SIPP v add to workplace pension?
Discussion
I have a workplace pension via Aviva with all-in fees of 0.49%
I'm fortunate enough to have enough in the bank and invested elsewhere to be looking at how to take best advantage of tax wrappers and my ISA allowance is always used up immediately.
One option for some of those savings is to open a SIPP with a third party provider and another option is to simply add a lump sum from savings to the workplace pension which looks to be as simple as a debit card payment through the Aviva website.
The workplace pension has a protected right to access at 55 which includes pensions that are transferred in so even if I opened a SIPP I might be looking to transfer to Aviva to consolidate at some point.
Does anyone know if there are any pros and cons of one options v the other that I may now have considered please?
I'm fortunate enough to have enough in the bank and invested elsewhere to be looking at how to take best advantage of tax wrappers and my ISA allowance is always used up immediately.
One option for some of those savings is to open a SIPP with a third party provider and another option is to simply add a lump sum from savings to the workplace pension which looks to be as simple as a debit card payment through the Aviva website.
The workplace pension has a protected right to access at 55 which includes pensions that are transferred in so even if I opened a SIPP I might be looking to transfer to Aviva to consolidate at some point.
Does anyone know if there are any pros and cons of one options v the other that I may now have considered please?
Tax-wise, surely they are the same?
Beyond that, the pension/SIPP is just a tax wrapper.
It’s the funds within the wrapper that determines the performance, & obviously the costs for those investments.
0.49% all-in? Sounds very reasonable.
If you are happy with the Aviva performance, invest in the same funds.
Which funds are you invested in?
Do they have any extra costs (I know some of the Aviva ones I have differ within the platform low-cost)
Beyond that, the pension/SIPP is just a tax wrapper.
It’s the funds within the wrapper that determines the performance, & obviously the costs for those investments.
0.49% all-in? Sounds very reasonable.
If you are happy with the Aviva performance, invest in the same funds.
Which funds are you invested in?
Do they have any extra costs (I know some of the Aviva ones I have differ within the platform low-cost)
That's what I think it's a sanity check that I'm correct as some sites do seem to make a distinction between a "personal pension" and a SIPP so I thought there might be subtle differences.
In terms of funds I think it would be the default multi-asset that Aviva use or a LifeStrategy/MyMap/Global Strategy equivalent in a SIPP so nothing super adventurous.
I'm trying to reach a zen like state of contentment where I just sit back and let compounding do its thing without getting super worried whether I'm in the exact right/best rough 60/40 fund.
Jasey I did consider that as someone suggested it and existing contributions are salary sacrifice but I think on balance I'm happier being able to just pull out the debit card as and when.
I'm still a basic rate taxpayer so other than the small NI benefit of salary sacrifice I'm not sure there's that much in it for me.
In terms of funds I think it would be the default multi-asset that Aviva use or a LifeStrategy/MyMap/Global Strategy equivalent in a SIPP so nothing super adventurous.
I'm trying to reach a zen like state of contentment where I just sit back and let compounding do its thing without getting super worried whether I'm in the exact right/best rough 60/40 fund.
Jasey I did consider that as someone suggested it and existing contributions are salary sacrifice but I think on balance I'm happier being able to just pull out the debit card as and when.
I'm still a basic rate taxpayer so other than the small NI benefit of salary sacrifice I'm not sure there's that much in it for me.
Salsac is the most efficient way of contributing but do at least check on the performance of the funds you are invested in as being in a doggy fund will have massive impact on your eventual pot.
One-off payments are ok but it's much better to set up a DD to make a regular payment that you can forget about & just drips in every month. Vanguard are ok but there are other providers, just watch the charges.
One-off payments are ok but it's much better to set up a DD to make a regular payment that you can forget about & just drips in every month. Vanguard are ok but there are other providers, just watch the charges.
Edited by Mr Pointy on Saturday 23 September 10:26
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hstewie said:
hstewie said: That's what I think it's a sanity check that I'm correct as some sites do seem to make a distinction between a "personal pension" and a SIPP so I thought there might be subtle differences.
In terms of funds I think it would be the default multi-asset that Aviva use or a LifeStrategy/MyMap/Global Strategy equivalent in a SIPP so nothing super adventurous.
I'm trying to reach a zen like state of contentment where I just sit back and let compounding do its thing without getting super worried whether I'm in the exact right/best rough 60/40 fund.
Jasey I did consider that as someone suggested it and existing contributions are salary sacrifice but I think on balance I'm happier being able to just pull out the debit card as and when.
I'm still a basic rate taxpayer so other than the small NI benefit of salary sacrifice I'm not sure there's that much in it for me.
First bold: do you know what you are currently investing in? It feels like you are unsure - investigate that, take an interest!!In terms of funds I think it would be the default multi-asset that Aviva use or a LifeStrategy/MyMap/Global Strategy equivalent in a SIPP so nothing super adventurous.
I'm trying to reach a zen like state of contentment where I just sit back and let compounding do its thing without getting super worried whether I'm in the exact right/best rough 60/40 fund.
Jasey I did consider that as someone suggested it and existing contributions are salary sacrifice but I think on balance I'm happier being able to just pull out the debit card as and when.
I'm still a basic rate taxpayer so other than the small NI benefit of salary sacrifice I'm not sure there's that much in it for me.
Second bold:
Every little helps. Might only feel like a teeny tiny number, but you have already mentioned the benefits of compounding.....
Using SalSac is an absolute no-brainer to me.
Do your company offer matched contributions? Many do.
Mine (when I worked!) used to add 6% so long as I put in 6% (by the end I was putting 19% in!). Our offspring get up to 19% company contributions (generous companies!)
Often easier to up contributions - if you got a 3% pay rise, put at least 1 more into the pension. Or if things are comfy, put all 3% in. Etc. Compounding
Do that first.
Indeed, do that on Monday - people prevaricate for far too long on this kind of thing. Compounding
Sadly I know what they invest in almost to an unhealthy level 
Perhaps my terminology is mixed up but the existing contributions from salary are done via salary sacrifice and I automatically pay in the most the company will match which is 9% and that'll automatically stay at 9% with future pay increases etc.
What I meant was I think I could speak to Payroll and ask to contribute an additional amount each month via salary sacrifice but I'd have to be confident how much that was in advance plus I wouldn't get an additional match.
Rightly or wrongly I think it suits me more to just pull out a debit card as I'll still get the basic rate tax contribution on anything I add to it.
Hopefully that makes a bit more sense
Perhaps my terminology is mixed up but the existing contributions from salary are done via salary sacrifice and I automatically pay in the most the company will match which is 9% and that'll automatically stay at 9% with future pay increases etc.
What I meant was I think I could speak to Payroll and ask to contribute an additional amount each month via salary sacrifice but I'd have to be confident how much that was in advance plus I wouldn't get an additional match.
Rightly or wrongly I think it suits me more to just pull out a debit card as I'll still get the basic rate tax contribution on anything I add to it.
Hopefully that makes a bit more sense
NI is what, 12%? Especially if you've got spare assets elsewhere, it seems an odd decision to forgo that.
You could choose to run a larger emergency fund or other easy access savings to offset the lower average take home pay (on the basis one off expenses would average out and could be covered from the e-fund), accept the lower average return on the easy access e-fund and still come out comfortably ahead.
You could choose to run a larger emergency fund or other easy access savings to offset the lower average take home pay (on the basis one off expenses would average out and could be covered from the e-fund), accept the lower average return on the easy access e-fund and still come out comfortably ahead.
This is an existing pile of savings though so right now it's sat there either as "cash" or in a general account.
Surely the tax treatment of sticking it into a workplace pension without the salary sacrifice element available to contributions directly from salary is better than nothing?
Surely the tax treatment of sticking it into a workplace pension without the salary sacrifice element available to contributions directly from salary is better than nothing?
bhstewie said:
hstewie said: Surely the tax treatment of sticking it into a workplace pension without the salary sacrifice element available to contributions directly from salary is better than nothing?
Certainly. However, can't you increase salary sacrifice down to the personal allowance/NI threshold, and use the unwrapped money to make your normal budget work?CheesecakeRunner said:
Mr Pointy said:
Salsac is the most efficient way of contributing but do at least check on the performance of the funds you are invested in as being in a doggy fund will have massive impact on your eventual pot.
What’s the difference between salary sacrifice and paying into a SIPP and then claiming tax relief on the contributions? Other than convenience?Personally, I have both. I put whatever is needed into my company pension in order to get the maximum contribution from the company, via salary sacrifice. But my company’s pension provider is somewhat limited in the funds they have available plus a current obsession with moving us to new ESG funds with no performance history. So I also maintain my own SIPP with Vanguard. This is obviously contributed to out of net salary, but I then get tax relief on the contributions.
xeny said:
bhstewie said:
hstewie said: Surely the tax treatment of sticking it into a workplace pension without the salary sacrifice element available to contributions directly from salary is better than nothing?
Certainly. However, can't you increase salary sacrifice down to the personal allowance/NI threshold, and use the unwrapped money to make your normal budget work?Still a no-brainier to me…..JFDI
bhstewie said:
hstewie said: This is an existing pile of savings though so right now it's sat there either as "cash" or in a general account.
Surely the tax treatment of sticking it into a workplace pension without the salary sacrifice element available to contributions directly from salary is better than nothing?
Not really as you're taxed on it on the way out and state pension uses up most your annual allowance. You only really benefit from the 25% tax free...and will that remain?Surely the tax treatment of sticking it into a workplace pension without the salary sacrifice element available to contributions directly from salary is better than nothing?
You need the 12% NI saving to make it worthwhile as a basic rate payer.
Abdul Abulbul Amir said:
Not really as you're taxed on it on the way out and state pension uses up most your annual allowance. You only really benefit from the 25% tax free...and will that remain?
You need the 12% NI saving to make it worthwhile as a basic rate payer.
Depends if you have any other tax sheltered options available. If you're out of ISA allowance and aren't a sophisticated investor, then the annually shrinking ISA and CGT allowances make unsheltered GIA investments rapidly less attractive as the balance increases.You need the 12% NI saving to make it worthwhile as a basic rate payer.
Yes, I'd take the 12% if it's available, but even without, a pension wrapper is better than nothing.
You do realise you can exit your default scheme funds and invest in index funds (for global, US equity, bond funds etc - not an amazing choice of funds, but enough) that have lower fees? I have done this with an Aviva works pension.
As others have said, stick with your salary sacrifice pension for the 32% tax relief.
As others have said, stick with your salary sacrifice pension for the 32% tax relief.
jhoney12 said:
I'm still a basic rate taxpayer so other than the small NI benefit of salary sacrifice I'm not sure there's that much in it for me.
At the high risk of being a bore :-( :If you're looking at 60/40 funds, then 12% NI is probably ~3 years of returns allowing for inflation. That seems a lot not to take advantage of..
This is assuming inflation returns to 2% (no laughing at the back) and taking 6% before inflation returns from
https://www.vanguard.co.uk/professional/insights-e...
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