Hopefully a simple question about making pension contributio

[FredClogs]

nickfrog said:

Thanks - sounds very much like a pension fund. I don't understand the difference between a SIPP and what I currently have. What I currently have is a personal pension plan opened 20 years ago and x2 funds from my last 3 PAYE employers, 2 of them with Scottish Windows and 1 of them with another provider when I worked with AIG. If a SIPP is different, what's the benefit ?

It's just a self invested pension plan . A new set of regulations etc... surround their creation and the behind scenes under writing. The platforms such as HL and Best invest should be 100% underwritten and totally risk free but the funds themselves are not, you have to chose on risk where the money goes which relieves some pressure from the supply chain and avoid Equitable life type situations.

As users I think the idea was two fold...

1) To allow people like us who have multiple old personal or work place pension plans that we no longer contribute to pool our pension pots into one place so we can keep them active and manage them - this is what I did, my pot is not massive but rather than lying dormant in a long term fund being nibbled by fees I'm now putting my effort into one pot I can actively manage, good for me and good for the financial services industry. But you don't have to do this.

2) You can open a SIPP even if you're not in employment, i.e for your kids, spouse etc... If you were wealthy enough and started from a young age using your yearly allowances you could build a staggeringly large amount of money in a very very tax efficient way, avoiding all sorts of CGT and IHT issues, you know how the rich like to legislate for themselves. If you then also used your ISA allowances in parallel... well someone can work it out at and annualized 7% gain - it would be staggering amount of money and tax saved.

I'm no expert though, that's just me talking. The main thing as I've said is watch for the fees and risk level of what you're investing in and you won't have any unfortunate surprises.

[TFP]

FredClogs said:

nickfrog said:

Thanks - sounds very much like a pension fund. I don't understand the difference between a SIPP and what I currently have. What I currently have is a personal pension plan opened 20 years ago and x2 funds from my last 3 PAYE employers, 2 of them with Scottish Windows and 1 of them with another provider when I worked with AIG. If a SIPP is different, what's the benefit ?

It's just a self invested pension plan . A new set of regulations etc... surround their creation and the behind scenes under writing. The platforms such as HL and Best invest should be 100% underwritten and totally risk free but the funds themselves are not, you have to chose on risk where the money goes which relieves some pressure from the supply chain and avoid Equitable life type situations.

As users I think the idea was two fold...

1) To allow people like us who have multiple old personal or work place pension plans that we no longer contribute to pool our pension pots into one place so we can keep them active and manage them - this is what I did, my pot is not massive but rather than lying dormant in a long term fund being nibbled by fees I'm now putting my effort into one pot I can actively manage, good for me and good for the financial services industry. But you don't have to do this.

2) You can open a SIPP even if you're not in employment, i.e for your kids, spouse etc... If you were wealthy enough and started from a young age using your yearly allowances you could build a staggeringly large amount of money in a very very tax efficient way, avoiding all sorts of CGT and IHT issues, you know how the rich like to legislate for themselves. If you then also used your ISA allowances in parallel... well someone can work it out at and annualized 7% gain - it would be staggering amount of money and tax saved.

I'm no expert though, that's just me talking. The main thing as I've said is watch for the fees and risk level of what you're investing in and you won't have any unfortunate surprises.

Fred,

I know your posts are clearly well intentioned, but you're right about being no expert.

Can I suggest that most of this is ignored, however well meaning and instead google HMRC or one of the pension provider websites.

[nickfrog]

Ginge R said:

Gut instinct, if you're going to buy a SIPP, then at least be able, ready and willing to use it properly. If not, don't bother. SIPPs aren't bad at all, but for most people who have them, they're needlessly expensive and complex, and are packed with unused functionality that is never used. Setting one up is a doddle, but how are you going to manage it?

Consider instead, a modern, bog standard personal pension. Most PPs these days with good and decently managed funds in the region of 25k, should cost c0.5%. If you have an old PP and assorted waifs and straifs there's a plausible case to consider consolidating them.

Thanks - I really don't want a SIPP as I don't understand the difference between a SIPP and a personal pension plan. I do not want to make my own detailed investment decision anyway, not a clue nor time for that.

But then again, the contributions are from my employer NOT from from me so a personal pension doesn't work does it ? I thought my Ltd Cy needed to open a specific plan to make contributions in it for my benefit ? Or did I get this wrong too ?

[Ginge R]

nickfrog said:

Thanks - I really don't want a SIPP as I don't understand the difference between a SIPP and a personal pension plan. I do not want to make my own detailed investment decision anyway, not a clue nor time for that.

But then again, the contributions are from my employer NOT from from me so a personal pension doesn't work does it ? I thought my Ltd Cy needed to open a specific plan to make contributions in it for my benefit ? Or did I get this wrong too ?

Possibly..

A PP should work just fine for you (in principle). Nearly all DC occupational pensions are GPP (Group Personal pensions) anyway. SIPP are fine in principle, but I wonder if they're for you. As you say, probably not.

[Jockman]

nickfrog said:

Thanks - I really don't want a SIPP as I don't understand the difference between a SIPP and a personal pension plan. I do not want to make my own detailed investment decision anyway, not a clue nor time for that.

But then again, the contributions are from my employer NOT from from me so a personal pension doesn't work does it ? I thought my Ltd Cy needed to open a specific plan to make contributions in it for my benefit ? Or did I get this wrong too ?

If it helps, we had PPs as Directors that the Employer contributions went into. We only changed them to SIPPs so that we could put commercial property into them.

My wife has a PP that I'm about to start putting Employer contributions into too.

[nickfrog]

Thanks ! Good to hear that any old PP will work as the vehicle for my Ltd Cy to pay into it. Makes it simple.

[Jockman]

Check with your Provider.

[WindyCommon]

TFP said:

FredClogs said:

nickfrog said:

Thanks - sounds very much like a pension fund. I don't understand the difference between a SIPP and what I currently have. What I currently have is a personal pension plan opened 20 years ago and x2 funds from my last 3 PAYE employers, 2 of them with Scottish Windows and 1 of them with another provider when I worked with AIG. If a SIPP is different, what's the benefit ?

It's just a self invested pension plan . A new set of regulations etc... surround their creation and the behind scenes under writing. The platforms such as HL and Best invest should be 100% underwritten and totally risk free but the funds themselves are not, you have to chose on risk where the money goes which relieves some pressure from the supply chain and avoid Equitable life type situations.

As users I think the idea was two fold...

1) To allow people like us who have multiple old personal or work place pension plans that we no longer contribute to pool our pension pots into one place so we can keep them active and manage them - this is what I did, my pot is not massive but rather than lying dormant in a long term fund being nibbled by fees I'm now putting my effort into one pot I can actively manage, good for me and good for the financial services industry. But you don't have to do this.

2) You can open a SIPP even if you're not in employment, i.e for your kids, spouse etc... If you were wealthy enough and started from a young age using your yearly allowances you could build a staggeringly large amount of money in a very very tax efficient way, avoiding all sorts of CGT and IHT issues, you know how the rich like to legislate for themselves. If you then also used your ISA allowances in parallel... well someone can work it out at and annualized 7% gain - it would be staggering amount of money and tax saved.

I'm no expert though, that's just me talking. The main thing as I've said is watch for the fees and risk level of what you're investing in and you won't have any unfortunate surprises.

Fred,

I know your posts are clearly well intentioned, but you're right about being no expert.

Can I suggest that most of this is ignored, however well meaning and instead google HMRC or one of the pension provider websites.

TFP - rather than responding in this way, perhaps you could constructively straighten out anything important that you think Fred has got wrong...? I don't think there is much.

[nickfrog]

Jockman said:

Check with your Provider.

Will do - I have now engaged a Fin Adv - costing me a little upfront fee but clearly solid advice. We can't get retrospective relief on the moneys we have paid CT on as I have not earned enough over the past 4 years in non-dividend (only £34k of PAYE income over 4 years, but I believe it would have needed to be over £40k)

[Jockman]

nickfrog said:

Jockman said:

Check with your Provider.

Will do - I have now engaged a Fin Adv - costing me a little upfront fee but clearly solid advice. We can't get retrospective relief on the moneys we have paid CT on as I have not earned enough over the past 4 years in non-dividend (only £34k of PAYE income over 4 years, but I believe it would have needed to be over £40k)

Remember there is no link to Salary for an Employer contribution. The principle criterion is that a pension scheme was in place when trying to use carry forward.

[Ginge R]

nickfrog said:

Will do - I have now engaged a Fin Adv - costing me a little upfront fee but clearly solid advice. We can't get retrospective relief on the moneys we have paid CT on as I have not earned enough over the past 4 years in non-dividend (only £34k of PAYE income over 4 years, but I believe it would have needed to be over £40k)

Don't forget, if a VCT is suitable in the first place, you can get 30% tax relief on a VCT contribution (instead of a pension). The characteristics of a VCT mean that whereas a pension contribution is linked to 'relevant income' (i.e., income you pay income tax on, such as salary) - a VCT isn't. With a VCT you can also get tax relief on rental income, dividends etc, up to £200,000 a year (which works well for high earners who are crippled by reduced tax relief allowance on pension contributions, or because a lot of their income is based on rental income). Ask your adviser /accountant about the suitability of making employer contributions into a VCT.

[sidicks]

FredClogs said:

It's just a self invested pension plan . A new set of regulations etc... surround their creation and the behind scenes under writing. The platforms such as HL and Best invest should be 100% underwritten and totally risk free but the funds themselves are not, you have to chose on risk where the money goes which relieves some pressure from the supply chain and avoid Equitable life type situations.

Please explain what a unit-linked DC plan has to do with the 'Equitable Life situation'?! I think the answer is absolutely nothing!

FredClogs said:

As users I think the idea was two fold...

1) To allow people like us who have multiple old personal or work place pension plans that we no longer contribute to pool our pension pots into one place so we can keep them active and manage them - this is what I did, my pot is not massive but rather than lying dormant in a long term fund being nibbled by fees I'm now putting my effort into one pot I can actively manage, good for me and good for the financial services industry. But you don't have to do this.

Funds are not 'dormant', they are still managed wherever they are, so whether you have 4 boys in 4 places or a1 large pot makes little difference in terms of strategy. Of course if some fees are fixed in £ terms then there may be some economies of scale achieved in bringing the plans together. Plus of course it's simply easier to keep track of for the individual. Makes very little difference to the 'financial services industry' though!

[sidicks]

FredClogs said:

I stand corrected as above.

A Sipp is just a stocks and shores investment account that you can't get at until your 55 and you don't get taxed on any of the interest or income it generates - you pay the tax when you draw it out (at 55 or above) based on the rules of the day.

A SIPP can invest in much much more than just stocks and 'shores' or even shares!

FredClogs said:

It's just like an ISA, you put money in monthly and decide what it's invested in. It's very very easy to set up so you just invest that money each month by buying a simple long term generic pension fund, that same as your private pension would do. There is loads available from the likes of axa, scotish widows, hsbc, legal and general.
There are also other funds with more focused levels of risk or investment but you don't have to touch them.

See the HL website, it's incredibly easy to set up and understand. You'll have to put in some effort to fk it up. The biggest mistake is choosing a fund that doesn't have competitive fees as I mentioned above. You can pay a fancy pants IFA to do it for you but the chances are you'll be paying for your peace of mind, and quite a lot, rather than any particular expert investment crystal ball excellence.

You can always chop and change if you get into it or later on. The way a managed personal pension fund or stake holder would work to protect any capital is start off investing in quite high risk equities and/or index trackers and then over time as you approach 55 it will start to transfer the capital into less risky bonds and then cash as you come to the point you might start drawing it out, that way you don't have a disappointing 10% or 20% capital loss on your 54th year.

You are confusing:

1) a managed fund - an investment strategy which can typically invest in different asset classes and hence respond to (and before) market stress to reduce risk
2) a stakeholder pension - a product wrapper with maximum charges defined by legislation

3) a lifestyle investment strategy which allocates more of your money to less risky assets as your retirement date approaches.

I know you mean well, but your misunderstanding is likely to confuse the OP, rather than help. Best leave it to the experts like Ginge!