Do I have to use my Umbrellas in house SIPP scheme?

[DallasDad]

In a nutshell do I have to use my Umbrellas in house SIPP scheme if I want to pay into a pension via Salary Sacrifice?

I have searched the forums but I have not found a great deal about the Pros and Cons of brollies in house pension schemes or any alternatives people may be using.
So before I sign on the dotted line for the brolly scheme I would like to bounce a couple of questions off those of you in the know here.

Your answers and advice to this thread may well be useful to other newbies in the future.

Some background
I am new to contracting, not ready to go PSC yet, plus if I get my pension contributions right there may not be any (tax) advantage in going PSC anyway.
I have a Gig inside IR35 via Hays, I had to use a brolly from their PSL so I chose Giant (no problems with Giant I hasten to add).
Giant offer a Sipp via Curtis Banks.
I am over 55 and can live comfortably off about 50% of my day rate so plan to put the other 50% into a Pension rather than lose a large chunk of it through paye.

The signup to the Giant scheme is via a link on their site saying:


"I don't have a pension and would like to join
No problem! We offer a flexible group SIPP pension with market-leading pension managers Curtis Banks. To help you with this, we've partnered with Independent Financial Advisors Humphries IFA. To join the Curtis Banks pension, or to find out more, click the link below for a call-back from a Humphries IFA specialist."

So on the face of it I have to go via an IFA to join their scheme hmm....... not sure why but ok.

A few days later I get a call from Humphries and I indicate I want to sign up for the scheme.
I know my risk appetite and the type of investment I want to make so effectively I just want the application made so Giant can contribute via salary sacrifice.

The IFA is clearly not really in a position to offer any 'independent' advice simply because this scheme seems to be his only option on the table so he is effectively acting as the salesman for the Giant/Curtis scheme.

I expected to pay something to the IFA for processing the paperwork to join me to the scheme as nothing in life is free and I should have asked for a breakdown of his charges but I didn't

What I have received is the following charges applied to the scheme.
Initial payment 3%
Ongoing annual payments 0.75%
Future transfer in payment 3% (e.g transfer in of other pensions)
Future contribution payments 3%
These are in addition to Cutis Banks own management costs which I accept.

If I pay £40k a year into it and or transfer other monies in, that over time could amount to a heck of a lot of my money being paid to the IFA simply for joining me up to a captive in house scheme! Naively I had expected a one off administration fee for his work joining me nothing else.

Questions:
Can I refuse to signup to these charges and simply ask for a bill from the IFA for him doing the paperwork?
I appreciate I might be shocked at the Bill depending on his hourly rate!

Am I tied to using the brollies in house scheme if I want them to pay into one via salary sacrifice or will/can/should they pay into other schemes instead?

My preference would be to take out my own Sipp with someone like Hargreaves Lansdown I know they can claim back the tax relief but does that also include the employers NI that I am currently paying?

I would really appreciate you collective advice or examples, thanks

[ASB]

If you pay in via net income there is no ability to reclaim ni.

if it is salary sacrifice it is by agreement where it is paid. Ie giant are within their rights to say "salary sacrifice contributions to x".

Those charges are extortionate and over the course of a few years will probably outweigh any ni savings. But I cant be bothered to calculate.

other umbrellas may be more flexible.

[mudskipper]

Self-invested personal pensions | The Pensions Advisory Service

"Although your employer may choose to contribute to your SIPP, there is no obligation that they do so."

Have you asked if they will pay it into a SIPP of your choosing? If they won't, I'd feel inclined to look for a new brolly who will.

[Fred Bloggs]

That's a really rubbish deal. Three layers of charges -

1 The IFA
2 The SIPP provider
3 The fund manager

[DallasDad]

Thank you for your replies, much appreciated.

ASB, I agree with your first two points and had not actually considered the charges could outweigh any benefits saved from the reduced NI payments, that has got me thinking now.

Mudskipper yes I had intended to ask but I suspect it is use theirs take it or leave it. so I take your point about considering another brolly.

I have received a whole raft of online docs to read and electronically sign from Curtis and the IFA which I am trying to digest. I may consider taking them to a truly independent advisor in order to be able to understand them!

For example I have just noticed the charges and payment to the IFA in the Curtis doc don't seem to tie in with those stated in the 'client agreement' doc from the IFA one says 3% the other 1.5%!
So I need to clarify what the real charges are going to be.

If I understand the wording in the client agreement correctly then the IFA has waived the initial payment charge of 3% mainly I guess because I am not putting any sum in up front.
Ditto, he will be unlikely to receive any future transfer in payment 3% (e.g transfer in of other pensions) because I doubt I will be doing this.

So I need to clarify what is meant by 'future contribution payments 3%'
If that is 3% of everything I am about to pay in then I am not happy about that.

One area I have not seen any reference to is what Giant gets out of this?
Could it be that the IFA is paying them something in return for getting my business" out of the 3% charges?

So I intend to ask the IFA to clarify what the actual charges are and if I can simply have a bill instead for the work involved in joining the scheme.

I am also going to think seriously about whether I ought to simply hold fire for now and wait until I go PSC then I will have far more choice of where to invest.

I will probably talk about that to a independent (of Giant) IFA.

[ASB]

In my view the ifa is completely unnecessary. The work involved, if you are happy with the underllying sipp is signing a form.

[seanraaron]

I'm also with Giant and I've decided not to use their pension, but just pay into some kind of ISA but I'll probably chat to Nationwide and see if they have any advice. I also have two pensions from previous employers so that's another possibility.

[DallasDad]

I have told Giants Pension IFA I am not interested in the scheme any more and suggested if he sent out a breakdown of his fees up front that would have saved us both some time.

He did try to explain his fees again but I just found the explanation even more confusing.
I simply can't get my head around paying effectively thousands over time for a Sipp that I can apply for myself Well maybe not the Giant one but there are plenty of Sipp providers out there I can personally sign up to

Plus to top it off I got my 2016/17 tax code from HMRC
0T so now I need to unravel what caused that

Seanraaron
I already have an Isa
the down side with that is it is a saving scheme so not tax efficient in the same way as paying into a Sipp.

The plus point of the giant scheme is the money is paid into the sipp before tax and NI so you save the additional 20% ish NI but minus the IFAs near 4% fees the 1+% that the fund manager charges and Curtis fixed fee.
i.e. as someone said above three layers of fees.

You can obviously take out and then pay into a personal Sipp and they will claim the basic income tax plus you then claim back any higher rate tax via Self assessment iirc.

I will wait till I go PSC and then look again at a personal Sipp.
There is a good thread on here comparing charges between sipp providers.

http://forums.contractoruk.com/accou...ions-sipp.html

I found the post from Ir35 Avoider very interesting and may well try and compare the fees as he describes.

[seanraaron]

I'm not interested in the market, so regular savings account is fine for me. I'd just put it in a safe in the house, but electronic is more convenient.

[DallasDad]

Everyone's interested in saving (tax) money though
Isas' are long term investments so bear in mind you can often invest in exactly the same fund through a Sipp as you would in an ISA but via the Sipp you get your income tax back as well
Also if transferring pensions if above a certain value 30K? I think, you are forced down the having to pay for 'advice' route anyway.

Certainly the IFA I have just been dealing with suggested reviewing transferring 3 of my pensions from previous employers to the Sipp he was going to be 'managing' for me.
Now I know what it would have cost me I think I know why he was so keen.