When to stop adding to a SIPP

[czarcasm]

£300k to £1million in 20 years assumes around 6% annual growth. Quite achievable.

Agreed. As it's 20 years away (and I have a larger amount stashed away in other non-pension investments), I've put a fair chunk into the higher growth equity markets. There's no guarantees of course.

I don't think it makes sense to stop your contributions at this point and the tables above seem to back this up. £40k straight off the top line is a huge win, particulary when/if the lifetime allowance is revised upwards. I expect this to happen following the current moratorium. Even with the ludicrous undervaluation of DB pensions at 20x, too many civil servants, politicians and tory voters will start making noise if they don't. Note that for 21/22 a DB pension of more that around £53,500 would incur a charge. Cap the LTA for more than a few years particularly as inflation takes hold and watch these guys squeal.

Looking at the history of the lifetime allowance since it was introduced in 2006 - it isn't obvious that it must keep increasing. Who knows what UK or world politics will look like in another 20 years? It might be an easy way for the woke generation to generate tax revenue.

Tax year	Standard lifetime allowance
2021/2022	£1,073,100
2020/2021	£1,073,100
2019/2020	£1,055,000
2018/2019	£1,030,000
2017/2018	£1,000,000
2016/2017	£1,000,000
2015/2016	£1,250,000
2014/2015	£1,250,000
2013/2014	£1,500,000
2012/2013	£1,500,000
2011/2012	£1,800,000
2010/2011	£1,800,000
2009/2010	£1,750,000
2008/2009	£1,650,000
2007/2008	£1,600,000
2006/2007	£1,500,000

For what it's worth, I'm the same age with more than double the amount in pensions and I continue to sock £40k into a SIPP each year.

Note that contrary to the response below, the 25% tax free lump sum is not taken out before any lifetime allowance charge is applied. The act of drawing this amount is a "crystallisation event" which will cause your pot to be tested against the LTA.

The example here is instructive:

https://adviser.royallondon.com/tech...owance-charge/

Good link. It's whether those rules will stay the same - obviously we don't know, so I guess the trick is not to put all one's eggs in the same basket. Possibly it'll be better to take the income tax hit today and invest the cash whilst continuing to have access to it.

[czarcasm]

21 years at 6% /pedant

Still optimistic in my view. There's a reason why endowments are all under-performing and that reason is optimistic growth forecasts. All around the 5,6,7% range.
Historically low inflation, with no sign of a change, and significant changes to the worldwide economies in the next two decades, does not make a stable market.
Yes you can get 6%, or more, if you have the right stocks at the right time. Hindsight is a great investor.
Try doing it for real. Year in, year out.

It's a challenge if you are trying to pick the right stocks and don't have access to a crystal ball.

If you simply put your cash into the FTSE100 with re-investment of dividends then it's been very achievable.

https://www.ig.com/uk/trading-strate...se-100--200529

[Lance]

It's a challenge if you are trying to pick the right stocks and don't have access to a crystal ball.

If you simply put your cash into the FTSE100 with re-investment of dividends then it's been very achievable.

https://www.ig.com/uk/trading-strate...se-100--200529

are you for real.

For a start a tracker has no dividend payments.
If you have the actual shares in FTSE-100 you will NEED to sell when they leave, and buy when they enter.

And that website shows annualised growth based on the start date of 1984 (high inflation and high returns in those days)

More realistically look at the last 20 years.
FTSE-100 in 2001 was at 5,800
Today it's 7,052

So nowhere near 6% a year.
It's just over 20% in total. Which as a compounded interest rate is just under 1%


I will say it again 6% growth is optimistic.

[sludgesurfer]

A tracker has no dividend payments?

Eh? What are you talking about?

Here's Vanguard's FTSE 100 fund. Currently yielding just north of 3.7%. You can purchase accumulation units where dividends are automatically reinvested.

https://www.vanguardinvestor.co.uk/i...rust_fund_link

Personally, I'm not sure why you'd want to purchase it given its woeful underperformance against most other world indices but that's beside the point.

[Lance]

A tracker has no dividend payments?

Eh? What are you talking about?

Here's Vanguard's FTSE 100 fund. Currently yielding just north of 3.7%. You can purchase accumulation units where dividends are automatically reinvested.

https://www.vanguardinvestor.co.uk/i...rust_fund_link

Personally, I'm not sure why you'd want to purchase it given its woeful underperformance against most other world indices but that's beside the point.

If the fund actually holds the shares then yes it will get dividends.
Trackers don't hold an exact amount of shares to track though. So if they don't happen to hold BP at the time of a bumper dividend payment then you'll not get it.
In fact I'm not sure that a tracker has to hold any shares in what it's tracking.

The point that was made was what the FTSE-100 did over a period, including dividends. I was suggesting they are not guaranteed. I made that point rather badly. Mea culpa.

6% is still optimistic.

[SimonMac]

Have a look at this...

https://www.hl.co.uk/news/articles/l...for-retirement

[JJUXI]

I agree with a fair wind you are very likely to hit the LTA even at the earliest point you could start extracting funds from the SIPP. I have stopped contributing to a 500K pot @ 48 for this reason.
The government have made very clear the direction of travel for the LTA with a five year freeze in place even preventing inflation increases. Supertax at 55% beckons above the LTA; why defer income 20 years to pay those sorts of rates?

An alternative is to keep paying in but reduce your risk by increasing the percentage of bonds vs equities. If nothing else, this allows you to withstand a big market crash without any loss of sleep.

[PeterE]

One option when you approach the LTA is to transfer your SIPP to a QROPS abroad eg Europe. This is a crystallisation event. You can still live in UK and benefit from the QROPS pension, or you can benefit from it were you to retire abroad. The QROPS can continue growing and it no longer becomes part of your assessment against the LTA. You can continue contributing to your SIPP. The SIPP will only grow with your new contributions and the investment growth of the SIPP, which is a much smaller amount since it is the remaining amount once you have subtracted the QROPS transfer. eg 5% growth on 100k as opposed to 5% growth on 1.1mil since you have transferred 1mil to the QROPS. This should allow you to keep within the LTA as it is increased in the future.

[cojak]

But watch out for scammers…
http://www.qropsspecialists.com/qrops-scams/

…and HMRC.
https://www.gov.uk/transferring-your...pension-scheme

[PeterE]

Yes, you need to be careful and employ an IFA. You cannot move a SIPP to a QROPS without an IFA. You need to do your research on QROPS. There are a few self-invest QROPS out there that have low annual charges (<£800 for 1 mil portfolio) without percentage based charges. In addition, the IFA you choose needs to be a fixed fee advisor otherwise they charge a % for the transfer. You will probably have to point out the QROPS you want (I did) since the IFAs tend towards the commission based QROPS products. My IFA then researched the option I proposed and their legal department approved it for a transfer.