SIPP for a 55 year old

[GoldRush]

If you're looking for a SIPP with free drawdown the best options I've found are Fidelity, Hargreaves Lansdown, plus now Vanguard who finally launched their SIPP yesterday.

Why would they offer free draw down? Well they still make money on the annual management charge, plus any charge for buying and selling investments. Also some have now started to offer free transfer out in fear of regulators cracking down on them. It's possible drawdown charges may be next to attract the regulators attention, some can be a real rip off so make sure you take them into consideration. Also competition comes into it, I wouldn't go near any company with drawdown fees and other sneaky fees when the above all offer free transfer out and free drawdown.

Charge wise Hargreaves Lansdown are 0.45%, fidelity 0.35%, Vanguard 0.15%.

If you invest in ETFs and Shares rather than funds some cap charges ie Fidelity £45, Hargreaves Lansdown £200 a year, but then you will have share dealing charges on top too, whereas fund purchases may be included in the AMC.

The new Vanguard SIPP could be a great option for small SIPP funds, they have free dealing as well all included in the 0.15% charge. Vanguard cap their fee at £375 a year, so for larger funds others may work out a bit cheaper.

Otherwise what you are suggesting looks good and I'd looked into it myself. i.e you could save £2880 a year as a none earner and tax man top it up to £3600. As an example you could then start to create a small pension every year between 60 and 67, before you get your state or any other pension. If you have no other income you could then take 25% of the amount withdrawn each year tax free. The other 75% would be taxed at your normal rate, but you currently have a £12500 annual tax free allowance. So for instance if you took out 16k, 4k would be tax free and the other 12k would be tax free as it falls under your annual allowance.

It is true that there are rules and attempts to prevent pension recycling, which is why the annual allowance has now been dropped to £4k once you start withdrawing from a pension. But the none taxpayer amount is already even less than this at £3600 so doesn't currently appear to be the main focus of the taxmans attention. Of course if everyone starts doing it, and it starts to cost the taxman lots of money no doubt it may get looked at, but I expect the amounts are quite small at the moment, so not attracting much attention, so make the best of it while you can.

And forget about the carry forward allowance, you can bring forward unused allowance from the previous 3 years, but need to have been in a pension scheme in those years, and can only invest what earnings you have in the current year, which in your case will be £0, so you just have the £3600 none earners allowance to use.

[itcouldbeworse]

Some interesting and useful points made by everyone, thanks.

Re using the new Vanguard SIPP of doing this. I did notice this on their website:

"The Vanguard Personal Pension may not be right for you if you think you might want to access your pension savings in the near future.
That’s because we don’t offer any flexi-access drawdown options yet, so you’d need to transfer to another pension scheme in order to start using your retirement savings or take your tax-free lump sum.
This could be important to people are 55 or older, or who are turning 55 in 2020 and thinking about retiring"

Given that Vanguard seemed to take an age to launch their SIPP in the first place, this rules it out from my perspective as I've no idea when/if this facility might be offered.