Fund & Share to a SIPP: is it a good idea?

DRS1

Lilio8 said:

DRS1 said:

Are you employed or self employed? Are you already contributing to a pension?  If the answer to both those questions is no then the maximum you can contribute to a pension in a tax year is £3600 gross (£2880 net).  Quite a bit less than you can put in an ISA.

I'm self-employed, sole trader. I thought that the max one can contribute to a SIPP was £60,000.

£60k is the annual allowance.
But you can only get tax relief on contributions up to your taxable earnings.
So let's say your taxable earnings for 25/6 are £20k and you contribute (gross) £2k of that to the stakeholder that means you can contribute an extra £18k (gross) to the stakeholder or a SIPP and get tax relief.  When I say gross that means including the basic rate tax relief claimed by the pension so you pay £14.4k and the pension reclaims £3.6k to get to £18k gross.
I have just made those figures up but hopefully it gives you the idea for your own figures. 
If your earnings are over £60k then the annual allowance comes into the picture (but there is carry forward of unused allowance so it is not a hard stop at £60k)
If your earnings are over £200k then mention that as it can make a difference (the £60k may start to decrease).  

Lilio8

jimjames said:

Lilio8 said:

DRS1 said:

Are you employed or self employed? Are you already contributing to a pension?  If the answer to both those questions is no then the maximum you can contribute to a pension in a tax year is £3600 gross (£2880 net).  Quite a bit less than you can put in an ISA.

I'm self-employed, sole trader. I thought that the max one can contribute to a SIPP was £60,000.

Are you earning over £60k?

No, I do not earn over £60,000. I'm no way close to that with my work, especially the past 4 years it's been horrendous. Things have improved a bit with the inheritance, it's given me some breathing space; but I'm going to keep on working for a while.

ClarityInvestUK

The way to approach this is to separate the wrapper decision (ISA vs SIPP) from the platform decision (HL vs Aviva), because they involve different trade‑offs.

1) The true Aviva cost is usually higher than the headline figure.
The 0.6% quoted charge rarely reflects the full cost. Once you include underlying fund charges, transaction costs, and any legacy unit structures or surrender penalties, the effective cost can be noticeably higher. It’s worth treating 0.6% as the starting point, not the all‑in number.

2) An ISA is generally the more flexible and tax‑efficient withdrawal wrapper.
ISA withdrawals are tax‑free under current rules. A SIPP gives tax relief on the way in, but withdrawals are taxable later. For someone who expects to draw money while still paying income tax, the ISA often ends up being the cleaner, more predictable option.

3) That usually points to maximising the ISA first.
If the goal is simplicity, flexibility, and avoiding future‑tax‑rate uncertainty, the ISA tends to be the wrapper to prioritise. It removes the behavioural pressure of “optimising” pension withdrawals later.

4) HL applies additional charges on funds.
Hargreaves Lansdown’s platform fee structure means that holding funds (rather than shares or ETFs) attracts an extra layer of annual charges. If the inherited portfolio is fund‑heavy, this is worth factoring in.

5) A stakeholder pension with Aviva may be cheaper and simpler — with fewer investment options.
Stakeholder pensions are designed to be low‑cost and easy to administer. The trade‑off is a more limited fund range. For someone who values simplicity over choice, this can be a reasonable compromise; for someone who wants full control, it may feel restrictive.

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/81863306#Comment_81863306

I'm not sure you've posted this in the correct thread, given what the OP is asking about, but to correct at least one point - there isn't an extra layer of charges for funds at HL, but there's a cap of £150 for exchange traded fees (but conversely, they charge for dealing, unlike funds).

dunstonh

1) The true Aviva cost is usually higher than the headline figure.

The 0.6% quoted charge rarely reflects the full cost. Once you include underlying fund charges, transaction costs, and any legacy unit structures or surrender penalties, the effective cost can be noticeably higher. It’s worth treating 0.6% as the starting point, not the all‑in number.

That is incorrect. The OP has stated that the provider is Aviva and its a stakeholder pension. So, it is using a bundled contract which will price an all in bottom line. 0.6% is constitent with the commission free stakeholder pension that they offer (before fund based discounts)

2) An ISA is generally the more flexible and tax‑efficient withdrawal wrapper.

ISA withdrawals are tax‑free under current rules. A SIPP gives tax relief on the way in, but withdrawals are taxable later. For someone who expects to draw money while still paying income tax, the ISA often ends up being the cleaner, more predictable option.

That is incorrect. Whilst the ISA is more flexible due to access rules, the OP has stated that they are over 55 and therefore can access the pension if they wish. The pension wrapper is more tax efficient than the ISA wrapper.

The OP appears to be a basic rate taxpayer and if we assume they are also a basic rate taxpayer in retirement, then the pension is 6.25% better than the ISA in terms of tax efficiency through tax relief on the way in and only 75% being taxable on the way out.

3) That usually points to maximising the ISA first.

If the goal is simplicity, flexibility, and avoiding future‑tax‑rate uncertainty, the ISA tends to be the wrapper to prioritise. It removes the behavioural pressure of “optimising” pension withdrawals later.

That is incorrect. As the pension is the financially better option, using the less efficient ISA in this case would lead to a poorer outcome.

4) HL applies additional charges on funds.

Hargreaves Lansdown’s platform fee structure means that holding funds (rather than shares or ETFs) attracts an extra layer of annual charges. If the inherited portfolio is fund‑heavy, this is worth factoring in.

Whilst Aviva is bundled, HL is unbundled and is one of the most expensive platforms in the UK. An alternative, lower-cost platform could be more desirable.

However, HL does not have an extra layer of charges for funds. Like all platforms that operate in the unbundled space, it has its platform charges. Just because it is not competitive does not mean it has an additional layer.

5) A stakeholder pension with Aviva may be cheaper and simpler — with fewer investment options.

Stakeholder pensions are designed to be low‑cost and easy to administer. The trade‑off is a more limited fund range. For someone who values simplicity over choice, this can be a reasonable compromise; for someone who wants full control, it may feel restrictive.

Whilst Stakeholder pensions were created to reduce costs and simplify terms when introduced in 2001, the retail markets changed over the years and by around 2006 onwards, personal pensions started coming out cheaper than stakeholders and today, SIPPs can do so too.

LHW99

£60k is the annual allowance.
But you can only get tax relief on contributions up to your taxable earnings.

For clarity, since the OP is self-employed, I think it is profits (not the overall "earnings" of the business, ie turnover) of self employment that can be added to a SIPP

Lilio8

Thank you all for your replies. They've given me food for thought! I've been doing a lot of reading and have been watching various youtube videos on the topic. My brain hurts!

One thing I'm certain of is that I will not transfer the stakeholder pension to an HL SIPP. Given their latest fees, I'm looking for a new home for the ISA (and GIA).

Part of me wants to transfer the stakeholder pension to a SIPP elsewhere, where it could perform better. Part of me wants to transfer to a low cost SIPP, then draw down the untaxed 25% and use it to treat myself to a holiday or buy a (used) motorcaravan. The latter might not be a responsible choice, but it does feel most appealing.