that you are already using some of the Annual Allowance with your DB contributions. And it isn’t the amount you contribute that you have to take off. It’s a figure called a Pension Input Amount.

Heres an example of how a PIA is calculated. You can see it can be a significant amount - in the example it is £48,000 due to a £3k growth in the future pension value. This has to be set against the Annual Allowance. https://fpsmember.org/glossary/pension-input-amount-pia

sadexpunk

"Heres an example of how a PIA is calculated. You can see it can be a significant amount - in the example it is £48,000 due to a £3k growth in the future pension value. This has to be set against the Annual Allowance. https://fpsmember.org/glossary/pension-input-amount-pia"

oh wow, i see what youre saying now!  ok i get the pension may have grown £3000 in a year.  and then theres the annual input too, say in my case 13k, so 16k going into the next years pension.  but whats the rationale for the initial X16??  thats not then a true reflection of whats being inputted.   or do i not want to know as itll frazzle my brain  

Sarahspangles

sadexpunk said:

"Heres an example of how a PIA is calculated. You can see it can be a significant amount - in the example it is £48,000 due to a £3k growth in the future pension value. This has to be set against the Annual Allowance. https://fpsmember.org/glossary/pension-input-amount-pia"

oh wow, i see what youre saying now!  ok i get the pension may have grown £3000 in a year.  and then theres the annual input too, say in my case 13k, so 16k going into the next years pension.  but whats the rationale for the initial X16??  thats not then a true reflection of whats being inputted.   or do i not want to know as itll frazzle my brain  

I don’t understand it either! But I do know I was surprised how high it was. It affects lots of people in the NHS who aren’t what you might imagine as high earners, for example senior nurses. No complaints about having a good pension scheme of course, it’s why many stay,

I still expect you’d be okay with your £10k but if you had a windfall to play with and wanted to pay more you’d need to get your employer to give you your PIA numbers. 

AlanP_2

sadexpunk said:

"Heres an example of how a PIA is calculated. You can see it can be a significant amount - in the example it is £48,000 due to a £3k growth in the future pension value. This has to be set against the Annual Allowance. https://fpsmember.org/glossary/pension-input-amount-pia"

oh wow, i see what youre saying now!  ok i get the pension may have grown £3000 in a year.  and then theres the annual input too, say in my case 13k, so 16k going into the next years pension.  but whats the rationale for the initial X16??  thats not then a true reflection of whats being inputted.   or do i not want to know as itll frazzle my brain  

The AA is based on the increase in your pension benefits, not just what you contribute.

For DC pensions it's easy - the gross amount contributed from all sources - employer, employee, tax man.

For DB there is no "standard" contribution rate so how do you equalise across schemes and arrive at a "fair" value to make it compatible with those who do not have a DB? The PIA calculation is the mechanism they came up with.

Some DB schemes were non contributory e.g. Armed Forces (may be different today I know) so employee made £0 contribution, another DB scheme might be 5% employee contribution or whatever. The PIA attempts to be fair across these vastly differing schemes and against vanilla DC schemes.
 
As for whether x16 is the "correct" multiplier or not I think it is low i.e. generously treated compared to DC.

Taking the example from above, £48k PIA for a £3k increase in pension each year. If £48k went into a DC pot instead you could safely assume a 3 to 4% withdrawal rate to maintain that level of payment over a retirement lifetime so say £2k max.

In the DC scenario you are still reliant on invest returns, sensible planning and mental capacity in later life to not screw things up. In the DB scenario you just sit back and the money rolls in each month until you die.

Now I've written that the x16 seems even more generous.

kinger101

HL's platform is easy to use, but you can almost certainly find something cheaper.

Firstly, I'd question whether you need six funds.  You might have a good reason, but there's also a very strong possibility that there is a single fund which would do the job more cheaply.  I'm 100% equities and use exclusively global index trackers.  But there are also funds with lower equity levels, and the option of using a combo to one equity and one bond fund in the proportions that work for.

With £130K, ETFs will be cheaper than OEICs.  HL's fees would be capped at £200 pa of ETFs within a SIPP.  Fidelity's would be capped at £90.

Paying in £100 pcm then investing in funds (either OEICs or ETFs) doesn't work.  For a start, there's a minimum purchase requirement.  And if you purchased 6 ETFs, even at £1.50 per trade, that's 9% of your money down the drain in acquisition costs.  Personally, I'd leave the money in a high interest bank account until I could make large contributions and purchase a single ETF.

Congrats on the matched betting!  That's some feat given the ease on which accounts are restricted or closed these days.

sadexpunk

thank you very much.  i dont understand most of what you describe but ill try and do a bit of research.

"Firstly, I'd question whether you need six funds.  You might have a good reason, but there's also a very strong possibility that there is a single fund which would do the job more cheaply."

the reason is diversity.  i was recommended to do this when i first set it up and also recommended these specific funds.  theyve not done too bad apart from the scottish mortgage, which i suppose reinforces the need for diversity?

"With £130K, ETFs will be cheaper than OEICs.  HL's fees would be capped at £200 pa of ETFs within a SIPP.  Fidelity's would be capped at £90."

sorry, dont know what ETFs or OEICs are, or the implications of investing in them vs those that ive got right now.  always interested in better options tho.  if i was to change anything i'd definitely need my hand holding
and ive already started the transfer process into II now, so probably best to see how that goes without getting myself into a pickle of chopping and changing.

"Paying in £100 pcm then investing in funds (either OEICs or ETFs) doesn't work.  For a start, there's a minimum purchase requirement.  And if you purchased 6 ETFs, even at £1.50 per trade, that's 9% of your money down the drain in acquisition costs.  Personally, I'd leave the money in a high interest bank account until I could make large contributions and purchase a single ETF."

thats really interesting, thanks for that.  so you wouldnt consider investing in just one other fund such as a LifeStrategy fund and investing in that each month?

"Congrats on the matched betting!  That's some feat given the ease on which accounts are restricted or closed these days."

thank you.  altho i think the glory days are over now :-)  i did way better than i thought i would, had some decent luck along the way too, but yes as you say, the bookies are quick to restrict stakes or close you down when they twig youre taking value from them.  in the end it just wasnt worth the time it took, looking at odds each day for the one or two bookies i had left.  i had two years at it so a decent return altho it did take over a lot of my time and it was a relief to actually draw a line under it :-)  and knowing what i do now, i know ill never actually place another bet in my life now, its a mugs game unless youre taking value.

thank you

MallyGirl

6 funds is quite a few for the value involved and something that could probably be simplified using one of the popular multi asset funds with maybe one or 2 more to address anything you think is missing
vanguard life strategy/HSBC global/blackrock are commonly mentioned 

sadexpunk

"6 funds is quite a few for the value involved and something that could probably be simplified using one of the popular multi asset funds with maybe one or 2 more to address anything you think is missing
vanguard life strategy/HSBC global/blackrock are commonly mentioned "

thank you mallygirl.  so do you think my best bet is to wait for the transfer to II to complete and then sell/buy just for ease?  or cash out my funds in HL now before the transfer completes and then invest in these new funds with II?  

thanks