I really like the idea of a SIPP but looks like too much hassle

batrachophagus · 7 July 2017 at 10:53AM

Hello, I'm 42 and in a defined benefit scheme with my employer, but in 2014 they changed the benefit for future contributions to be significantly worse (e.g. I used to call it final salary, but that is no longer accurate). So in 2014 I started contributing to the same employers defined contribution scheme as well.

I don't like the defined contribution scheme as it is difficult to get valuations, understand charges and understand underlying investments. I am happy self selecting and wanted to open a SIPP for the transparency and possibly better returns.

However, the company uses a method to avoid NI on my contributions, and the tax situation is straightforward with all tax handled through PAYE. In a SIPP I would have to pay NI on contributions, would only get tax back at basic rate, and would have to claim the rest of the tax back annually through self-assessment.

The company DC and SIPP are both available at 55.

I think I have talked myself out of the SIPP. What does anyone else think please?

Lokolo · 7 July 2017 at 10:58AM

You can continue to pay into the company pension, then every year or 2 you could transfer the balance into your SIPP.

That way you get the salary sacrifice benefits into the SIPP. You would obviously have 12/18 months of contributions as cash or a fund you don't particularly like too much, but it would surely be worth the extra 12%.

However, the valuations, charges and underling investments would be a very similar set up to the SIPP. My company pension has a list of funds, their charges and a valuation page, exactly like my SIPP. So not sure what you are on about with this regard.

Malthusian · 7 July 2017 at 11:34AM

Charges are very likely to be low under the employer's pension; many have lower charges than it is possible to achieve in a personal arrangement. Getting a valuation should be a simple phone call if it is a unit-linked DC scheme.

As Lokolo says you should definitely stick with the employer scheme to get the NI saving (they may refuse to pay employer contributions to a different scheme as well). You could always periodically do a partial transfer to a SIPP, but if your main objective is to avoid "hassle" that wouldn't seem to suit.

If you understand pensions well enough to self select then it shouldn't be that difficult to get a copy of the available funds in your employer scheme and work out how to get as close as possible to what you would choose in your SIPP.

My own workplace fund selection is not exactly what I would want, but it is close enough that it isn't worth the extra hassle of transferring it periodically, and I wouldn't pretend that my genius fund selecting skills will generate sufficient additional returns to justify it.

batrachophagus · 7 July 2017 at 11:51AM

Thanks both - some very good points.

GazHol · 7 July 2017 at 7:22PM

As you are only 42, the salary sacrifice into the company scheme is likely to be the best investment for now. If you leave the company, then you can consider moving the pension to your next employer, staying as a deferred member or transferring to a SIPP/PP. And many employers will give you a year to start the transfer, so you can decide after your probationary period.

As pension transfers are getting easier, I can see a time when employees go for certain jobs late in life in order to take advantage of favourable pension transfers.

I really like the idea of a SIPP but looks like too much hassle

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