Reply to: SIPP question

[dingdong]

Vanguards fees for the lifestratey funds are very low around 0.24% annually

You'll have platform fees on top. For low value pots the likes of Hargreaves Lansdown work out best even though they have an annual percentage fee.

One you're over 25k in your pension pot you're better off transferring to interactive investor which charges a fixed fee each year of £120ish but no platform percentage fees.

[Hobosapien]

Can Vanguard LifeStrategy via a SIPP get away from this annual percentage fee leeching, or just opens up a different type of fee leeching so not that straight forward?

[dingdong]

I don’t know why anyone would use an IFA to manage their investments – you only have to look at the impact of a minor increase in charges over a portfolio over a period of time to see the dramatic impact an extra 0.5% or 1% of fees can have.

Hargreaves is a good easy starting point to setup a self-managed SIPP but once you’ve got 20k or more you’re then better off transferring to a low cost provider with a fixed annual fee such as Interactive Investor.

Vanguard Lifestrategy are a great option for a low cost, diversified fund that you won’t need to tinker with. Vanguard have also now launched their Target Retirement Funds in the UK that automatically adjust your portfolio to reduce risk as you approach retirement date.

Anyone considering using an IFA for investments should check out the new robo-advisers (e.g. Moneyfarm, Nutmeg) that will also result in lower fees compared to a traditional IFA.

[lukemg]

So open it in my own name and just move the contributions from the company bank to the SIPP and declare appropriately.

yes

[lukemg]

Thanks, just the answer I was looking. Understood on the 40k and how pensions work - it just the actual mechanics I wasn't clear on.

It's really simple, you write a cheque or transfer from company account to the SIPP account. You DO have to indicate this is a payment from a company so they don't reclaim the tax (which they would from a personal contribution), usually a form to sign.
Mark on your co accounts as employee pension contribution - job done.

[lukemg]

Caution is needed here by all…

Whilst SIPPs offer a very good savings mechanism, one should always compare the low cost managed options available against an IFA managed service, albeit the IFA costs will be higher.

I have opted for the latter for a number of years on the basis that even though I may be paying higher commission rate, the additional returns I am able to get far exceed this commission, through a wider spread of funds and a more tailored service. This should be considered in line with what other posters have also been suggesting.

Yeah - This is the standard line that has been supporting the active management industry for decades and continues to do so.
The trouble is that it just isn't true, there is no confusion about it, passive index investing with low charges smashes 80-90% of active managed funds after charges over long periods. They just can't make up the charges AND the market rise.
Yes - there are always a few outliers who beat the market but this is just what would be expected by any thousands of random picking of shares AND there is no way to reliably pick which funds will do this.
Read 'a random walk down wall st' and then tell me some IFA is helping you out.
Tailored service - please tell me you aren't chucking thousands of pounds of returns away for feeling like the guy really cares...

[Cirrus]

I may be paying higher commission rate, the additional returns I am able to get far exceed this commission, through a wider spread of funds and a more tailored service.

The general rule is nobody but nobody can predict the future so no money manager can deliver better than average returns except by luck, but money managers can deliver better-than-average charges, so seek out the low charge funds. I'd be interested why you think you've got 'additional returns' - what were you comparing with?

As for a wider spreads of funds, Hargreaves Lansdown let you invest in millions of things. I can't imagine why you would want more choice.

When you say 'tailored' what are they measuring about you to use to select investments.

[kaiser78]

Caution is needed here by all…

Whilst SIPPs offer a very good savings mechanism, one should always compare the low cost managed options available against an IFA managed service, albeit the IFA costs will be higher.

I have opted for the latter for a number of years on the basis that even though I may be paying higher commission rate, the additional returns I am able to get far exceed this commission, through a wider spread of funds and a more tailored service. This should be considered in line with what other posters have also been suggesting.

[tomtomagain]

Yes, buy more VLS- so I use Value cost averaging to dictate monthly investment.
it sets a target amount for each month - 1st month 4000in ,2nd month - make it up to 8000, 3rd month make it up to 12000 etc. So when you check the first months investment, it may have gone up to 5000, you only add 3000 to make it up to 8000 or if its gone down to 3000, you add 5000.
This automatically means you buy more at lower prices and less at higher ones.
VLS is spread across thousands of shares, it is all the diversification needed, plus the 20% in fixed interest/bonds means they are rebalancing constantly so you don't even need to do that.
You can choose to re-invest divis or not, its a SIPP so no further tax implications.

Also Vanguard LS re-balances automatically once it diverges by about 1% from the chosen asset allocation. It is a core part of my SIPP. I buy it every month. For someone who is starting to look at investing it would be my number 1 recommendation.

[faxfan]

We seem to be complicating matters.

You can open s SIPP in your own name and make company contributions into that SIPP as a director/employee of the company. Those contributions are a legitimate business expense and so come off the company books before corp. tax is applied. There is an annual limit to pension contributions for an individual (£40k) so you need to be mindful of this but otherwise, crack on If you are unsure then consult a professional.

Thanks, just the answer I was looking. Understood on the 40k and how pensions work - it just the actual mechanics I wasn't clear on.

[Hobosapien]

We seem to be complicating matters.

You can open s SIPP in your own name and make company contributions into that SIPP as a director/employee of the company. Those contributions are a legitimate business expense and so come off the company books before corp. tax is applied. There is an annual limit to pension contributions for an individual (£40k) so you need to be mindful of this but otherwise, crack on If you are unsure then consult a professional.

Also, read elsewhere, that the limit may be affected by current year company turnover with HMRC potentially getting uppity if more was contributed than accrued in the tax year. Though the money has to have been accrued at some time so not sure if this is a problem, if the info is even accurate.

So company contributions and SIPPs are something that needs careful research if not just handing over the responsibility to an FIA 'expert'.

I also read elsewhere that a SIPP isn't necessarily significantly more efficient than any existing private/stakeholder pension with a managed fund, in terms of management fees, as the SIPP will have platform/action fees that may not be that much better. Again, not sure if accurate or just foggying the water by doing 'too much' research.

[adubya]

We seem to be complicating matters.

You can open s SIPP in your own name and make company contributions into that SIPP as a director/employee of the company. Those contributions are a legitimate business expense and so come off the company books before corp. tax is applied. There is an annual limit to pension contributions for an individual (£40k) so you need to be mindful of this but otherwise, crack on If you are unsure then consult a professional.

[IR35 Avoider]

Silly question - but when setting up a pension (SIPP or whatever) does it go in the company name or the directors name?

As has been said, you give your name when opening an account, but strictly speaking the account contents do not belong to you in the way those in an ISA or bank account would.

A SIPP is usually a trust where you are (a) the beneficiary and (b) the investment manager. The SIPP provider will provide the trustee, probably a company rather than a person. Both you and your employer can make payments into your SIPP.

So the only time your company name is relevant is when you are making an employer contribution.

(Most of this isn't particularly important to know, for all practical purposes it's as if the SIPP account belongs to you, but it's nice to understand how things work.)

[northernladuk]

So open it in my own name and just move the contributions from the company bank to the SIPP and declare appropriately.

Ask a professional. Not a board of strangers. If you get it wrong or don't do it the best way it's going to cost you IMO

[faxfan]

Self-Invested Personal Pension

So open it in my own name and just move the contributions from the company bank to the SIPP and declare appropriately.