SIPP v Stocks and Shares ISA

PoGee

I read that only 15% of UK adults have a stocks and shares ISA as most don't understand them. I've spent today trying to understand how these work. I'm late 50s and due to working part time as I was a lone parent, my nhs pension will be 'adequate'. Lump sum as of March 2024 statement is sitting at £30000 and monthly pension around £940. Monthly contributions to my work pension are around £200, so I think I can have a SIPP alongside.
How does the government give tax relief on a SIPP? Do I contact my employer - would it show in my payslip (that part of the tax I pay would go to my SIPP)? 
Am I correct in thinking that as a SIPP gets tax relief, it would make sense to contribute to a SIPP rather than a stocks and shares ISA?

dunstonh

How does the government give tax relief on a SIPP?

The provider handles the tax relief.  All automatic unless you are in the higher rate band where a little bit of extra work is required.

 Do I contact my employer - would it show in my payslip (that part of the tax I pay would go to my SIPP)? 

No.

Am I correct in thinking that as a SIPP gets tax relief, it would make sense to contribute to a SIPP rather than a stocks and shares ISA?

ISAs and pensions can share the same investment options at the same cost.   So, the only difference is the "maturity" process and tax.   The pension wrapper beats the S&S ISA wrapper as long as you can wait until you can access it.

MX5huggy

You open a SIPP deposit money either a one off lump sum or a monthly contribution. A few weeks later 25% more is added. 

kempiejon

My shiny new Halifax SIPP credit the rebate immediately, but my other SIPPs can take up to 6 weeks.

PoGee

Thanks for replies. I looked at stocks+shares ISA and sipps 4 years back but found it too complicated. It was a 'now I get it's moment, when i looked into them this weekend. Probably a bit late for me but I can advise my kids to set up sipps. One has recently opened up a business and think sipp contributions can be deducted as an expense.

kempiejon

It is probably never to late to start adding to a SIPP, even small amounts get the tax advantage. So at 50 probably better than an ISA, similarly it's probably never to early to start, a junior SIPP can be opened presumably once a kid is born though I've not checked if there is an absolute minimum age.

LHW99

The only other thing worth considering - if you paid extra into your work pension, would the employer also pay in more?

That would be extra "free" money in your pension. Some employers will, some won't.

Exodi

PoGee said:

Probably a bit late for me but I can advise my kids to set up sipps.

This is one of the reasons that very few end up properly investing for their future.

Younger people feel it's so far off it's not even worth thinking about
Older people feel they're 'too late' to bother doing anything

The best time to open a SIPP was yesterday, the second best time is today.

Unlike your kids, any money (and subsequent tax relief) you receive is accessible to you at a moments notice, if you desire. It's not like a 20 year old seemingly throwing their money into the void, unable to access it for at least several decades.

PoGee

LHW99 said:

The only other thing worth considering - if you paid extra into your work pension, would the employer also pay in more?

That would be extra "free" money in your pension. Some employers will, some won't.

I'm in the nhs scheme. I used the nhs calculator for an extra £100 each month in pension income, paying 'extra' over 2 years, as I intend to work another 2 years max. The payments would be £844 a month, with a total of £20256 paid over 48 months, or around £19600 as a lump sum. I'd need to live another 18 years to make it worth while but we tend to die young in my family so don't think this would be the way to go about things regarding upping my pension. Might just go the sipp route.

PoGee

I do a yearly self assessment tax return due to rental income. Day job as paye. If I open a sipp, does this need documenting on my tax return? I'm a basic income tax payer.

EthicsGradient

PoGee said:

I do a yearly self assessment tax return due to rental income. Day job as paye. If I open a sipp, does this need documenting on my tax return? I'm a basic income tax payer.

Yes, there is a section for what you've contributed to pensions, including SIPPs. If you end up as a basic rate payer, it won't make a difference to the final calculation, but they increase the upper limit of the basic rate band, which is how they make the rebate of tax for higher rate payers.