SIPP Questions

[AsleepInYorkshire]

For the last seven years I've been trying to put our family finances back into shape. It's been a struggle. Such is the road that I fear many travel. We're not out of the woods yet. But there's more than a glimmer of candlelight.

My good lady has been in her job all her working life. There's little chance she will not be able to see her working life out in the same position. She will get a pension from her employer (the local authority) which is about 14 years away. I'm a little light on my private pension as I've had a few long terms issues with my health.

However, the family finances are slightly more robust today than they were seven years ago.

I have been working freelance for three months now. My income isn't where it could be but that should sort itself out with time.

However, based on todays incomes and outgoings we're well above water. Our joint net income puts us in a very fortunate position. And that helps us to sleep nights

Of my income I am committed to have to spend £1,000 per month. Of that commitment £600/month is being diverted into savings (£200 for Xmas and £400 for my daughter) The other £400 is for bills. I need to work 3 days a month to earn £1K. In addition there is always more that £15K in my current account. I feel we can cope with "economic" shock if I didn't work for a short period of time. And we've been there more times than we would have preferred.

I've spoken about this before. I want to divert some money into my pension. And that is the final part of my plans. We do have pensions but not enough and some of that will go on paying the capital on the mortgage off.

I'm 59. I'm self employed. I will be 72 when my good lady retires. I don't think I could retire before her and stay at home washing windows, watching cricket and teaching the parrot to swear. I may step back to a shorter week in five years time. My body will tell me when I need to consider that.

I think I need a SIPP. I believe this may present a good way for me to progress. It think it will also allow some flexible way of improving available cash if we can't deal with an "economic shock" with our current cash.

I've estimated I can put about £32K into this pa. That should increase to £40K if I can sell my freelance skills at a slightly better rate.

I'm considering AJ Bell or Aberdeen Standard for the SIPP. I'd welcome thoughts about any other providers please. Also I'd like to know if the provider applies for the tax relief on the investment please and if so when that is put in the SIPP? Or do I need to claim that back through HMRC?

Thank you in advance

AiY

[Alaric]

Also I'd like to know if the provider applies for the tax relief on the investment please and if so when that is put in the SIPP? Or do I need to claim that back through HMRC?

As far as tax relief is concerned you pay the amount net of basic rate tax into the SIPP. About a couple of months later HMRC pay in the tax relief. If you earn enough to pay higher rate tax, you get this back through a tax return or similar. Be aware that you cannot put in more than you earn except under limited circumstances where you bring forward allowances from previous years. Thus if your income is £ 1,000 a month, the maximum amount you can put in over a year is £12,000 gross ( £9,600 net)

[AsleepInYorkshire]

AiY, if you freelance through a Ltd Co, you really need to be paying into your SIPP directly from the company. This money attracts no corporation or other taxes and is a very efficient way to build your pot. Look at Interactive Investor too as well as AJ Bell. Once your SIPP pot starts to grow, II will soon be more cost effective for you than AJB.

RVF

Thank you. I am currently in the CIS (construction industry scheme) having been told my "freelance" position isn't inside IR35. So I am stopped 20% by the "employer" and submit an annual self assessment. I think it amounts to the same outcome but it does impact on my immediate cashflow, but that's just an injustice not a penalty.

AiY

[Urbandreamer]

I'm considering AJ Bell or Aberdeen Standard for the SIPP. I'd welcome thoughts about any other providers please.
AiY

My SIPP is with A J Bell and it's very easy to manage. This isn't to say that others like II are not just as good, more a comment about managing a SIPP.

I contribute both by direct debit and via a debit card. They reclaim the 20% tax, which takes 4-8 weeks to turn up in the account.
I tend to use the regular investing service, which I believe is handled slightly differently between A J Bell and II, though the differences are quite technical and in many ways unimportant.
The key thing is that you make your investment choice and once a month the investment is made (if there are the funds), rather than the process of getting a real time quote and having to accept or reject it within 15 seconds. It's easy to change what you invest in, important for me, but not for those who like passive investments.
I find the website easy to navigate, though I only recently found out how to download a consolidated tax record. That's because I hadn't felt a need to until recently.

Here is an overview.
https://www.youtube.com/watch?v=MxlPITh4T0Q

[genou]

I've estimated I can put about £32K into this pa. That should increase to £40K if I can sell my freelance skills at a slightly better rate.


AiY

32k net / 40k gross is the max that you are allowed to contribute. So you may need to rethink a little. As pointed out elsewhere, any SIPP provider will reclaim BR tax into your SIPP - contributions made up to 5/1 will have the tax refunded into them on 21/3 and so on. For HR tax, you get relief by filing a tax return and getting a refund outside the SIPP.

AJBell are absolutely fine, and cheap unless you want to hold Unit Trusts, but they are not alone in this. You need to have a view as to what you are going to invest in. If you are going to put it all into tracker ETFs ( and why wouldn't you ) providers are much of a muchness. For funds, you need to look at the fine print as you will be charged ad valorem with varying maximum fees. I don't hold UTs, so have no view on best broker for them.