SIPP Guidance vs Employer Pension

[Taita]

Hello there,

I was wondering if I might query the PH hive mind for some guidance please

I am in the position of having a good PAYE salary at my new job, but a fairly poor company scheme. They pay a %age of qualifying earnings up to 50k, with me paying 5% and them 3%. My wages are above that level, so only get contribs on a proportion of it. It's a fairly small company.

I'm enrolled in their scheme, but conscious that my new employer contributions will be quite low. I could also continue to contribute to my previous employer pension (Aviva). One option I am considering is a SIPP as I think I would get better gains that simply just putting a lot more (unmatched) contributions into my new company pension.

I would prefer a sort of 'fire and forget' approach, where I can set the risk tolerance and then not have to actively manage it. Payments would likely be monthly as my salary arrives, but I could save it and do one large one per year just before Self Assessment time? I appreciate Vanguard / AJ Bell, HL and IM all have products that can fulfill this, but would be keen to know of any pitfalls or additional things to consider.

I would be looking to contribute maybe 1300pm to a personal pension (on top of my 5% within my employer scheme), and I guess I would complete a SA to claim back the tax relief on it as I already have to complete an SA for other reasons.

Thank you!

[TCX]

Been worth it for me taking 3 pensions and amalgamating into a sipp,I'm very proactive,sipp basically shadows share dealing fund,no doubt you'll beat company growth even just investing in funds yourself,but I reckon the whole advantage of a sipp is the ability to do it yourself

[xeny]

Is the company scheme salary sacrifice? The NI savings can make AVCs very attractive relative to a SIPP.

[Taita]

xeny said:

Is the company scheme salary sacrifice? The NI savings can make AVCs very attractive relative to a SIPP.

I don't believe so, but will confirm today, thanks for the pointer as I'd missed it

[LeoSayer]

Also compare the investments in the employer pension and compare the charges to a SIPP platform. A small % charge difference per year can make a massive difference over the long term.

Another question to ask is whether it is possible to make periodic (eg. annual) transfers from your employer pension to a SIPP should you want to.

If you are earning monthly then there's no reason to wait until a year has passed before investing. "Time in the market" is generally the best strategy.

[Colonel Cupcake]

TCX said:

Been worth it for me taking 3 pensions and amalgamating into a sipp,I'm very proactive,sipp basically shadows share dealing fund,no doubt you'll beat company growth even just investing in funds yourself,but I reckon the whole advantage of a sipp is the ability to do it yourself

I have a few very small pensions from past employers. Is transferring them to a SIPP just a matter of giving your SIPP provider the details of the pension and they handle the transfer, like if you transfer an ISA to a new platform?

[Mattt]

xeny said:

Is the company scheme salary sacrifice? The NI savings can make AVCs very attractive relative to a SIPP.

Only if his Employer shares some of their savings, as based on his comments he’s on the higher 2% rate.

[B9]

I salary sacrifice into my employer pension to benefit from the 40% tax relief and 2% NI saving, your employer may even agree to pay their 12% NI saving(!).

I then periodically run a partial transfer to my Intelligent Money SIPP. I'm fortunate that there's no fees for this, you may want to check your scheme.

It's very low effort. I'd say easier than the self assessment you need to complete for asking HMRC to give you the other 20%. And my money is always invested.

[Mattt]

No self assessment required to get the extra 20% back, you just ring them and tell them what the contributions were.

[Taita]

B9 said:

I salary sacrifice into my employer pension to benefit from the 40% tax relief and 2% NI saving, your employer may even agree to pay their 12% NI saving(!).

I then periodically run a partial transfer to my Intelligent Money SIPP. I'm fortunate that there's no fees for this, you may want to check your scheme.

It's very low effort. I'd say easier than the self assessment you need to complete for asking HMRC to give you the other 20%. And my money is always invested.

I will speak to my employer about AVC / Salary Sacrifice. They are quite a small company so they are unlikely to be particularly well-read in this area as HR is done by a generalist etc. I guess I could try and get them to ask the pension provider whether they can accept salary sacrifice in the scheme or not . Haven't received all the paperwork from the pension provider yet so will need to see.