Additional SIPP for portfolio

MF2015 · 9 January 2018 at 9:38PM

Hi all,

A little bit about me.

I'm 39 and currently enrolled in my company pension paying 7% of my basic into a DB scheme., this has recently changed from 4.75%. The company pay 14.7%, up from 9.55%. This is only on my basic, I receive a 35% shift enhancement that is not pensionable.

As well as the DB contribution I also put another £500 per month into AVC's and have done for the past couple of years, I then put in a lump sum at the end of the year to take me just below the higher rate tax bracket. This is in a couple of tracker funds.

My student loan is due to be payed up in a couple of months so I'll have at least £215-£500+ extra per month depending on how many hours overtime I do.

Where would you put this if it was yours?

I'm thinking of putting it into a SIPP into individual shares that I buy each month based on my own research, possibly holding or selling depending on how they do. With this in mind it will need to have relatively cheap dealing fees. I think I've got my bases covered so this part is for a bit of fun and is not detrimental to my plans of early retirement.

Can you see any holes in my plan?

What platform would be best for the SIPP? Also, with regards to the tax I should be below 40% from my other pensions so I take it the 20% relief will automatically be added to give me £268 in the SIPP each month if making DD permanents?

Many thanks.

Alexland · 9 January 2018 at 9:44PM

Yes you will get a 25% contribution on top of your SIPP contribution equivalent to 20% tax relief. In addition if you paid 40% tax (by not contributing enough into your workplace scheme) then you can do self assessment for the difference.

I doubt this is the right place to ask for advice on how to have fun with individual shares but if you are already contributing enough into your workplace pension to avoid higher rate tax then does your employer operate Salary Sacrifice on additional contributions (to save both 20% tax and 12% NI)?

Alternatively if you are 39 have you considered a S&S Lifetime ISA?

MF2015 · 9 January 2018 at 9:52PM

Alexland wrote: »

Yes you will get a 25% contribution on top of your SIPP contribution equivalent to 20% tax relief. In addition if you paid 40% tax (by not contributing enough into your workplace scheme) then you can do self assessment for the difference.

I doubt this is the right place to ask for advice on how to have fun with individual shares but if you are already contributing enough into your workplace pension to avoid higher rate tax then does your employer operate Salary Sacrifice on additional contributions (to save both 20% tax and 12% NI)?

Alternatively if you are 39 have you considered a S&S Lifetime ISA?

Alex.

My employer won't offer Salary Sacrifice, they already give the maximum through my DB scheme.

I haven't considered a S&S Lifetime ISA, will I get the tax relief on that?

I can't transfer anything out, I'm in a defined benefit scheme and an AVC scheme.

Alexland · 9 January 2018 at 9:55PM

MF2015 wrote: »

I haven't considered a S&S Lifetime ISA, will I get the tax relief on that?

You will get a 25% bonus on contributions and no tax on withdrawal at 60 which works out about the same as saving the NI via salary sacrifice. You have until your 40th birthday to open the LISA account and can contribute until your 50th.

Audaxer · 9 January 2018 at 9:55PM

MF2015 wrote: »

Can you see any holes in my plan?

Buying enough individuals shares each month to create a diversified portfolio will be expensive in trading costs, very risky and less likely to produce as good returns as investing in a couple of globally diversified funds.

E&G · 9 January 2018 at 9:59PM

The figures are completely different for me but I have a secure career average pension and have for the past 3-4 years been paying into a SIPP each month and supplementing it with the odd lump sum. I also stick a wee bit into an AVC as this will pay a tax-free lump sum when I take my workplace pension. I am using the Lifetime ISA to fund a property purchase in April and thereafter I'll use as much of it as I can from 19-20 onwards and see it as a better option than both the AVC (greater investment choice and flexibility over when to take it while also tax free on way out) and a SIPP (as it's tax free on the way out - though SIPP is likely better for higher rate tax payers). So, for me the LISA is a no brainer for the first 4k of pension investment and if I was in your position at 39 I would open one straightaway and fill it. And any net pay you earn over the higher rate tax band stick into your AVC.

MF2015 · 9 January 2018 at 10:16PM

Audaxer wrote: »

Buying enough individuals shares each month to create a diversified portfolio will be expensive in trading costs, very risky and less likely to produce as good returns as investing in a couple of globally diversified funds.

The plan is to buy a block of £2-500 every month. I did a bit of trading a few years back and did ok out of it and doing it within a tax wrapper seems like a no brainier. I just need to find the cheapest way to do the trades with the lowest platform fees or a combination of both.

MF2015 · 9 January 2018 at 10:19PM

E&G wrote: »

The figures are completely different for me but I have a secure career average pension and have for the past 3-4 years been paying into a SIPP each month and supplementing it with the odd lump sum. I also stick a wee bit into an AVC as this will pay a tax-free lump sum when I take my workplace pension. I am using the Lifetime ISA to fund a property purchase in April and thereafter I'll use as much of it as I can from 19-20 onwards and see it as a better option than both the AVC (greater investment choice and flexibility over when to take it while also tax free on way out) and a SIPP (as it's tax free on the way out - though SIPP is likely better for higher rate tax payers). So, for me the LISA is a no brainer for the first 4k of pension investment and if I was in your position at 39 I would open one straightaway and fill it. And any net pay you earn over the higher rate tax band stick into your AVC.

I thought I had a secure career average pension, it's getting transferred into a Defined Contribution scheme, though we've managed to put them off for 2 years.

E&G · 9 January 2018 at 10:34PM

Treat what you've accumulated as a very good foundation. Your contribution rates plus the spare cash you have to invest, even if you only achieve an average return on next twenty years or so, should give you a comfortable retirement. You could be doing a lot worse!

MF2015 · 9 January 2018 at 10:57PM

E&G wrote: »

Treat what you've accumulated as a very good foundation. Your contribution rates plus the spare cash you have to invest, even if you only achieve an average return on next twenty years or so, should give you a comfortable retirement. You could be doing a lot worse!

True, I can't see many DB schemes been around in 20 years time and I'm not that worried by it as I'll have the freedom to invest my DC contributions where I like, hopefully I can make it work harder for me.

Additional SIPP for portfolio

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