Lets talk about SIPPs & your plan

Ok, not everyone has a SIPP, presumably because of work place pensions.

I have a SIPP & a small timeline relative to investing, to access mine. 9 years… No other workplace pension.

I’m 100% happy with my SIPP investments … But being years behind I need to ‘up my game’ with contributions. Only started contributing recently.

It’s really hard, in my experience, to lock away money for that amount of time. Even though I’ve managed to max my ISA 2 years running & have 2 GIAS. A SIPP is another story.

However I know I need to ramp it up in order to retire.

Does anyone here have a master plan for SIPPS? Do you invest a % of earnings & aim to increase % contributions nearer retirement? It makes sense to throw in as much as possible when close to retirement, but I’m finding it hard 9 years out.

If you’re fortunate enough to be a higher tax payer then SIPPs can be an incredible scheme. Even more so as you approach your intended retirement / wind down date, so I certainly prioritise SIPP > ISA these days.

1 Like

I pay into my workplace pension (5%) and my employer matches this. I also pay a similar amount into a SIPP.

When it comes to drawdown, i intend to take out just enough from my SIPP within the personal allowance (currently £12,570) and top up with ISA.

I intend to ramp up the amount i pay into my SIPP as the tax relief is a boost which can’t be ignored.

I might not want to invest at that point but might leave my money as cash in the SIPP, but that will still get the tax relief.

4 Likes

Max the SIPP for the next 9 years imo.

1 Like

My SIPP is an add on to my Defined Benefit pension ( ask your parents )

1 Like

One thing you might want to consider (and you may have meant or know about this anyway) is that if your drawdown plan doesn’t involve taking all of the tax-free lump sum at the start, then you could take it via lump sums. This means in one tax year you could withdraw £16,760, with HMRC regarding the first 25% (£4,190) as part of your tax-free lump sum, and the remaining 75% (£12,570) being taxable, but of course being covered by the personal allowance leaving £0 of tax payable.

5 Likes

Thanks for reminding me of this. I was aware but in my mind, I have me taking the 25% tax free lump sum at the start so subsequent withdrawals would be fully subject to the personal allowance.

I might try to do a drawdown model where I don’t take the lump sum to see how that looks. Cheers! :relaxed:

Same here :smile: My DB pension won’t be available until two years before state pension age, so until then, income will come from the ‘bridge’ of SIPPs and ISAs.

1 Like

Enjoy the cruise! :slight_smile:

1 Like

Not tempted by a transfer out @weenie ? The valuation I got last year was certainly interesting.

No, still not tempted, although I know it would be a decent valuation as an ex-colleague transferred out.

I like that the DB is guaranteed and not linked to the stock markets like my SIPP and DC pension.

Are you planning to transfer out or were you just curious about what the transfer value was?

I am now :wink: Will see how it looks when it comes to decision time ( 2027 at the earliest ). Would rather have the money front loaded while I can still enjoy it though.

Thanks @Jim_mcgrain , unfortunately I’m a low tax earner… My original SIPP lump sum was because I hit the higher tax bracket the year prior to Covid, so did get the tax break at both ends at the time.

1 Like

@Mattywallace , Thanks. Sadly I don’t earn enough to max out my SIPP, I can most probably max out my ISA each year… Only because I’ve got a good GIA build up… I guess I need find a happy medium of %age into SIPP.

Great plan @weenie , thanks for sharing :+1:Hope its an around the world cruise :laughing:

1 Like

A pension is definitely the most tax efficient you can get, it sounds like you’re selling assets in a GIA to put into an ISA, this is likely to have been taxed income previously i.e. you paid income tax on the original money you placed in the GIA.
You can claim tax relief on those payments into a SIPP - “Tax relief on personal payments into your pension for amounts up to £40,000 or 100% of your annual earnings (whichever is less)
I made a small payment into my SIPP to round out the share purchases, Freetrade (or the custodian) sorted the 20% tax relief on my behalf.

It might be worth reading into it a bit more/financial advice, as I’d hazard a guess based on the above you might end up with a bigger pot of money by being able to get the tax relief (ignoring the investments made) - ISAs vs pensions - Aviva

Edit - Vanguard article with more specific points about a SIPP - Vanguard Asset Management | Personal Investing in the UK

2 Likes

Sorry if this is off-topic but is a SIPP better to have from a tax point of view than an ISA? I currently have a work-based pension which I’m leaving to do its thing and am paying what I can into an ISA, because I don’t earn enough, it’s never the full allowance of £20k per year. I’m a basic rate tax payer. I’ve never considered a SIPP due to having the ISA, but should I be considering it?

Me too.

Even as a basic rate payer, consider that every £100 you put into the SIPP, you will get £25 rebate on top of that from the government, which also gets compounded.

Sure, the SIPP doesn’t have the flexibility of the ISA but the tax rebate is hard to ignore and can help build wealth.

6 Likes

Thanks for all the info.

I’ve decided to sell down one of my GIAs and lump it into my SIPP. Then I’m going to up my monthly contribution from £100 to £250.

Hopefully, subject to investment returns, this should get me on track.

I will be able to contribute to a workplace pension in a few weeks also … Which will only be in NEST with 3% employer contributions, but it’ll help.

Out of interest, your allowed to use pension allowance carry forward from the past 3 years.

3 Likes

I prefer using an ISA. The problem with a SIPP or indeed any sort of pension is that you can become “pension rich”.

In this sense I keep in check any individual contributions to anything pension related, out of direct salary/employer/government matched contributions.

That may mean I underscore somewhat on the pensions front, but since I prefer the option for instantaneous withdrawal that an ISA provides, in most cases that’s my preferred avenue of tax free account.

That said I stil operate both ISAs with a long term goal and reinvest the dividends, but if a major life scenario were to take place, I have options, even if it would pain me to have to use them.

No ISA subs have taken place at all in this tax year at time of writing.

2 Likes

Hi,
And thank you to Weenie and RumNCoke for your advice to me. You are both making very valid points although from slightly different points of view. So far, I’ve been inclined towards what RumNCoke says with regards to ISA vs SIPP, especially as the monthly charge will increase quite a lot if I put money into a FT SIPP. I’ll explore with my work’s HR what will happen tax-wise if I decide to put £50 or £100 a month into a separate SIPP but will most certainly retain the ISA as my primary source of savings.

2 Likes