Reply to: What folks do with SIPPs?

[eek]

Bear in mind the employer will still have to pay you the minimum wage at the least. That may or may not affect how much you can salary sacrifice each year.

That comes to about £500 a week assuming a typical working week. Anything above that can go into the pension pot.

[Fred Bloggs]

so even though I've just started my first inside role in June of this year, I can use all my inside salary to count towards previous years pension allowances - use this towards previous years allowances rather than money from LTD? - that's cracking point if allowable?

Bear in mind the employer will still have to pay you the minimum wage at the least. That may or may not affect how much you can salary sacrifice each year.

[eek]

so even though I've just started my first inside role in June of this year, I can use all my inside salary to count towards previous years pension allowances - use this towards previous years allowances rather than money from LTD? - that's cracking point if allowable?

Get yourself some proper advice but if you pay into your existing SIPP the unused allowances of the past x years will be usable. Whether your umbrella allows you to do that is a question for your umbrella but you can always move to one that will allow you to.

[gazelle]

A decent umbrella firm will pay into your existing SIPP so allowing the allowances within those previous years to be used.

so even though I've just started my first inside role in June of this year, I can use all my inside salary to count towards previous years pension allowances - use this towards previous years allowances rather than money from LTD? - that's cracking point if allowable?

[Lance]

Vanguard LifeStrategy 100% and the like seem to be the got to for most posters that have commented though so a good look. I would be talking to an IFA if you don't know what to do though.

I have Vanguard and it has grown by around 45% over the last 8 years.
I also have a UBS S&P 500 tracker. That has grown by 37% in 4 years, and that's even with the GBP growing against the USD.
Those growth figures are growth in my real GBP value and as it's been a regular investment it's difficult to tie back to a 'fund growth' number.

[gazelle]

I'd go with this too. The personal tax/NIC saving from putting more of your new salary into a pension will almost certainly outweigh the corporation tax you might otherwise save by making company contributions.

They are for different tax years. So yes, I should sort something out pronto regarding my current inside role. But also, I should also be able to claim back CT for previous years in my LTD - but take the point it might be a drawn out exercise.

[eek]

The pension from the ltd - would be for previous years, so not the current tax year where my inside role is (started Jun 2021), finished outside gig (Oct 2020) - had a break in between.

Thanks for the figures, it does paint quite a picture.

I understand the tax benefits of putting money into the SIPP - just got to make sure the SIPP is then invested in something worthwhile that is going to provide a return and not end up crashing and burning

A decent umbrella firm will pay into your existing SIPP so allowing the allowances within those previous years to be used.

[gazelle]

It's more than a fair point.


If you take the pension from your limited company you save yourself 29% tax (19% corporation tax, 10% on MVL rate)

£1 in salary sacrifice on your pension will save you something like 54% (40% income tax, 13.9% employer NI & Apprenticeship levy).

The pension from the ltd - would be for previous years, so not the current tax year where my inside role is (started Jun 2021), finished outside gig (Oct 2020) - had a break in between.

Thanks for the figures, it does paint quite a picture.

I understand the tax benefits of putting money into the SIPP - just got to make sure the SIPP is then invested in something worthwhile that is going to provide a return and not end up crashing and burning

[Maslins]

+1 - retrospectively paying into a SIPP and claiming back CT just sounds like a world of complete pain for zero real benefit.

Just take the whole lot out via MVL and as it's a better deal than putting it into a pension and paying tax when you remove it later.

As for your pension what you really should be doing is throwing as much as possible into your pension from your inside roles via Salary Sacrifice and using the MVL money when it finally arrives to live on if so required.

I'd go with this too. The personal tax/NIC saving from putting more of your new salary into a pension will almost certainly outweigh the corporation tax you might otherwise save by making company contributions.

[eek]

Fair point

It's more than a fair point.


If you take the pension from your limited company you save yourself 29% tax (19% corporation tax, 10% on MVL rate)

£1 in salary sacrifice on your pension will save you something like 54% (40% income tax, 13.9% employer NI & Apprenticeship levy).

[gazelle]

talk to a pension adviser

I'm not sure about the logistics of claiming back CT for previous years AND doing an MVL.
You might want to consider cutting your losses and just crack on with the capital distribution.
Or get a new accountant.

Good point - will do that as well.
Wouldn't be doing both at the same time, will get the CT back, then do MVL. But yes, take your point it maybe worth cutting my losses. Also an option - just trying to get all the facts and figures and then trying to make decision.

This. Making decisions on 100's of K of money based on comments from other contractors isn't the best move

Well, I think they are some very clever people on these forums and we all tend to have the same sorts of issues from time to time. No doubt, others will have already gone down the SIPP road, which is new to me, would be interested to know how others have used their SIPP, might prove beneficial or help avoid making the wrong investment.

+1 - retrospectively paying into a SIPP and claiming back CT just sounds like a world of complete pain for zero real benefit.

Just take the whole lot out via MVL and as it's a better deal than putting it into a pension and paying tax when you remove it later.

As for your pension what you really should be doing is throwing as much as possible into your pension from your inside roles via Salary Sacrifice and using the MVL money when it finally arrives to live on if so required.

Fair point

[northernladuk]

Man, I'd knew you'd be wading in with something obtuse ok, it wasn't a guess - it's from what I've gleaned from these forums that I could do and claim back a decent amount of money. Happy now

As happy as a Yorkshire man can be yes

From what I understand, a SIPP is nothing more than a wrapper, you choose what investments you wish to invest into - be that individual shares, active managed funds, passive funds, trackers etc I believe you can also invest in commercial property - which is probably one of the options I may look into.
I thought I'd get a flavouring to see what everyone else is doing and see how they are finding things. Those that invested in the stockmarket a few years ago, I imagine are sitting pretty.

Ah so you are asking how to invest the money, not what to do with the SIPP as a whole. Gotcha. That's a really difficult one. I've also made mistakes investing, my 'safe' paypal shares are getting an absolute hammering so I'm not the person to ask either. I didn't listen to AtW and his AMD has been the best stock picked on the forums to date. Vanguard LifeStrategy 100% and the like seem to be the got to for most posters that have commented though so a good look. I would be talking to an IFA if you don't know what to do though. Might cost a bit but as you've seen already it can be money well spent.

I was previously over 4 years at the same client (outside). You were very strongly suggesting (in previous posts) that I should close LTD due to I'll be prime pickings. The contracts I seem to be getting seem to be on the inside. My other option is, I could take out qdos insurance (they do say they will represent prior contracts as well), and keep LTD - but there is a wad of cash in there and no efficient way of extracting it out.

It's a tough one and not a situation I've been in so hard to say what to do when facing this. All I'm saying is make sure you've thought MVL through very carefully. We've already got a trickle of people that knee jerk MVL'd their company with the first inside gig they took and it's ended and they want to go outside again. I expect that's going to grow steadily as the more inside gigs come to an end.

[gazelle]

Doing this first means that this wouldn't have been a guess and answers your question.

Man, I'd knew you'd be wading in with something obtuse ok, it wasn't a guess - it's from what I've gleaned from these forums that I could do and claim back a decent amount of money. Happy now

Only if your umbrella will let you allow you to contribute to your own SIPP else you'll have to go with their offering.

Yes, I went with an umbrella that does allow you to choose your own SIPP

What do you mean don't know what to do wit a SIPP? You put money in to it and then use it when you retire.

From what I understand, a SIPP is nothing more than a wrapper, you choose what investments you wish to invest into - be that individual shares, active managed funds, passive funds, trackers etc I believe you can also invest in commercial property - which is probably one of the options I may look into.
I thought I'd get a flavouring to see what everyone else is doing and see how they are finding things. Those that invested in the stockmarket a few years ago, I imagine are sitting pretty.

If you MVL and gain a tax advantage you cannot open another company for two years so if you do find an outside gig you are stuck with a brolly in that period.

I was previously over 4 years at the same client (outside). You were very strongly suggesting (in previous posts) that I should close LTD due to I'll be prime pickings. The contracts I seem to be getting seem to be on the inside. My other option is, I could take out qdos insurance (they do say they will represent prior contracts as well), and keep LTD - but there is a wad of cash in there and no efficient way of extracting it out.

[eek]

talk to a pension adviser

I'm not sure about the logistics of claiming back CT for previous years AND doing an MVL.
You might want to consider cutting your losses and just crack on with the capital distribution.
Or get a new accountant.

+1 - retrospectively paying into a SIPP and claiming back CT just sounds like a world of complete pain for zero real benefit.

Just take the whole lot out via MVL and as it's a better deal than putting it into a pension and paying tax when you remove it later.

As for your pension what you really should be doing is throwing as much as possible into your pension from your inside roles via Salary Sacrifice and using the MVL money when it finally arrives to live on if so required.

[northernladuk]

talk to a pension adviser

This. Making decisions on 100's of K of money based on comments from other contractors isn't the best move