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  • FIRST POST
    • ForestBluebells
    • By ForestBluebells 12th Jan 20, 9:48 AM
    • 74Posts
    • 15Thanks
    ForestBluebells
    SIPP or pay into workplace pension
    • #1
    • 12th Jan 20, 9:48 AM
    SIPP or pay into workplace pension 12th Jan 20 at 9:48 AM
    Iím currently paying the minimum into a workplace pension and my employer is paying their minimum, I donít think Iím going to get them to increase their contributions so when I get my pay rise this month I intend to save all additional income into retirement plans. Is it best to pay it into my work pension given thereís no additional benefits from matching or should I set up a SIPP or S&S ISA instead and pay into that? Iím 35 if that makes a difference.

    Iíve been looking at Vanguard and intend to set up a S&S ISA (either LifeStrategy 80/20 or VWRL) with them anyway to build up a cash fund for retirement/later in life needs and not touch it for 30+ years but this would be accessible should I ever need it before retirement however I wasnít sure if I should also be looking at a SIPP or LISA and couldnít work out which is best. Iím a basic rate tax payer. I also save into a regular saver (where my money goes currently ) but I want to start splitting this between pension, and other accessible funds but not sure which is best. So which is best? SIPP, LISA, workplace pension with no additional matching, S&S ISA.... or something else?
Page 1
    • Albermarle
    • By Albermarle 12th Jan 20, 10:50 AM
    • 2,214 Posts
    • 1,454 Thanks
    Albermarle
    • #2
    • 12th Jan 20, 10:50 AM
    • #2
    • 12th Jan 20, 10:50 AM
    So which is best? SIPP, LISA, workplace pension with no additional matching, S&S ISA.... or something else?
    Firstly investing in a SIPP or extra in the workplace pension, is basically the same thing . There will be some differences in charges and choice of funds, but effectively they are both pensions and ruled by the same tax regime.
    The main point is that if you are a basic rate taxpayer and probably will be in retirement, then a pension has a 6.25% advantage over non pension investments , like S& S ISA. The disadvantage is that you will not be able to access the money until around 58 years old . If at any time you become a higher rate taxpayer and/or a non taxpayer in retirement , then the pension becomes even more attractive.
    A LISA is a kind of special case , and can be used to help buy a house or to save for retirement with the government also chipping some money in, with a limit .
    .https://www.moneysavingexpert.com/savings/lifetime-isas/
    A S& S Isa could be useful if you think you might need to access the money before you retire but you should think in terms of a 10 + years timeframe , to iron out any volatility in the markets .
    • ForestBluebells
    • By ForestBluebells 12th Jan 20, 11:30 AM
    • 74 Posts
    • 15 Thanks
    ForestBluebells
    • #3
    • 12th Jan 20, 11:30 AM
    • #3
    • 12th Jan 20, 11:30 AM
    I already have £22k savings so these are truly future plans and wonít be touched, definitely long term investments. I donít actually know the fees of my workplace pension I couldnít figure it out, I seem to be paying a set fee each month is that normal?

    Does the LISA work out better than a SIPP as I assume itís very low interest rates currently whereas in the long term I would assume a SIPP could outperform that over time.
    • Marcon
    • By Marcon 12th Jan 20, 11:42 AM
    • 1,587 Posts
    • 1,257 Thanks
    Marcon
    • #4
    • 12th Jan 20, 11:42 AM
    • #4
    • 12th Jan 20, 11:42 AM
    I donít actually know the fees of my workplace pension I couldnít figure it out, I seem to be paying a set fee each month is that normal?
    Originally posted by ForestBluebells
    Ask the pension provider - there will be a helpline number somewhere in the literature, so give the a call.
    • ForestBluebells
    • By ForestBluebells 12th Jan 20, 12:11 PM
    • 74 Posts
    • 15 Thanks
    ForestBluebells
    • #5
    • 12th Jan 20, 12:11 PM
    • #5
    • 12th Jan 20, 12:11 PM
    Ok I think itís 0.5% annual management fee for my workplace pension
    • cloud_dog
    • By cloud_dog 12th Jan 20, 2:07 PM
    • 4,747 Posts
    • 2,993 Thanks
    cloud_dog
    • #6
    • 12th Jan 20, 2:07 PM
    • #6
    • 12th Jan 20, 2:07 PM
    Does the LISA work out better than a SIPP as I assume itís very low interest rates currently whereas in the long term I would assume a SIPP could outperform that over time.
    Originally posted by ForestBluebells
    Albermarle comments have pretty much covered things (together with the link). Access to a SIPP/pension is currently from age 55 (but will be going up in line with State Pension Age minus 10 years at some point), a LISA penalty free from age 60.

    There are other pluses for a pension over a LISA, for example IHT considerations/planning and also if you think you may ever claim benefits (money in a pension is excluded, money in a LISA is included.

    Can you confirm if your company pays you via Salary Sacrifice (SS) (sometimes referred to as Salary Exchange)?

    If you are a BRT payer and your company does not pay you via SS, and as part of your planning you will access some of the money at 60 then a LISA may well be more beneficial. The reason for this is that all withdrawals from a LISA are tax free (from a pension 25% tax free then remaining 75% subject to your taxation at the point of withdrawal).

    If you are paid via SS then this heavily sways the benefit of utilising the works scheme over your own SIPP/pension or a LISA.
    Personal Responsibility - Sad but True

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    • Albermarle
    • By Albermarle 12th Jan 20, 2:30 PM
    • 2,214 Posts
    • 1,454 Thanks
    Albermarle
    • #7
    • 12th Jan 20, 2:30 PM
    • #7
    • 12th Jan 20, 2:30 PM
    Ok I think it’s 0.5% annual management fee for my workplace pension
    Sometimes there is a fee for managing the pension + a fee for the actual investment fund ( which is not that visible ) Sometimes it is just all one fee , in this case 0.5% would be quite good .
    • kinger101
    • By kinger101 12th Jan 20, 2:53 PM
    • 4,990 Posts
    • 7,108 Thanks
    kinger101
    • #8
    • 12th Jan 20, 2:53 PM
    • #8
    • 12th Jan 20, 2:53 PM
    On basic rate, it's partly a question of whether you have a salary sacrifice arrangement with you employer. Let's consider three examples.

    LISA:

    Every £1 you put in becomes £1.25. 25% uplift.

    No salary sacrifice:

    Regardless of whether it's a SIPP or company pension, £1 gross in your pension actually costs you 80 p of net salary. However, this £1 will be taxed at an effective rate of 15% on withdrawal (BR tax minus tax free lump sum).

    80 p of net income becomes 85 p of net income, which is only a 6.25% uplift.

    Salary sacrifice:

    You'll need to use workplace pension for this, but now that 85 p of net income in pension only costs 68 p. Which is the same 25% uplift as the LISA.


    It's swings and roundabouts whether LISA is better the salary sacrifice for basic rate taxpayers. It might partly depend on costs of the two schemes. On the positive side for the LISA though, I think you probably have better protection from legislative changes having a negative impact. The tax benefits of pension schemes are partly hypothetical in some way on what the tax regime is at retirement. Reduction of the TFLS for example would reduce that 25% uplift.
    • ForestBluebells
    • By ForestBluebells 13th Jan 20, 8:44 AM
    • 74 Posts
    • 15 Thanks
    ForestBluebells
    • #9
    • 13th Jan 20, 8:44 AM
    • #9
    • 13th Jan 20, 8:44 AM
    Thatís really interesting as for some reason I just assumed the LISA wasnít worth doing as itís swings and roundabouts as you are taxed before you pay in the LISA and when you take your pension so I assumed it worked out the same. Now Iím not so sure thatís right and maybe a S&S LISA is the way to go.

    I donít currently have access to salary sacrifice but I will ask about it at work. Iím basic rate tax payer but may end up high rate in a few years.
    • AlanP
    • By AlanP 13th Jan 20, 11:59 AM
    • 1,846 Posts
    • 1,524 Thanks
    AlanP
    Open a LISA before you hit 40 , even if only with a nominal amount. You will have access to it then whether you use it seriously or not.
    • ForestBluebells
    • By ForestBluebells 13th Jan 20, 6:54 PM
    • 74 Posts
    • 15 Thanks
    ForestBluebells
    Good idea, Iíll open a LISA and then decide, sounds like it might work out best.
    • GunJack
    • By GunJack 14th Jan 20, 10:29 AM
    • 10,896 Posts
    • 8,189 Thanks
    GunJack
    Just bear in mind, if you draw anything from a LISA before age 60 NOT to buy your first house, you'll get penalised on it all so not only wll you not get the 25% uplift, it'll also cost you some ££
    ......Gettin' There, Wherever There is......

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    • adonis10
    • By adonis10 14th Jan 20, 12:06 PM
    • 1,691 Posts
    • 234 Thanks
    adonis10
    Iím currently paying the minimum into a workplace pension and my employer is paying their minimum, I donít think Iím going to get them to increase their contributions so when I get my pay rise this month I intend to save all additional income into retirement plans. Is it best to pay it into my work pension given thereís no additional benefits from matching or should I set up a SIPP or S&S ISA instead and pay into that? Iím 35 if that makes a difference.

    Iíve been looking at Vanguard and intend to set up a S&S ISA (either LifeStrategy 80/20 or VWRL) with them anyway to build up a cash fund for retirement/later in life needs and not touch it for 30+ years but this would be accessible should I ever need it before retirement however I wasnít sure if I should also be looking at a SIPP or LISA and couldnít work out which is best. Iím a basic rate tax payer. I also save into a regular saver (where my money goes currently ) but I want to start splitting this between pension, and other accessible funds but not sure which is best. So which is best? SIPP, LISA, workplace pension with no additional matching, S&S ISA.... or something else?
    Originally posted by ForestBluebells
    Why would you not increase your contribution in order to trigger the highest possible e'er contribution? By not doing so you are refusing free money, effectively saying "no, I don't want that extra pay rise".
    • ForestBluebells
    • By ForestBluebells 14th Jan 20, 12:33 PM
    • 74 Posts
    • 15 Thanks
    ForestBluebells
    My employer is already paying the maximum they will pay into my pension so thereís no additional benefits for increasing payments to my workplace pension
    • adonis10
    • By adonis10 14th Jan 20, 12:42 PM
    • 1,691 Posts
    • 234 Thanks
    adonis10
    My employer is already paying the maximum they will pay into my pension so thereís no additional benefits for increasing payments to my workplace pension
    Originally posted by ForestBluebells
    Oh ok. I asked because your OP said "Iím currently paying the minimum into a workplace pension and my employer is paying their minimum, I donít think Iím going to get them to increase their contributions"
    • ForestBluebells
    • By ForestBluebells 14th Jan 20, 1:23 PM
    • 74 Posts
    • 15 Thanks
    ForestBluebells
    I meant auto enrolment amount which is also the only amount my employer will pay.
    • JoeCrystal
    • By JoeCrystal 15th Jan 20, 5:09 AM
    • 2,099 Posts
    • 1,513 Thanks
    JoeCrystal
    My employer is already paying the maximum they will pay into my pension so thereís no additional benefits for increasing payments to my workplace pension
    Originally posted by ForestBluebells
    There is one benefit contributing more into your workplace pension compared to adding to a separate SIPP, fewer administrative hassle! You can always move your workplace pension scheme to a new workplace pension scheme or SIPP if needed once you leave.
    • ForestBluebells
    • By ForestBluebells 15th Jan 20, 9:00 AM
    • 74 Posts
    • 15 Thanks
    ForestBluebells
    Iíve had a look and if I move the fund in my workplace pension to one I prefer then the management fee goes up to 1% which is high so I think Iíll open a separate one I can control for lower fees and combine them later should I ever leave this company.
    • surbhi09
    • By surbhi09 15th Jan 20, 9:40 AM
    • 1 Posts
    • 0 Thanks
    surbhi09
    Pension percentage
    What would be 5% of the pension to the actual salary?
    I am Surbhi Singh, I am an adviser in MNC for Designer Salwar Kameez & designer online sarees.
    • Albermarle
    • By Albermarle 15th Jan 20, 9:56 AM
    • 2,214 Posts
    • 1,454 Thanks
    Albermarle
    What would be 5% of the pension to the actual salary?
    Best not to 'hijack ' other threads and start your own instead.

    When you do, you need to expand on the question as in its current form it means nothing.
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