Choosing the right SIPP

#1
First time starting a thread so apologies if this has been covered before.
I am in receipt of an Army pension but I would like to start a second private pension this year. I have an ISA and a couple of other bonds but I was hoping that someone here could give me some advice. I would like to start a pension with one off lump sum as opposed to monthly contributions. Something along the lines of a 20 year fund that I won't need to draw on.
Would I be better off looking for a different type of investment or is there a type of pension that suits my plan ?
Any help greatly appreciated.

Cheers

MoE
 
#2
Go and talk to a properly qualified financial adviser. They will take a very small cut from your fund, but you'll end up with the right sort of fund for your needs and if he's any good he'll review issues like risk profile of your portfolio with you in simple terms, like how soon do you want the money. Ask around you're bound to have couple of mates already using one.
 
#3
Go and talk to a properly qualified financial adviser. They will take a very small cut from your fund, but you'll end up with the right sort of fund for your needs and if he's any good he'll review issues like risk profile of your portfolio with you in simple terms, like how soon do you want the money. Ask around you're bound to have couple of mates already using one.
Agreed, i posted here because there are some members who work in this field. I was looking for direction more than specifics.
 

Sixty

ADC
Moderator
Book Reviewer
#4
First time starting a thread so apologies if this has been covered before.
I am in receipt of an Army pension but I would like to start a second private pension this year. I have an ISA and a couple of other bonds but I was hoping that someone here could give me some advice. I would like to start a pension with one off lump sum as opposed to monthly contributions. Something along the lines of a 20 year fund that I won't need to draw on.
Would I be better off looking for a different type of investment or is there a type of pension that suits my plan ?
Any help greatly appreciated.

Cheers

MoE
Doesn't sound like you need a SIPP to be honest; they are (generally) for those who want to take an active role in selecting their investments. If you just want to bung some cash in and leave it for two decades, you won't need any of the SIPP functionality.

I'd be inclined to stack it all into a tracker fund that will look to mimic the returns on an index (FTSE, S&P etc.) and leave it. It would save you shelling out for things you're never going to use.

^Not qualified or authorised to offer advice though.
 
#5
You can have a tracker fund(s) as a SIPP.

Though the real advantage of a SIPP is in the tax breaks. Makes more sense if you're still paying tax, but you do get some tax "repaid" even if you're not. Then, the benefit is less if you'll have enough pension earnings to be taxed.

You can do both - Stick your lump sum under an investment ISA and use it to make annual payments in to a SIPP in order to gain the tax man's contributions.

Another tactic is to draw down the pension earlier to avoid combined pensions putting you in the tax bracket and bung the dosh back in an ISA wrapper.

Not sure that you can't even just move your funds from one to the other without a need to trade 'em - summet else to look in to.

Of course it all depends on your circumstances......

Pull your finger out if you're talking about more than £20k for ISA's.
 

Sixty

ADC
Moderator
Book Reviewer
#6
You can have a tracker fund(s) as a SIPP.

Though the real advantage of a SIPP is in the tax breaks. Makes more sense if you're still paying tax, but you do get some tax "repaid" even if you're not. Then, the benefit is less if you'll have enough pension earnings to be taxed.

You can do both - Stick your lump sum under an investment ISA and use it to make annual payments in to a SIPP in order to gain the tax man's contributions.

Another tactic is to draw down the pension earlier to avoid combined pensions putting you in the tax bracket and bung the dosh back in an ISA wrapper.

Not sure that you can't even just move your funds from one to the other without a need to trade 'em - summet else to look in to.

Of course it all depends on your circumstances......

Pull your finger out if you're talking about more than £20k for ISA's.
I wasn't suggesting an ISA. The tax efficiency applies to all pensions, not just SIPPs. I was pointing out that a relatively unsophisticated and bog standard Personal Pension with the investment choice of a cheap tracker would suit the OPs purposes.
 
#7
Fair enough, but a lump sum in to any pension all at once might lose some of the potential tax breaks, especially if you've not paid much tax over the last 3 years.




.....could be a bit of a moot point if moneybags 'ere is likely to still be coining it 'til he kicks the bucket.
 
#8
I have had a SIPP (and before that a personal pension) since 1990. I have been contributing steadily with a combination of regular payments and lump sums. I put lump sums in e.g. when I get a bonus. With luck I will be able to reture early, age 62.

As recommended above, see an Independent Financial Adviser.

Make sure that your chosen IFA is Whole of Market and not tied to a specific company.

Also, you can pay the IFA a set fee, which you should agree, or else the IFA will take a percentage of the lump sum as his/her payment. A good IFA will make their terms transparent.

I'm not personally sure that a SIPP is the right vehicle for a simple lump sum as it is tied into the fund until retuirement, i.e. you can't touch it until your set retirement date.
 
#9
First time starting a thread so apologies if this has been covered before.
I am in receipt of an Army pension but I would like to start a second private pension this year. I have an ISA and a couple of other bonds but I was hoping that someone here could give me some advice. I would like to start a pension with one off lump sum as opposed to monthly contributions. Something along the lines of a 20 year fund that I won't need to draw on.
Would I be better off looking for a different type of investment or is there a type of pension that suits my plan ?
Any help greatly appreciated.

Cheers

MoE
Your profile is locked so i cant send you a message but i do this stuff for a living and Id be happy to have a chat if you PM me your phone number.
 
#10
Depends how much of an old git Muddy is.

You can start drawing down a pension from 55 and I've a suspicion he might be there already.

Sipps are just a tax wrapper, you can shift your investments about as you please within it.

I've a suspicion it's what he'll end up with, provided he can benefit from feeding his cash in and gaining the tax breaks - £2880 a year, or more if paying enough income tax. The choice between a SIPP or other pension will likely come down to what it costs in fees - they can effectively do all other types can - and more.

Unless we're talking a serious fortune one of the online investment supermarkets (I use Fidelity) is likely to be the way to go for an investment Isa and a Sipp.

The other side of the equation is draw down and the related income tax liability.

By all means consult an IFA if you feel the need.
 
#11
Depends how much of an old git Muddy is.

You can start drawing down a pension from 55 and I've a suspicion he might be there already.

Sipps are just a tax wrapper, you can shift your investments about as you please within it.

I've a suspicion it's what he'll end up with, provided he can benefit from feeding his cash in and gaining the tax breaks - £2880 a year, or more if paying enough income tax. The choice between a SIPP or other pension will likely come down to what it costs in fees - they can effectively do all other types can - and more.

Unless we're talking a serious fortune one of the online investment supermarkets (I use Fidelity) is likely to be the way to go for an investment Isa and a Sipp.

The other side of the equation is draw down and the related income tax liability.

By all means consult an IFA if you feel the need.
Thanks for all the input. I'm not that old....So far the best step is to meet with an IFA who is Whole Of Market
 
#13
Not a bad idea, sounds like you have potentially more investment opportunities than just your lump sum if you're still a relative youngster.
Well I'm not 55 but I am at a stage where I am putting saving above holidays, a new car, Rolex watches etc. Save now and enjoy life when the right time comes.
 
#14
One of the quirks of our tax system is that you don't need to be paying tax, or even earning to get tax relief on contributions of up to 2880 pa.
I'll reply in more detail tomorrow.
 
#15
Right, here you are.

THIS IS NOT INTENDED TO BE CONSTRUED AS ADVICE. ITS JUST SOME BLOKE ON THE INTERNET. ENTER AT YOUR OWN PERIL.

I view three main factors when talking to clients about pensions; attitude to risk (ATR), capacity for loss (CFL) and timeframe.

Attitude to Risk is how you'd view your investments rising and falling like a whore's drawers. If you're comfortable with that, and don't mind taking more risk in order to get potentially higher, long term returns you have a relatively high ATR.

Complete this quick survey, don't think long and hard about the answers and you'll get a decent idea of your ATR.

Risk Profiler - Royal London

Their Managed Strategies make a lot of sense to me, and I use them for smaller pension pots. I've just completed a transfer for one client of about £280k, when to Royal London for various reasons. Depending on timeframe (see below) they can invest in relatively punchy funds early doors, calming down a bit as time goes by and the date at which you need the £ gets nearer.

Capacity for Loss is how you'd actually be impacted by a downturn in your portfolio.
If all you have to invest is £25k, no property and no other savings you have a very low capacity for loss. You'll be knackered if you need the £.

If you have significant other wealth and this investment forms say 2% of your overall portfolio, a plunge in the value of the pension really won't bother you at all. A high CFL. You lucky Insurance Broker, you.

Timeframe - when do you need the £?

@MuddyOldEngineer has twenty years in mind, so it'd probably make sense to put a good proportion of the £ into the Equity market, spread a bit around the world. Maybe 60:40 UK / US. I'm a bit of a fan of Midcaps, they tend to outperform the FTSE 100. The longer the timeframe, the less the impact of a short term downturn in the markets.

In the long term equities tend to rise, especially when dividends are reinvested. Low risk tends to mean low long term returns. Invest in cash and you will lose money as inflation eats away at the real value of your £ over time.

SIPP or not?

Unless you actually want to invest directly in equities or gucci investments, don't bother. Too expensive, and if you self select shares, too much risk of it all going wrong. Obviously some people have done well... But most don't, if they pick individual stocks. You can't time the market - choose the best time to buy or sell - so don't bother trying,

Active or Passive fund management?

While some active fund managers will outperform over time, far too many don't, and as they're more expensive than tracker funds, they'll need to outperform to make up for eg. trading costs.

Buy and hold, Elvis. Buy and hold.

Active or Passive Investing? What's Best for You

Do I need a "Whole of Market" IFA?

Nope.

Just one that can advise on pensions. Whole of Market doesn't mean what many people think it does - that the IFA can access any provider they choose - thats what the Independent bit of Independent Financial Adviser means - it means they can advise on any financial services product - pensions, ISAs, VCTs, QROPS etc etc etc.
 

Sixty

ADC
Moderator
Book Reviewer
#16
I would like to start a pension with one off lump sum
I'd be slightly wary of that one if it was me. Very dispiriting if you buy all of your shares (in an OEIC) or units (in a Unit Trust) when they're riding high and then plunge. As @Bravo_Bravo says, you can't time the market.

Pound-cost averaging may be the way forward. You invest regular amounts so that some months you'll win, others you'll lose but the price you pay averages out over the long term in theory.

^Not qualified/authorised yadda yadda.
 
#18
Thanks for all the replies and information. When I do sit down with an advisor I will at least have some ideas to discuss as opposed to a one way. @Bravo_Bravo your post , especially the Risk Profiler link was excellent.
 
#19
You can have a tracker fund(s) as a SIPP.
No, but you can have a tracker fund in a SIPP.

But why would you?

Tracker funds are often used because they're cheap, but a SIPP adds extra costs.

Though the real advantage of a SIPP is in the tax breaks. Makes more sense if you're still paying tax, but you do get some tax "repaid" even if you're not. Then, the benefit is less if you'll have enough pension earnings to be taxed.
I'd bet £1000 MOE is paying tax. SIPPs are no more tax advantaged than any other approved personal pension.

You can do both - Stick your lump sum under an investment ISA and use it to make annual payments in to a SIPP in order to gain the tax man's contributions.
Why would you do that?

Why not put the £ straight to pension and have it instantly increased by 25%? ( yes 25%.) Bigger fund growing straight away. Whats not to like?

Another tactic is to draw down the pension earlier to avoid combined pensions putting you in the tax bracket and bung the dosh back in an ISA wrapper.
Again, why would you do that?

And why put £ into a vehicle that will effectively form part of the Estate on death?

You do realise that accessing £ flexibly will trigger the Money Purchase Annual Allowance don't you?

Not sure that you can't even just move your funds from one to the other without a need to trade 'em - summet else to look in to.
This cannot be done.

Pull your finger out if you're talking about more than £20k for ISA's.
You're the only person talking about ISAs.
 
Last edited:
#20
Make sure that your chosen IFA is Whole of Market and not tied to a specific company.
No - that is NOT what "Whole of Market" means. The word you need to look for is Independent.

Whole of Market means the IFA can deal in any Regulated space - ISAs, pensions, VCTs, etc etc etc.

Also, you can pay the IFA a set fee, which you should agree, or else the IFA will take a percentage of the lump sum as his/her payment. A good IFA will make their terms transparent.
Financial Advisers have no option other than to be transparent. Retail Distribution Review refers.

I'm not personally sure that a SIPP is the right vehicle for a simple lump sum as it is tied into the fund until retuirement, i.e. you can't touch it until your set retirement date.
No, and wrong.

You have great flexibility of investment choice with a SIPP. Literally thousands of funds available. And all you need to do to access the £ is reach age 55. (this age will increase to State Pension Age minus ten years quite soon.
 

Similar threads


Top