Can I start a SIPP?
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boxwood
Posts: 30 Forumite
The pension advice service says "If you’re not earning enough to pay Income Tax, you’ll still qualify to have tax relief added to your contributions up to a certain amount. The maximum you can pay is £2,880 a year. Tax relief is added to your contribution so if you pay £2,880, a total of £3,600 a year will be paid into your pension scheme"
That sounds like me. So can I just open a SIPP with an online platform and I can pay in up to £2,880?
How do I get the extra £720 paid in? Does it get paid into the SIPP as cash by HMRC (and I then choose how to invest it) or does it happen another way?
When does the £720 get paid? Do I have to fill in forms or a tax return and claim it? Does it happen at the end of the tax year? Or is it paid as soon as I make my own payment?
I was looking at A J Bell as they have no set up fee and then 0.25% custody charge and £9.95 per deal for a fund. I will only make one fund buy a year so on the first £3,600 that will total £18.95 whch is 0.53%. I will then buy a low cost VanguardLifeStyle fund which has low fees and seems to be a good "save and forget" option for a no fuss approach.
That sounds like me. So can I just open a SIPP with an online platform and I can pay in up to £2,880?
How do I get the extra £720 paid in? Does it get paid into the SIPP as cash by HMRC (and I then choose how to invest it) or does it happen another way?
When does the £720 get paid? Do I have to fill in forms or a tax return and claim it? Does it happen at the end of the tax year? Or is it paid as soon as I make my own payment?
I was looking at A J Bell as they have no set up fee and then 0.25% custody charge and £9.95 per deal for a fund. I will only make one fund buy a year so on the first £3,600 that will total £18.95 whch is 0.53%. I will then buy a low cost VanguardLifeStyle fund which has low fees and seems to be a good "save and forget" option for a no fuss approach.
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Comments
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Yes, that's correct..you open it, pay in your 2880 and in a few weeks that will be upgraded to 3600 to invest as you wishNo.79 save £12k in 2020. Total end May £11610
Annual target £240000 -
Hello,
The charge with AJ Bell for fund purchase is £1.50.
Regards,
mrwmartin0 -
How does whover processes the extra contribution know how much to top up my investment by (as I think higher rate tax payers get more, not me but how do they know?)
How long after does the extra cash arrive in the account? If getting the top up is quite quick I may wait to invest all at once to reduce dealing costs.0 -
You'll get basic rate relief (higher rate taxpayers have to claim the rest from HMRC). Generally you wait 6 weeks or so.
There are some platforms which pre-fund the tax relief, ie put it into your account before they get the relief from HMRC, however they generally have higher charges or they insist you use an intermediary who will charge so you'll likely end up paying far more for this.
The statement above that "If you’re not earning enough to pay Income Tax [...] the maximum you can pay is £2,880 a year" is acually bulls**t, if you earn above £3600 then you can pay in 100% of your earnings gross, ie 80% net. For instance, if you earn £10,000, you can pay in £8000 to a SIPP and the SIPP will reclaim £2000. The £3600 limit (£2880 net) limit only applies to those who earn less than £3600. For everyone else the limit is 100% of earnings as the gross contribution, so 80% of earnings as the net.0 -
The HMRC website says income up to £11,850 is tax free. So if I earned £11,000 it could all be invested in a SIPP and I would get a top up of £2,200 making £13,200? Just like that?0
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No. If you earn £11,000 then the gross maximum is £11,000. The gross includes the tax relief.The HMRC website says income up to £11,850 is tax free. So if I earned £11,000 it could all be invested in a SIPP and I would get a top up of £2,200 making £13,200? Just like that?
So you could contribute 80% of £11,000, ie £8800, and the SIPP would claim £2200 tax relief making the gross total £11,000.0 -
Hello again,
If you are a member of a company pension scheme , any contributions made to your pension will limit the amount of further payments to SIPP.
Regards, mrwmartin0 -
The statement above that "If you’re not earning enough to pay Income Tax [...] the maximum you can pay is £2,880 a year" is acually bulls**t, if you earn above £3600 then you can pay in 100% of your earnings gross, ie 80% net. For instance, if you earn £10,000, you can pay in £8000 to a SIPP and the SIPP will reclaim £2000. The £3600 limit (£2880 net) limit only applies to those who earn less than £3600. For everyone else the limit is 100% of earnings as the gross contribution, so 80% of earnings as the net.
Just for the record, i googled that phrase and its NOT the Pensions Advice Service, its the Money Advice Service, a commercial website AFAICS
https://www.moneyadviceservice.org.uk/en/articles/tax-relief-on-pension-contributions#tax-relief-if-youre-a-non-taxpayer0 -
Vanguard are preparing to launch a SIPP.
https://www.vanguardinvestor.co.uk/need-help/answer/do-you-offer-a-pension-or-a-sipp
http://monevator.com/using-vanguard-lifestrategy-funds-life/
HL might be worth a look for a modest pot.
https://www.hl.co.uk/pensions/sipp0 -
Thank you all for the replies.
They have got me thinking. I have been paying my own NI contributions for some years now so I can get some state pension. The NI costs me a few hundred pounds a year.
Is it OK to be employed by your husband's business to do admin work for a small salary of around the amounts being discussed, e.g. £10,000 p.a., so the company can pay my NI, and then I use that tax free income to put into a SIPP and get the 20% top up. I would have no other income.0
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