SIPP & Pension guidance - IM Private Clients

[Intelligent Money]

mjb1 said:

I don't know the actual mechanics of splitting it off the mortgage (hopefully that's not a stumbling block), just that the house might be worth 50k less without the garage, and that would increase the LTV on the house from about 30% to 36%. I think both are low enough that it wouldn't affect mortgageability or interest rate? Obviously I don't want to split the mortgage, that needs to stay on the house by itself.

Hi,

Apologies for the delay in a reply, a few days holiday got in the way!

You are very unlikely to find a SIPP that will take the holiday home. HMRC tend to take the view that if the properties could be used for residential purposes then they won't qualify.

The garage option could work but would need to be assessed and approved by the SIPP provider first. As you say you would need to hold it on separate title and designate its use as commercial. Your mortgage provider would need to approve the separation of title, although this shouldn't be a problem based on the outline you have provided.

Cheers

Nik

[anonymous-user]

Quick question on personal pension and drawdown if I may.

I’m currently retired with no income so should probably start taking drawdown up to the personal allowance for tax efficiency. If I don’t need the 25% tax free lump right now what are my options for this? I know I can utilise the 25% as part of every drawdown amount if I want to BUT what if I want to keep the 25% lump sum as an option in case I need it in the future for whatever purpose.

[LeoSayer]

garyhun said:

Quick question on personal pension and drawdown if I may.

I’m currently retired with no income so should probably start taking drawdown up to the personal allowance for tax efficiency. If I don’t need the 25% tax free lump right now what are my options for this? I know I can utilise the 25% as part of every drawdown amount if I want to BUT what if I want to keep the 25% lump sum as an option in case I need it in the future for whatever purpose.

If you’re looking for tax efficiency then why not take 25% tax free lump when you drawdown?

As I understand it the legislation gives you a year to take the 25% tax free once you start drawing income. In practice, I think all pension providers will only support immediate payment of the 25%.

So if you’re looking to drawdown up to the personal allowance then you’ll take £12,570 as income plus £4,190 as the 25% tax free.

However your post makes it sound like you don’t actually need any income at all so why withdraw anything?

[Carbon Sasquatch]

LeoSayer said:

If you’re looking for tax efficiency then why not take 25% tax free lump when you drawdown?

As I understand it the legislation gives you a year to take the 25% tax free once you start drawing income. In practice, I think all pension providers will only support immediate payment of the 25%.

So if you’re looking to drawdown up to the personal allowance then you’ll take £12,570 as income plus £4,190 as the 25% tax free.

However your post makes it sound like you don’t actually need any income at all so why withdraw anything?

Retired & no income - so assuming you'll spend it eventually, make use of this years tax allowance to take out as much as you can tax free.

I agree - I'd be taking £16,760 (12570+4190)

Then put it into an ISA invested in the same thing as your SIPP

[anonymous-user]

Carbon Sasquatch said:

Retired & no income - so assuming you'll spend it eventually, make use of this years tax allowance to take out as much as you can tax free.

I agree - I'd be taking £16,760 (12570+4190)

Then put it into an ISA invested in the same thing as your SIPP

That’s the plan.

I just wasn’t sure if I could keep back the 25% available as a lump sum in case I needed it in the next few years. Just have to work out if taking it now suits my situation better than taking it every year as you describe alongside the taxable element of drawdown.

[Carbon Sasquatch]

You don't need to take 25% of the whole thing in one go. As long as your provider supports the functionality, you can 'crystallise' any amount you like - take 25% tax free & the other 75% at your marginal rate. The remainder remains uncrystallised and you can take 25% of that (or any part of that) at a later date.

[anonymous-user]

Carbon Sasquatch said:

You don't need to take 25% of the whole thing in one go. As long as your provider supports the functionality, you can 'crystallise' any amount you like - take 25% tax free & the other 75% at your marginal rate. The remainder remains uncrystallised and you can take 25% of that (or any part of that) at a later date.

[Craikeybaby]

Where is a good place to read up on SIPPs/pensions in general?

As I need to work out what to do with mine. I have a pot with Scottish Widows, from my previous employer, which I was paying 14% of my salary in to via salary sacrifice. I have since changed jobs and have a new pension with Nest, which is getting 8%, there doesn't appear to be the option to vary my contribution. However, I would like to put the additional 6% into a pension - during my probation period I have just been putting it in a savings account, but I realise I need to get it into a pension.

It seems like my options are:

• Pay it into my existing Scottish Widows pot - however, I don't know if this is any good, as it was just the old company pension.
• Start a SIPP - how do I choose one that isn't going to cost loads in fees etc? So far my only idea is the Vanguard products, as I have my S&S ISA in their Lifestrategy funds and that seems to be doing OK.

Then if I start a SIPP, there is also the question of do I add my Scottish Widows pot in to that too?

[pingu393]

Craikeybaby said:

Where is a good place to read up on SIPPs/pensions in general?

As I need to work out what to do with mine. I have a pot with Scottish Widows, from my previous employer, which I was paying 14% of my salary in to via salary sacrifice. I have since changed jobs and have a new pension with Nest, which is getting 8%, there doesn't appear to be the option to vary my contribution. However, I would like to put the additional 6% into a pension - during my probation period I have just been putting it in a savings account, but I realise I need to get it into a pension.

It seems like my options are:

• Pay it into my existing Scottish Widows pot - however, I don't know if this is any good, as it was just the old company pension.
• Start a SIPP - how do I choose one that isn't going to cost loads in fees etc? So far my only idea is the Vanguard products, as I have my S&S ISA in their Lifestrategy funds and that seems to be doing OK.

Then if I start a SIPP, there is also the question of do I add my Scottish Widows pot in to that too?

If I understand correctly, an IM SIPP is free until you invest in a fund. This will enable you to add to the SIPP into "cash" and get the 25% from HMRC.

You only pay fees when you move out of "cash" into a fund. Hopefully, the fund would grow by more than the fees. The fees are in the region of 0.6% to 0.8% depending upon the fund you choose.

[anonymous-user]

pingu393 said:

If I understand correctly, an IM SIPP is free until you invest in a fund. This will enable you to add to the SIPP into "cash" and get the 25% from HMRC.

When I joined IM, I transferred my entire (no longer contributed to) SIPP straight in to a fund - did I lose 25%?!

[pingu393]

OnTheBreadline said:

pingu393 said:

If I understand correctly, an IM SIPP is free until you invest in a fund. This will enable you to add to the SIPP into "cash" and get the 25% from HMRC.

When I joined IM, I transferred my entire (no longer contributed to) SIPP straight in to a fund - did I lose 25%?!

You did a transfer, so had already claimed the 25% previously. He is talking about adding new money into a SIPP.

Unless you are taking the piss. In which case - ha ha ha.

[PM3]

Taking the piss , might take form of freeloading on IM platform by holding cash only ? In the end someone has to pay for their services , and I for one don't want to promote a need to increase rates for those in paying funds.

It nice sticking it to the man.....but , personally I'm not putting Julians company in that bracket ( I could in a heart beat stick it to Mercer , but that's a one way trip my direction for sure)

[Craikeybaby]

pingu393 said:

If I understand correctly, an IM SIPP is free until you invest in a fund. This will enable you to add to the SIPP into "cash" and get the 25% from HMRC.

You only pay fees when you move out of "cash" into a fund. Hopefully, the fund would grow by more than the fees. The fees are in the region of 0.6% to 0.8% depending upon the fund you choose.

Thanks, it is good to at least have a ball park of the funds costs. I will be investing in a fund when I have settled on the best company/platform for me.

[pingu393]

PM3 said:

Taking the piss , might take form of freeloading on IM platform by holding cash only ? In the end someone has to pay for their services , and I for one don't want to promote a need to increase rates for those in paying funds.

It nice sticking it to the man.....but , personally I'm not putting Julians company in that bracket ( I could in a heart beat stick it to Mercer , but that's a one way trip my direction for sure)

You make a good point. I wouldn't use the cash option as anything other than a lifeboat. It would be a waste of potential to not move the money into a fund as soon as the time is right.

Personally, I would see nothing wrong with Julian charging for holding cash.

[dingg]

pingu393 said:

Personally, I would see nothing wrong with Julian charging for holding cash.

Give yer self a swift kick up the arse then

[pingu393]

dingg said:

pingu393 said:

Personally, I would see nothing wrong with Julian charging for holding cash.

Give yer self a swift kick up the arse then

Why? Because I wouldn't be taking the piss? IM supply SIPP investment facilities at very reasonable rates. IM supply the infrastructure to enable me to reclaim 25%. Why shouldn't I pay?

£500 per £100,000 per year wouldn't be excessive when £25,000 of that was because of them. It would be my fault that I chose not to invest it over the 50 years repayment time.

[dingg]

Because interest rates are rising and you'd be an idiot to pay someone to nurse cash when you could be capitalising on holding it.

The first rule of investing

Make sure that you don't get stiffed in fees and your suggestion paying fees when its not required is bonkers.

Give yer self another kick up the arse but harder this time, the first time didn't help. :-)

[pingu393]

dingg said:

Because interest rates are rising and you'd be an idiot to pay someone to nurse cash when you could be capitalising on holding it.

The first rule of investing

Make sure that you don't get stiffed in fees and your suggestion paying fees when its not required is bonkers.

Give yer self another kick up the arse but harder this time, the first time didn't help. :-)

You do know that this is a SIPP thread and that I can't withdraw the cash?

[dingg]

pingu393 said:

You do know that this is a SIPP thread and that I can't withdraw the cash?

Yes, but I've learned something today, don't converse with penguins, I'm oot.

[anonymous-user]

pingu393 said:

You did a transfer, so had already claimed the 25% previously. He is talking about adding new money into a SIPP.

Unless you are taking the piss. In which case - ha ha ha.

Not taking the piss. And I don't remember ever claiming 25%! Oh well, a fool and his money...