Sorry but you really have lost the whole context of the previous conversation. The discussion was ONLY about SIPP and the reactions were only about that 1 topic. As I said the ISA thing is true and good to know but Jim was not talking about that.
Jim 100% correctly pointed out that the discussion was about SIPP tax and not ISA differences as we were not disputing that in any way at all. It may be handy for people to know but the whole ISA issue was totally irrelevant to the conversation. Jim wasnāt being rude just making it clear it wasnāt in dispute.
The whole point was that @mqInAugrim came up with a really good post and idea thread and both got told they were wrong when they were correct and as mentioned corrected so the thread now looks very distorted but Jim was very fair in his comment.
I really need to be able to see better SIPP data - My HL account shows my total SIPP contributions including the 20% additional from HMRC and without it. In FT app itās very hard to track the additional 20% from HMRC and is causing a bit of a headache as I donāt know how much I have contributed in total. When you are putting in 10-20k per annum it makes a big difference on taxes.
Hi, to answer your question about moving pensions to FreeTrade, I have a few laying around but I decided any pension that qualifies as a ātrivial pensionā I will not consolidate.
The following is intended to give a flavour rather than 100% accurate;
My understanding is that once you trigger a non-trivial pension, the amount you can put into pensions afterwards reduces from Ā£40k per annum to Ā£4k per annum.
I believe you are entitled to trigger a small number of ātrivial pensionsā without affecting your annual contribution limit.
I hope to be able to trigger some ātrivial pensionsā in the future to offset a poosible 5 day working week reduction to a 4 day working week without affecting future contribution limits.
I think a ātrivial pensionā is one with a toal value of Ā£15k or less (or around there).
If you have trivial pensions, you could trigger up tp Ā£60k pension value while retaining Ā£40k per annum future contributions.
25% tax free is Ā£15k leaving Ā£45k to generate income/drawdown to offset reduced salary from a shoerter working week (assuming I temain employed in the first place).
This is NOT advice in respect of trivial pensions, rather a personal outlook upon how I might handle any trivial pensions rather than consolidate everything.
The trivial commutation rules allow someone in a defined benefits scheme aged 55 or over with total pension rights of no more than Ā£30,000 to take them as a lump sum.
Trivial commutation, I believe, is for occupational defined benefit scheme whilst small pots rules are for defined contribution money purchase pension schemes.
This is an area that needs investigating fully before cashing in pensions and potentially ending up with a tax bill or limits on future contributions.
Not financial advice of course, but there are a fair few rules around this.
Iām not sure if this is the right place to post this, but Iām slightly agonising over opening a SIPP. Obviously I know that people are not going to give me advice, and nor should they, but if people outlined how they went about it, or even if anyone else is currently considering opening one now that the new charging structure has been put in place, then that would still be useful I think.
For context, Iām too risk averse to put my entire pension in here so I would only be putting a proportion in, and a pretty low proportion at that.
Firstly, the charge. Itās effectively Ā£5 per month once you factor in the ISA taking up the other Ā£5, so effectively Ā£60 per year. With Aviva charging 0.5%, that would seem to mean Iād need Ā£12,000 in my SIPP before it would be in any way advantageous wouldnāt it?
On the other hand, you could put in less and buy enough dividend stocks initially to make the Ā£60 charge pay for itself. They would have to be very solid stocks as Iām not inclined to experiment with the pension as I do to a degree with the ISA but it would be possible to buy those first and then just add to the S&P, FTSE, etc ETFs later and over time that I would intend to be the bulk of any SIPP holding. I do understand that this product may not be so worthwhile at the beginning but will become more and more so with time.
Secondly, the regular contribution. There is no way that I will be able to pay more than Ā£25 per month into the SIPP most months, some months probably not even that. Iām loathe to put too much away due to the untouchable nature of it (hence why Iād always put more into an ISA). The FreeTrade product may therefore still be worth it with an initial lump sum added but definitely not if I was only going to start with only Ā£25 per month.
Thirdly, the 3% interest on cash in the GIA and ISA - this is attractive because I would be inclined to use the GIA as the account for my emergency cash. Having a SIPP would really be a pre-requisite to that though as the Ā£60 charge would wipe out any benefit from the 3% on its own.
I know this is a bit rambling and the questions may not really be that specific but Iām more interested in peoplesā thoughts rather than any specific advice (which I know you shouldnāt be giving anyway).
(1) If you are not 100% comfortable with managing your own pension via a SIPP donāt do it. Be completely comfortable with the idea.
(2) There is often a clamour by companies to get you to consolidate your pensions. But you are right to consider it to be a risk to have all your pension(s) in one place. So I fully understand the point that you wish to diversify the risk by not putting all your pensions with one company. Even if the pension is protected by various laws - if anything goes awry it is not clear how long it would take you to get your hands on what is yours.
(3) I donāt think that the Ā£60 is that relevant. Aviva might charge you 0.5% and therefore you might think that you need a pot of Ā£12K before it all makes sense. But OTH the returns from the Aviva pension might be terrible so you have to think carefully about this. There is no guarantee that you would get a better return by investing yourself.
(4) When I first started a SIPP I considered it to be a āplay penā pension ā¦ where I could take more risks than my company pension. I still largely have the same attitude. It is worth looking at your company pension and seeing what funds they invest in and asking yourself whether you can replicate what they are doing (even testing it as a game, in a spreadsheet for example, with no real money involved) using ETFs and/or Investment trusts.
(5) It is perfectly reasonable to consider your ISA to be your pension. You might want to avail yourself of a LISA (to get the government top up; but the drawback is that, as you have said, you donāt like the money locked up for a long time - you can get this LISA money though with a hefty penalty). The key thing is save as much as you can whichever mechanism you use.
I know I havenāt answered or addressed each and every one of your points. Nevertheless, I hope that some of what I have said here helps you to work out what an optimal strategy for saving for your later years might be.
What you do here may be less important, than why you are doing it. Itās a psychological game.
You state that you are very risk averse. Thatās ok, but this doesnāt work well with investing. The problem is that we are always taking risk, whether we realise it or not. Leaving everything in cash seems less risky, but means itās value is erroded by inflation. Itās a small but guaranteed risk. Buying equity is a much larger short term risk, but the risk is not guaranteed, in fact, over longer timespan itās almost guaranteed not to be a risk, rather, itās beneficial.
Think about it like quick dip in the sea. Many people wade in, feel the chill and bail. So they sit cold on the beach. If they stayed in and started swimming, they would soon be warm.
The only insurance is time. Minimise costs, buy the market, accept thereās risk you canāt avoid, donāt look, relax.
First, I think @bitflip has provided you with some very good answers. So I donāt want to repeat them.
I just wanted to add a couple of notes.
You mentioned you have a pension with Aviva? If you were considering transferring this pension, in full or in part, then you need to consider what benefits Aviva provide, and what you may lose by transferring to a SIPP.
Many pensions providers for example provide 100% protection on pensions, as compared to the 85k protection from the FSCS. With a SIPP youāre only covered up to the 85k. Youād need to check if what kind of pension you have and how itās covered with Aviva.
Also, many companies get a deal with pension providers to get a discount, or other services are bundled in.
That said, that doesnāt mean you shouldnāt transfer your pension. itās just something to consider.
On the all eggs in one basket. Iāll only add that Freetrades SIPP is managed by a third party. In the event of Freetrade going bust, from past examples, your SIPP is usually protected. I consolidate my pension into a SIPP by doing partial transfers every year, and transferred my old pension. But my pension isnāt a lot of money, thereās no advantage to splitting it upā¦ for me.
Advantages of leaving pensions with a pension provider is that you can basically set it and forget it. If youāre prone to changing things up and you donāt want to do this with your pension you might prefer it in an account you donāt access all the timeā¦ really depends on yourself. That said, always remember to check your pension at least once a year and make sure its in an appropriate fund (if a pension), or ETF or similar (if a SIPP) suitable to your age and risk appetite.
Thank you all of you for your answers, very useful and exactly what I was looking for. I have much clearer ideas what to research and do now. Iāll try to avoid an essay but some points:
I am comfortable managing part of it, Iāve been managing an ISA for the last 6 months and feel I know enough of what Iām doing to open a small part of my pension in a SIPP. Itās good that you mentioned the āplay penā pension bit because thatās exactly how I would view this, it would be a proportion of my pension, not all of it. Thatās what I meant by ārisk averseā rather than referring to investing in general.
Thank you, yes I have paid two years into a LISA but the problem is I never have a spare Ā£4,000 and being nowhere near 60 and no longer being a first time buyer, what I feel Iām doing here is tying up money that I might need to buy a bigger property in the future. If FreeTrade provided a LISA Iād probably transfer but as it is, I get a pathetic interest in addition to the 25% and dividing 25% over 15 or so years gives a return of less than 2%, ergo I think I can get much more even just dividend investing.
An excellent point I hadnāt though of, Ā£75 per year if you keep it up. Plus more dividends and, ultimately, even more capital!
Yes, it took me until this year to realise that but youāre right, cash is a guaranteed loser. Thatās why Iāve been trying to tie up as much as I can get away with in my ISA. Only disadvantage is liquidity and the need to hold spare cash but thatās why I thought the 3% interest might be a solution, albeit imperfect.
Iāve actually got two pensions each in Aviva and Standard Life, itās a bit messy! Aviva charges are 0.5% for both but Standard Life is odd with 0.355% for one and 0.672% for the other - Iāve written to ask them why! However, the only disadvantage potentially for having the two different providers is one of them not being paid into, which isnāt necessarily a disaster. Iāll take a good look at the performance of each fund. Taking everything into account, including the protection, it will potentially make sense to keep both providers and transfer something like Ā£5,000 into a FreeTrade SIPP in addition from the worst performing one. Or do a series of partial transfers as I think Eden said above.
So thank you again, I appreciate the very helpful comments.
Ive got 2 old pensions I was considering moving into a Sipp, think the value is only 5000 ish, so would be interesting to see if I could improve their value by doing it myself, my company pension, I would leave as is. Anyone else thought the same?
Please could we see a more comprehensive HMRC narrative?
Something like
Tax relief for period mm-yyyy in respect of Ā£xxx.xx deposit
Perhaps, Tax Relief entries should expand as Dividend payments do now to give the extra detail.
This allows us the ability to directly tie an HMRC payment with a deposit given there might be multiple deposits in a month (though imagine most months would be a single deposit).
This additional information should be included in any data export being worked on.
