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Dear all,


Need some Sipp advice.


Am currently getting a much higher than my typical average salary, so while this lasts I want to minimise tax and maximise my savings potential. Plus to be honest have never really taken a pension seriously before and it is time to start doing so.



Here are the facts:


Six months into tax year paid 45k so far estimate 90k for tax year.


Have not filled isa allowance or my son’s isa yet.


Paid over 50% of salary in commissions, paid quarterly.


No sipp at present, just small stakeholder one getting approx £200 per month paid by company I work for.



Questions:



Which is best low cost sipp provider around atm? Am going to look at low cost index trackers (recommendations?)


I know a pension is a long term bet, but typically they say 60% equity/40% bonds for someone my age (mid to late 30s) as per Tim Hale's book, but bonds appear risky and equities could drop soon especially if I am investing in quarterly lumps.


Should I hold it in cash within the SIPP, is this possible? Then buy equities when prices have dropped further?


Should I lump as much as possible of remaining yearly pay into Sipp? What’s the annual limit?


Any other tips.


Cheers,


J

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Dear all,

Need some Sipp advice.

Am currently getting a much higher than my typical average salary, so while this lasts I want to minimise tax and maximise my savings potential. Plus to be honest have never really taken a pension seriously before and it is time to start doing so.

Here are the facts:

Six months into tax year paid 45k so far estimate 90k for tax year.

Have not filled isa allowance or my son’s isa yet.

Paid over 50% of salary in commissions, paid quarterly.

No sipp at present, just small stakeholder one getting approx £200 per month paid by company I work for.

Questions:

Which is best low cost sipp provider around atm? Am going to look at low cost index trackers (recommendations?)

Lots out there - Alliance Trust? Nutmeg?

I know a pension is a long term bet, but typically they say 60% equity/40% bonds for someone my age (mid to late 30s) as per Tim Hale's book, but bonds appear risky and equities could drop soon especially if I am investing in quarterly lumps.

Should I hold it in cash within the SIPP, is this possible? Then buy equities when prices have dropped further?

You can hold as cash and invest in what you like on the SIPP owner's platform or Nutmeg do it for you.

Should I lump as much as possible of remaining yearly pay into Sipp? What’s the annual limit?

Can't remember its changed recently - google it - I think you're well below it. and I think you can/could use previous year's allowances too.

Any other tips.

Cheers,

J

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Which is best low cost sipp provider around atm?
cheapest when I looked last was Bestinvest , but you will need to DYOR, particularly as the government/FSA only protects your investments to about £50k. Hargreaves Lansdowne, TD waterhouse etc. all offer decent sounding SIPPs. I'm more interested in security than absolutely lowest cost.
Am going to look at low cost index trackers (recommendations?)

can't help I'm afraid. I like investment or unit trust based trackers rather than ETFs as I understand their structure and they own the underlying assets.
Should I hold it in cash within the SIPP, is this possible? Then buy equities when prices have dropped further?
I I knew the answer to this I would be rich. You could contribute a single lump sum then invest this in several monthly/ bimonthly/ quarterly deals to smooth out the price.
Should I lump as much as possible of remaining yearly pay into Sipp?
Only if you can really afford to - however there are very good tax reasons for making contributions, particularly at the higher tax rate.
What’s the annual limit?
£40,000 I think (including the 20% basic tax rate contribution from the govt.). You will need to include your employer's stakeholder contributions in this limit (along with any contribution you make and the 20% tax relief). it's more complicated than it sounds see
for more details.
Any other tips.
Cheers,

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Which is best low cost sipp provider around atm?
cheapest when I looked last was Bestinvest , but you will need to DYOR, particularly as the government/FSA only protects your investments to about £50k. Hargreaves Lansdowne, TD waterhouse etc. all offer decent sounding SIPPs. I'm more interested in security than absolutely lowest cost.
Am going to look at low cost index trackers (recommendations?)

can't help I'm afraid. I like investment or unit trust based trackers rather than ETFs as I understand their structure and they own the underlying assets.

Should I hold it in cash within the SIPP, is this possible? Then buy equities when prices have dropped further?
I I knew the answer to this I would be rich. You could contribute a single lump sum then invest this in several monthly/ bimonthly/ quarterly deals to smooth out the price.
Should I lump as much as possible of remaining yearly pay into Sipp?
Only if you can really afford to - however there are very good tax reasons for making contributions, particularly at the higher tax rate.
What’s the annual limit?
£40,000 I think (including the 20% basic tax rate contribution from the govt.). You will need to include your employer's stakeholder contributions in this limit (along with any contribution you make and the 20% tax relief). it's more complicated than it sounds see
for more details.
Any other tips.
Cheers,

If you haven't made pension contributions in previous years you will also be able to carry forward some relief from previous tax years.

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I use Interactive Investor (www.iii.co.uk) who are good and cheap.

I only invest in the lowest costs trackers - over the years my whole portfolio is now merged to Vanguard trackers and funds as they are the cheapest. An easy option is the Lifestrategy funds they have at the level of risk you like (Lifestrategy 60% is 60 equities, 40 bonds, and so on). They have a low charge of circa 0.25% per year. You could just choose the Lifestrategy 60% and be done with it - I have the Lifestragey 100% supplemented with bond trackers on the side. The most important decision here are

(1) your equities /bonds/cash split, I use age -10% (ie if you're 40 invest 30% in bonds). No golden rule just risk appetite.

(2) where you will hold equitues abd bonds (global/UK/Europe/etc). I just spread globally with a small bias to UK (thats vanguard UK standard). Its easy and I got bored of predicting markets and getting it wrong pretty much all the time.

Thereafter it is easy: don't predict the market, just invest every quarter according to your split. If equities crash you buy more equities and vice versa. you automatically rebalance. You won't get the market timing right and for all you know a massive bull market is around the corned, or massive crash. As you keep on investing it doesn;t reallt matter. If you feel uncomftable going all in at one point just enter every quarter over a year or 2 years. Keep in mind though that over a long horizon that shouldnt really matter that much.

Keep trading costs in mind too, at your level of funds I would suggest max 1 or 2 funds, and limiting trades frequencies as they add up over time .

PS: as exiled canadian stated use your previous years allowances while you can as pension tax cuts are on their way.

Keep it simple! and try not to think about it - just invest and keep on investing if markets crash or boom without looking back. I once had a dismal pot and now 10 years on it's a pretty signifcant sum . It goes slow and steady

There is a HPC'er who runs this website: http://www.retirementinvestingtoday.com. One of the soundest financial dudes around in my view (although he does take saving too extreme for my liking), very valuable advice on there and also great to see the slow & steady

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Sounds like you're in a similar situation as I was in 2008, at the start of a period of two and a half years on a similar income.

As the rules stand today, you can usefully shovel £40k into pensions (meaning £32k net from your taxed income), but be aware the stakeholder contribution eats in to that sum. As others have said, you may be able to put more in short-term, but it would be a very good idea to read the rules in detail and/or take professional advice before trying any such thing.

I'm with H-L, who were ahead of the game in 2008. Can't be arsed to move now, but if I were starting today, I'd go for a lower-cost provider.

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Ok this has hit a snag, the whole process of salary sacrifice is proving too difficult for celergo the payroll company that pays me on behalf of the US company I work for. Should I just aim to top up with already taxed money then claim tax relief?

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Yes, you just inform hrmc and they will adjust your tax code, or you cab get a refund at the end of the tax year. It's pretty much the same as doing it from payroll.

Happy to be corrected but I don't believe it is. If you salary sacrifice you'll get the employee NI benefit also. Additionally if you can do some wheeling and dealing you also might be able to get some/all of the employer NI saving also.

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...

There is a HPC'er who runs this website: http://www.retirementinvestingtoday.com. One of the soundest financial dudes around in my view (although he does take saving too extreme for my liking), very valuable advice on there and also great to see the slow & steady

Thanks for the vote of confidence and glad you get some benefit from my musings/ramblings. I can see why you observe my savings as being a bit extreme but as I've written about recently those 'extreme savings' are actually the bit that is accelerating my FIRE journey faster than anything else. This is partly because of 'poor' investment returns but more so because an ability to increase savings not only moves you towards the goal posts but also brings the goal posts towards you. Something investments, expense minimisation etc can't do.

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Thanks for the vote of confidence and glad you get some benefit from my musings/ramblings. I can see why you observe my savings as being a bit extreme but as I've written about recently those 'extreme savings' are actually the bit that is accelerating my FIRE journey faster than anything else. This is partly because of 'poor' investment returns but more so because an ability to increase savings not only moves you towards the goal posts but also brings the goal posts towards you. Something investments, expense minimisation etc can't do.

Totally see that perspective but I guess for me personally I'm trying to balance the now with the later slightly (but not much ) differently.

Keep up to the good work on the site.

PS: yes you are right about NI on salary sacrifice. Forgot about that as my employer also couldn't do the salary sacrafice bit wasn't top of my considerations. As a net consideration still worthwhile to SIPP (for now - pending changes to the system!)

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