AIBU to get a SiPP

[Stuffedcrust55]

My dad had a pension that was a disaster. Worth loads less than he paid in. Hes 72 now. It's really put me off having a pension. I have some savings but very small. I had planned to get n additional property but IVF took this money. I have a house although its mortgaged.

I'm now in a position where I'm earning good money and want to put away a good chunk every month for retirement. I'm 45. I work for myself in a limited company so no employer contributions. I pay myself a base salary then dividends.

I've enquired about a SiPP and I can pay any amount up to £40k a year and I'll get 20% tax rebate if I pay it from my take home money. The 20% is quite an incentive.

I just cant shake the unease at having money tied somewhere i cant get it - what if i need cancer treatment abroad and cant use it, what happens if it loses value etc etc?

Alternatives are investing in premium bonds or property or maybe both.

Any advice please?

Talk to your accountant as with having a limited company you may be able to invest more tax efficiently by having the company pay into your SIPP or another type of pension.

This Meaningful Money podcast episode, whilst a bit old now, talks about different types of pensions which you may find useful: meaningfulmoney.tv/2013/06/05/mmp013-making-sense-of-pensions-podcast/

YANBU to use tax efficient investment vehicles.

You are too old for a LISA (Lifetime ISA) but you can use a Stocks&Shares ISA. You don't get the tax relief though so it is not where you would put most of your money but putting some there can give you a nest-egg to use whenever you need to use it. It is commonly used to bridge the gap between when you decide to retire and when your pension actually starts to pay out.

Listen to podcasts and watch videos from UK based financial planners, you will learn a lot and the more you understand about investing the better... never do an investment you don't understand.

Some podcasts to get you started, some also have Youtube channels:
Meaningful Money
Money To The Masses
Maven Money
In Her Financial Shoes
The Retirement Cafe

Make sure you do your research. I work with SIPPs that have gone wrong. And some go very very wrong. Make sure the investments that are being recommended are actually suitable recommended investments as a minimum also watch for fees that may cancel out any benefit as some can be quite high.

Are you sure that it's a sipp you want, where you choose the investments yourself or a personal pension scheme where the fund manages the investments (for a fee)? Either way, a pension shouldn't really be your only way of saving, you should have some that you can access easily and others that are more long term. Maybe worth seeing a financial advisor?

Are you going to be doing any sort of self investment such as buying shares direct through the SIPP or are you just looking at investing in insured funds? If it’s the latter then all you’d need is a standard pension plan which would have much lower charges. Remember if you do put £40k a year in you can take 25% of the value tax free from age 55 so you will be able to access some in about 10 years (although by then that age might have gone up to 57 or later). Pensions are good tax efficient vehicles so definitely worth talking to an adviser and your accountant regarding possible contributions through your company

I've enquired about a SIPP and I can pay any amount up to £40k a year and I'll get 20% tax rebate if I pay it from my take home money. The 20% is quite an incentive.

If you have a company it's usually a better idea to pay employer contributions into a SIPP. You can do this with any SIPP and it's really not much more complicated than paying personal contributions.

You will probably get more tax relief on employer contributions than personal ones.

Another consideration with personal contributions is that they can't be more than 100% of your salary (dividends don't count) but that same rule doesn't apply to employer contributions.

I worked for a Sipp company. You are in control so they can’t lose your money ‘it’s protected’ the fees can be fairly high. Do you have a commercial property? You can put that onto your Sipp and then pay rent (or tents pay rent) that accumulates in your Sipp fund. There are several companies that do property based Sipp funds as well as personal sipp’s.

My DH works for himself and has made his contributions as employer contributions. That way you don't pay corporation tax or NI on the amount. We use best invest and they made it all very easy. Once it's open and there's money in it you can buy whatever investments you like. He has a mix of tracker and managed funds. Or you can just go with one of their managed ones. You can access it from 55.

We have a ltd company and use it to pay contributions to a SIPP with interactive investor. The funds are in shares, which we select ourselves

Go see an IFA.

Thanks everyone. I think ive got some wrong advice as I spoke to an advisor who said I couldn't pay direct from my Limited company and that sounds like its totally wrong. I think ill need to talk to another advisor. Thanks again. Also a bit scary to think 55 isnt that far off so my money wouldn't actually be tied for very long! Im still 30 in my head :)

caution - a SIPP is just one type of pension which is probably not the right product for you unless you are a keen reader of financial journalism pages and stock market prices and are happy to put a lot of time into selecting companies to invest in on a monthly basis as well as regularly reviewing your holdings to sell off poorly performing investments. a SIPP is a product that gives you the power to do this within the counfines of an arrangement which meets the government requirements for a pension ie you can't access the money you make as immediate income. The charges for a SIPP are generally quite high.

lots of ill-informed people start a SIPP and then treat it like an ordinary personal pension, selecting a small number of managed funds to automatically add their contributions to and rarely changing that balance. so they are paying the double fees of a SIPP while only using the same service they could get at half the price with a PP.

You almost certainly want a personal pension not a SIPP.

and yes it is worth doing. even if it never gets very big it will make a difference.

you probably won't be able to get independent financial advice. IFAs have no interest in helping ordinary non-wealthy people with this kind of thing as their work is commission based as a percentage of yours funds available to invest and if you aren't wealthy their cut is diddly-squat. however all the big financial companies will have a simple personal pension you can buy as a private individual, and they are reasonably comparable with litte to differentiate them from one another so just pick one.

Crikey yeas that advice was very wrong you can definitely pay employer contributions from your limited company. I can DM you the name of an exceptionally good IFA if you like, she’s based in London but works remotely with clients all over the UK.

What about the difference in fund fees between a Personal Pension and a SIPP, would that not make a SIPP lower cost over a long period of time?

My personal pension has 1% AMC on the funds.

SIPP I am looking at would have a total of 0.47% (platform fee plus fund fee). A 0.53% saving may not seem a lot but when looking at £100k invested having a fee of £470 vs £1000 is surely better. What am I missing? Drawdown fees will be different but should that be considered when drawdown would not start for 15+ years?