SIPP or not

Alan2020

Dear Forum Friends,
I wanted to pick your amazing brains.
1. Hitting 47 soon, if I open a SIPP when can I access the money 
2. Which SIPP provider will you recommend?
3. If I pay sum I earn above £50k into a SIPP, will this mean I only bay 20% tax and in 10years access the amount saved, circa about 10k pa?
4. Is the age 55 or 57 and is this locked in?
many thanks for your help as always 

bucklb

1) 57

2) I happily use ii, but sites like monevator give prices & wiser feedback

3) Any money you pay in to a SIPP gets boosted by 25% (after 6 ish weeks) that compensates for 20% tax most people pay.  If you pay tax at a higher rate you can claim the extra tax back from HMRC (normally a quick letter to state the numbers; I don't think it is automatic (or I never risked it anyway))

4) It'll be 57 from 4/2028. Thereafter I believe it sets as 10 years pre-state pension age (so if state pension age rises, so will the age you can access your SIPP)

vacheron

@bucklb has hit most of the nails perfectly on the head, I would just add my £0.02 into the mix regarding Q2:


Before looking at SIPPs, do you have an employer with their own pension scheme, and can you make additional contributions to this? If they operate a salary sacrifice scheme, or employer matching on additional contributions, this should probably be the first choice to consider. 

I use my workplace pension for all new money into my pension as my employer puts in 1.6% for every 1% I contribute, and they operate a salary sacrifice scheme, so any high rate tax is taken care of automatically. They also give me back 100% of their NI saving (15%).
Once these contributions are all "in the bag" I will regularly move lump sums from my employer scheme to one of my SIPPs, which I currently hold with II and Fidelity, but am currently in the process of transferring these to Freetrade who are currently offering a 1% cashback promotion on all pensions transfers and contrubutions up to £500K.

The things to consider regarding a new SIPP provider are:

• Firstly, do they offer the funds / investments you want to make? If you want to purchase (or transfer) an investment or fund that they do not offer, then they are a non-starter.

• Secondly, fees, reputation and ease of use. This is a personal judgement call as things like fees can very hugely between SIPP providers depending on which investments you plan to hold in your SIPP.

Alan2020

bucklb said:

1) 57

2) I happily use ii, but sites like monevator give prices & wiser feedback

3) Any money you pay in to a SIPP gets boosted by 25% (after 6 ish weeks) that compensates for 20% tax most people pay.  If you pay tax at a higher rate you can claim the extra tax back from HMRC (normally a quick letter to state the numbers; I don't think it is automatic (or I never risked it anyway))

4) It'll be 57 from 4/2028. Thereafter I believe it sets as 10 years pre-state pension age (so if state pension age rises, so will the age you can access your SIPP)

Thank you so much for your help.
Is there a particular form to fill as a higher rate tax payer or just a generic letter would do.
I will give ii a good look, thank you!

Albermarle

Are you not already contributing to a pension at your place of work ?
Or are you self employed ?

Alan2020

vacheron said:

@bucklb has hit most of the nails perfectly on the head, I would just add my £0.02 into the mix regarding Q2:


Before looking at SIPPs, do you have an employer with their own pension scheme, and can you make additional contributions to this? If they operate a salary sacrifice scheme, or employer matching on additional contributions, this should probably be the first choice to consider. 

I use my workplace pension for all new money into my pension as my employer puts in 1.6% for every 1% I contribute, and they operate a salary sacrifice scheme, so any high rate tax is taken care of automatically. They also give me back 100% of their NI saving (15%).
Once these contributions are all "in the bag" I will regularly move lump sums from my employer scheme to one of my SIPPs, which I currently hold with II and Fidelity, but am currently in the process of transferring these to Freetrade who are currently offering a 1% cashback promotion on all pensions transfers and contrubutions up to £500K.

The things to consider regarding a new SIPP provider are:

• Firstly, do they offer the funds / investments you want to make? If you want to purchase (or transfer) an investment or fund that they do not offer, then they are a non-starter.

• Secondly, fees, reputation and ease of use. This is a personal judgement call as things like fees can very hugely between SIPP providers depending on which investments you plan to hold in your SIPP.

Thank you for all the great points. Yes my employer does contribute and I wanted to have one in addition to the employer one which is at its maximum contribution.
i was thinking of having a separate pot to access earlier on say in 10years. Using ISA at the moment, so was wondering if SIPP will give an advantage.
thank you for all the great points. Much appreciated.

Alan2020

Albermarle said:

Are you not already contributing to a pension at your place of work ?
Or are you self employed ?

Thank you for the reply. Yes I am, just wanted one not work related but to use instead of an ISA, if it makes sense.

InvesterJones

Alan2020 said:

bucklb said:

1) 57

2) I happily use ii, but sites like monevator give prices & wiser feedback

3) Any money you pay in to a SIPP gets boosted by 25% (after 6 ish weeks) that compensates for 20% tax most people pay.  If you pay tax at a higher rate you can claim the extra tax back from HMRC (normally a quick letter to state the numbers; I don't think it is automatic (or I never risked it anyway))

4) It'll be 57 from 4/2028. Thereafter I believe it sets as 10 years pre-state pension age (so if state pension age rises, so will the age you can access your SIPP)

Thank you so much for your help.
Is there a particular form to fill as a higher rate tax payer or just a generic letter would do.
I will give ii a good look, thank you!

If it's under about 10k you can just ring them. Above that you can either write with proof of the amount paid in, or there's now an online form (I can't remember the URL) which you can use to let them know and submit proof.

bucklb

Alan2020 said:

bucklb said:

1) 57

2) I happily use ii, but sites like monevator give prices & wiser feedback

3) Any money you pay in to a SIPP gets boosted by 25% (after 6 ish weeks) that compensates for 20% tax most people pay.  If you pay tax at a higher rate you can claim the extra tax back from HMRC (normally a quick letter to state the numbers; I don't think it is automatic (or I never risked it anyway))

4) It'll be 57 from 4/2028. Thereafter I believe it sets as 10 years pre-state pension age (so if state pension age rises, so will the age you can access your SIPP)

Thank you so much for your help.
Is there a particular form to fill as a higher rate tax payer or just a generic letter would do.
I will give ii a good look, thank you!

Once upon a time you could ring and get it sorted, but certainly not lately and even then I gather it takes quite a while for a call to be answered. Last few times I just wrote, specifying my NI number and details of what had been paid in to the SIPP and that I was due tax back as a higher rate taxpayer.  It's worth including details of the SIPP and the contributions (via a screen grab) in the letter, rather than waiting to be possibly asked for evidence.

I did find that it helped to clearly specify that I (and my employer) paid in to a company pension and that the SIPP payments were separate (and nett) payments. HMRC sometimes seemed to struggle with the idea that someone could do both and needed it pointed out.

I used to specify that I'd prefer any refund be as a direct payment; by default they seemed to want to amend the tax code rather than refund directly

DRS1

There is an online form for claiming higher rate tax relief  - see here

Claim tax relief on your private pension payments - GOV.UK

Don't necessarily give up on ISAs though - if you want to access something before 57 then they can be very handy.

vacheron

Alan2020 said:

vacheron said:

@bucklb has hit most of the nails perfectly on the head, I would just add my £0.02 into the mix regarding Q2:


Before looking at SIPPs, do you have an employer with their own pension scheme, and can you make additional contributions to this? If they operate a salary sacrifice scheme, or employer matching on additional contributions, this should probably be the first choice to consider. 

I use my workplace pension for all new money into my pension as my employer puts in 1.6% for every 1% I contribute, and they operate a salary sacrifice scheme, so any high rate tax is taken care of automatically. They also give me back 100% of their NI saving (15%).
Once these contributions are all "in the bag" I will regularly move lump sums from my employer scheme to one of my SIPPs, which I currently hold with II and Fidelity, but am currently in the process of transferring these to Freetrade who are currently offering a 1% cashback promotion on all pensions transfers and contrubutions up to £500K.

The things to consider regarding a new SIPP provider are:

• Firstly, do they offer the funds / investments you want to make? If you want to purchase (or transfer) an investment or fund that they do not offer, then they are a non-starter.

• Secondly, fees, reputation and ease of use. This is a personal judgement call as things like fees can very hugely between SIPP providers depending on which investments you plan to hold in your SIPP.

Thank you for all the great points. Yes my employer does contribute and I wanted to have one in addition to the employer one which is at its maximum contribution.
i was thinking of having a separate pot to access earlier on say in 10years. Using ISA at the moment, so was wondering if SIPP will give an advantage.
thank you for all the great points. Much appreciated.

If you're sure you won't be thinking of retiring before 57 then SIPPs are generally considered the better option (especially if you are still paying any higher rate tax after your company pension deductions).

ISA's are good if you may need the money earlier. Say you decided to retire (or were possibly made redundant or fell ill at 56). The ISAs come into their own then as a way to bridge that gap to 57 where you can access your pensions. They can also be used to provide additional untaxed income in retirement, especially in any years wher the amount you withdraw in retrirement may take you into a higher rate tax band (assuming you will be using drawdown in retriement).

This is why many people use both in parallel.