Best SIPP advice

[Bouleversee]

My 47 year old daughter has been self-employed for some years and athough she has various pension pots associated with previous employments whose value amounts to about £137k and a reasonable sum in ISAs, she has not contributed to a pension scheme since starting on her own (incorporated). She was probably put off by her father's experience with his Equitable Life drawdown which culminated in his buying a fixed rate annuity with what was left of it after the debacle but the other reason is lack of time; her work is very demanding and she has a couple of teenagers who are also pretty demanding. However, she is now considering starting a SIPP rather than adding to any of the existing schemes and ideally would like to do so before April 5 to save tax but knows little about the various providers. Who would you recommend? She has equity ISAs with Interactive Investor and Selftrade. I don't know whether either does SIPPS and if so how they compare. I believe people speak highly of HL but I think I read that they charge quite a lot if you hold funds; that possibly doesn't apply to Investment Trusts.

I don't think she is the type to choose and monitor individual shares (my late husband and I were managing her ISAs, (neglected of late and I need to free myself from that responsibility), and I wondered if one could hold Investment Trusts in SIPPS without paying extra charges as I believe happens with funds. TBH I know next to nothing about SIPPS and their charges or whether you can transfer them to another provider if you are not happy or transfer other pots into them if you are, or when you can access the money. Is it at age 55 now? I've never had a private pension myself so am not clued up at all in this sphere. Any helpful advice would be much appreciated. Are there any better pension options than SIPPS if you haven't time or inclination to spend your very limited free time studying the stockmarket and reading Lemonfool boards. I'd quite like to opt out of all that myself, though I'd miss your helpful responses.

[Alaric]

Are there any better pension options than SIPPS if you haven't time or inclination to spend your very limited free time studying the stockmarket and reading Lemonfool boards.

The PP of SIPP stands for "Personal Pension" of which there are and were many and varied providers including Equitable Life. The investment choice is usually restricted to "in house" funds or a wider range from the OIECs universe. Those funds accessed through stock markets such as ETFs and Investment Trusts are not normally available.

Whether a "better" option is debatable, but they can be a simpler option. They are often geared up in terms of charging structures for a £ X a month regular investment. So for example if you put aside £ 500 a month into ITs or ETFs, in a SIPP you would be hit for £ 10 or whatever dealing charge. In a Personal pension, there would be a charge related to the size of the accumulated fund, but only a small charge if at all on the money going in.

It's always possible to start with a Personal Pension and later transfer to a SIPP. It's also possible to transfer between SIPP providers. Outside the world of Defined and Guaranteed Bbenefits, transfers are no more complex than moving dealing accounts or ISAs.

[Bouleversee]

Many thanks, Alaric. She is actually thinking in terms of a lump sum investment before Apr. 5. If she can invest in ITs, funds and individual shares in a SIPP, that might be a better choice than the funds available through PPs. I think one of the pension products she holds would charge 5% for fresh money going in now. So back to which SIPP provider is best.

[Alaric]

So back to which SIPP provider is best.

That's a more particular version of the question as to which Broking and Share Dealing service is the best. There's been plenty of discussion on that, both here and in the past on TMF.

She has equity ISAs with Interactive Investor and Selftrade. I don't know whether either does SIPPS and if so how they compare.

I believe both Interactive Investor and Selftrade offer SIPPs. One practical point is that time is short before April 5th and the aim of opening and funding the account before then could be thwarted by extended Money Laundering procedures. That might support using an existing ISA provider.

[Urbandreamer]

I don't think she is the type to choose and monitor individual shares (my late husband and I were managing her ISAs, (neglected of late and I need to free myself from that responsibility)...

Are you sure that a SIPP is the best choice then? "Personal" pensions have become far more like SIPPs of recent years, simply without the ability to choose individual investments. Instead you choose a risk level or possibly funds and objectives.

Obvious options are Nutmeg and Aviva.

There are costs, ie Aviva chare 0.4% on the first £50k then taper the charges. However I'm sure that many want an easy life.

My SIPP is with A. J. Bell who charge 0.25% but cap the amount charged to £25pq if you only hold shares, ETF's, gilts, and investment trusts. With funds (unit trusts) the percentage drops once you hit £250000. They have however recently changed their charges on their ISA, so remember that the future is a foreign land.
Selftrade do, do a SIPP. They currently charge £99+VAT pa. Possibly good value if you have a larger pot.

It's my understanding that you can transfer defined benefit pensions and SIPP's with relative ease, but are required to get advice before transfering a defined benefit pension.

Currently pension freedoms mean that at 55 you can start drawing down with either. I understand you also have the freedom to remain invested and not buy an annuity until 75.

I believe that most providers will offer the full range of options on new accounts once you retire, but charge differently when it comes to accessing your pension. For example A. J. Bell charges £25 for each one-off payment and £100pa if you use regular payments. Many others don't charge a fee for regular payments.

On a personal note, since pension freedoms I have stopped almost all ISA contributions and put the money in my pension instead. There are significant tax adavantages for me in doing so and I regard the chances of political meddling before I can crystalise my position as low.

[Bouleversee]

I don't think she is the type to choose and monitor individual shares (my late husband and I were managing her ISAs, (neglected of late and I need to free myself from that responsibility)...

Are you sure that a SIPP is the best choice then? "Personal" pensions have become far more like SIPPs of recent years, simply without the ability to choose individual investments. Instead you choose a risk level or possibly funds and objectives.

Obvious options are Nutmeg and Aviva.

There are costs, ie Aviva chare 0.4% on the first £50k then taper the charges. However I'm sure that many want an easy life.

My SIPP is with A. J. Bell who charge 0.25% but cap the amount charged to £25pq if you only hold shares, ETF's, gilts, and investment trusts. With funds (unit trusts) the percentage drops once you hit £250000. They have however recently changed their charges on their ISA, so remember that the future is a foreign land.
Selftrade do, do a SIPP. They currently charge £99+VAT pa. Possibly good value if you have a larger pot.

It's my understanding that you can transfer defined benefit pensions and SIPP's with relative ease, but are required to get advice before transfering a defined benefit pension.

Currently pension freedoms mean that at 55 you can start drawing down with either. I understand you also have the freedom to remain invested and not buy an annuity until 75.

I believe that most providers will offer the full range of options on new accounts once you retire, but charge differently when it comes to accessing your pension. For example A. J. Bell charges £25 for each one-off payment and £100pa if you use regular payments. Many others don't charge a fee for regular payments.

On a personal note, since pension freedoms I have stopped almost all ISA contributions and put the money in my pension instead. There are significant tax adavantages for me in doing so and I regard the chances of political meddling before I can crystalise my position as low.

Did you mean you can transfer defined contribution pensions (rather than defined benefit pensions) and SIPPS with relative ease? There would not be any defined benefit pensions in my daughter's case.

So do you still have to buy an annuity at 75? I was under the impression that you could continue in drawdown indefinitely these days. I thought it was recently announced that one could leave it IHT free to heirs if one died before 75 and at the marginal rate of heirs on their withdrawals if you die after 75, but that wouldn't work if you had to buy an annuity at 75.

[swill453]

So do you still have to buy an annuity at 75? I was under the impression that you could continue in drawdown indefinitely these days.

That's right. You never need to buy an annuity.

Scott.

[Urbandreamer]

Did you mean you can transfer defined contribution pensions (rather than defined benefit pensions) and SIPPS with relative ease? There would not be any defined benefit pensions in my daughter's case.

I just looked up what it would cost me to transfer from A.J. Bell, not that I will at the moment.

£75 + (£25per holding) if transfered in specie (as a share holding).

So simple, if not free. Other providers might charge less to transfer out, or refuse to accept transfers in of specific specie. I believe that they all accept cash transfers (after money laundering and "know your customer" checks).

Just checked Pilling & Co (who are not cheap), they charge on exit and if you transfer in.

The point is that you are not "locked in" today as you might expect from former times. Older schemes may penalise transfers out, but it costs nothing to ask by how much and if they do.

You can also contribute to more than one scheme (though it may not be a good idea). I contribute to a SIPP and a company scheme administered by Aviva. I also consolidated a couple of old FAVC's into the company scheme to reduce costs. I keep kicking myself that I contribute more to my SIPP than my company scheme as there is a tax advantage with the latter, yet I can't help myself. I enjoy managing my investments too much to give up doing so.

[Bouleversee]

Thanks to both. I did reply last night but my post seems to have disappeared into the ether yet again.

Fred Bloggs - do you have a SIPP with II yourself (if so how do you find it?) or are you just recommending it for speed and ease of opening, which shoud certainly be the case. I forwarded your post to my daughter and I am sure she will contact them if she had not already done so. I'm pleased to hear your SIPP is doing so well (can't say the same for my last few years' ISA contributions). What sort of things do you hold? ITs, Funds, individual shares, ETFs or a mix of all and maybe others as well? What would you advise a newbie when it comes to investing and is getting a bit long in the tooth imo to take too big risks? I know diversification is key and in a pension fund where divs. are not taxed, presumably one should go for reasonably high yield but not danger zone. I have always preferred to settle for a slightly lower yield which increases each year and if held for a long time produces a huge yield on original investment as well as good capital growth. However, she is probably not going to have time to seek those out and I may not be around for long which is why I was suggesting collective vehicles she could buy and forget or add to. In her ISA I have

recently bought Scottish Mortgage, Witan and Invesco Perpetual High Income. I feel she should have some global ITs, smaller or midsized companies, special situations, but not much idea which. City of London seems to have done well but this is an area I have not had time to research.

I presume that when one looks up their performance figures, they include reinvested dividends, but is it better to reinvest them back into the relevant holding or select accumulation units or let them be paid into the fund, accumulate there and select the best home for them at the time, the danger being that they would sit there doing nothing, as is the case at the moment in the ISAs.?

[Bouleversee]

Thanks a million, Fred. Very reassuring; way to go. Just had a quick search for SIPPS on their website and I see there's loads of info to read.

[Fluke]

OP - your daughters circumstances are very similar to my own minus the kids and ok I'm a few years older, but I too work through my own Ltd Co and I too had 5 smallish pension pots from previous employments. Until last year when the rules changed on dividend taxation I paid myself a combination of salary and dividends and lived quite comfortably on that but after the change I decided it was a good time to open a SIPP and pay myself a pension - I went with AL Bell. As Fredbloggs points out this is very tax efficient as the pension payment goes down as an expense on the company accounts thereby reducing your corporation tax bill.

I had 2 DB pensions which I left alone but transferred the other 3 to my SIPP and invested the proceeds of those plus the company contribution in HYP shares as I am already an HYP investor through my ISA (HL).

As Fredbloggs also points out it is the company year end rather than the financial one that is important here, that is the deadline by which she needs to make the pension contribution if she's going to do it, using 'carry forward' she can contribute up to 4 years worth of pension allowance (i.e. the current year plus the last 3 years) if she so chooses - I did this, 2 years worth though not 4. When she's 55 she can take the 25% tax free bit out and draw down the remainder however she chooses. Carry forward rules explained here.

https://www.pensionsadvisoryservice.org ... ry-forward

[Urbandreamer]

As I said, I'm with A. J Bell (youinvest, formally sippdeal) and find very little difference between running my SIPP and my ISA.

I'd expect the same with all SIPP providers, though "full service" personal pension providers will naturally be different.

There are a few things to consider with respect to pensions. Ie limits on how much you can invest. But that doesn't really change the day to day aspects of contributing or investing. I recently made a ad-hoc contribution over the internet using my debit card, it's that easy!

What do/would I invest in or advise a newbe.

I prefer investment trusts to unit trusts and active to passive.
I too have scottish mortgage, though I hold it for growth rather than income and expect volatility.
I also hold and might suggest FCS, FRCL and HFEL.

I have other holdings, but they suit me rather than a newbe and we must remember that you said you want to stop managing your daughters investments and that she may have less interest in researching racy shares or odd investment trusts rather than generalists.

[Bouleversee]

Thanks again to all. All very informative. As I said at the outset, she has a few pension pots, presumably in in-house funds, not contributed to for some years and I felt it wd be better to start a SIPP but maybe she can't carry forward to that. I think she was hoping to put £80k in somewhere. No idea when her trading year ends. All passed over to her.

[Bouleversee]

I think City of London and Edinburgh are pretty good, too, aren't they?

[Bouleversee]

I've just accessed the link that Urbandreamer kindly supplied. I also have a son who is also self employed and incorporated but previously worked for companies which didn't offer pension schemes so his options will presumably be limited as he has never contributed to a pension. No idea what their profits, salaries, dividends, are so will just pass on all this info. and leave them to sort it out. I see that the PAS offers free advice.

[Urbandreamer]

I think City of London and Edinburgh are pretty good, too, aren't they?

I keep hearing good things about City of London and they do top this list.
http://www.moneyobserver.com/news/13-03 ... -increases

It's a bit UK centric for my portfolio though.

[Bouleversee]

Yes, I had the same reservation but if one has various others with a more global slant perhaps it doesn't matter and it wd be interesting to compare performance with the global ones, which will require more homework.

[Bouleversee]

So back to which SIPP provider is best.

That's a more particular version of the question as to which Broking and Share Dealing service is the best. There's been plenty of discussion on that, both here and in the past on TMF.

She has equity ISAs with Interactive Investor and Selftrade. I don't know whether either does SIPPS and if so how they compare.

I believe both Interactive Investor and Selftrade offer SIPPs. One practical point is that time is short before April 5th and the aim of opening and funding the account before then could be thwarted by extended Money Laundering procedures. That might support using an existing ISA provider.

You are right, Alaric. She says they are saying it might not be possible to do it in time so she might have to top up one of her others. It appears it's not quite so easy as clicking a box and sending the money by dd. I've told her to put pressure on them; we'll see. Hope she doesn't fall between 2 stools.