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Frank Wright
Posted: 04 March 2013 23:08:41(UTC)
#1

Joined: 04/03/2013(UTC)
Posts: 42
Hi

I've got about £100k of inheritance sitting in a fairly low interest account. As a 40% tax payer I have been considering moving some of this, say £10k just now and £10k after April, into my SIPP. Until now I have resisted using a SIPP for this inheritance because I like the idea of keeping the options open for getting access to this money on retirement. However, the attraction of using the SIPP is that I will reduce my tax bill by £2.5k this year and next.

Some background - age 48, plan to retire at 60. Have 150k already invested in SIPP and adding 15k per year from income. My stocks ISA allowance is already used up for this year and have allocated money for it for the next year.


So, should I make the most of saving some additional tax and lock my money away in a SIPP, or move it into stocks/trusts outside of a SIPP wrapper?

And while I've got your attention, my SIPP is with HL, but I like the look of Alliance Trust - any comments on this?
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LouisV-W4
Posted: 05 March 2013 15:29:50(UTC)
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Joined: 07/04/2011(UTC)
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Frank,

Personally, I am considering moving my SIPP away from HL and into a managed equities fund. The costs are similar, but I don't have a myriad fund managers all doing their own thing with variable results, and charging well whether they perform or not.

I have just moved into Drawdown, and am frustrated at not being able to take as much income as I would like due to the GAD constraints (nothing to do with HL). I wish I had far less invested in my SIPP, because it is likely I will end up with a sizeable pot remaining on my death, which will be taxed at 55% before going to my estate, far outweighing any tax relief benefit I received going in.

I'm not an adviser, but I wish I had put the maximum into PEPs and Stocks & Shares ISAs for the past 20 years, rather than a pension. It's what I will be doing going forward.

Good luck.
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Frank Wright on 05/03/2013(UTC), Peterdh2u on 05/03/2013(UTC)
Gary Taylor
Posted: 05 March 2013 18:35:40(UTC)
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Joined: 02/02/2012(UTC)
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Frank,

I am in the same situation as Louis, having gone into drawdown last year. My SIPP pot is quite modest , but even with drawdown due to return to GAD x 120% at the end of this month, I believe the fund will ultimately yield more for the tax man than it will for my heirs.

I have never benefited from tax relief at more than the standard rate (you will thus gather I am not a financial adviser!) and this may make a difference to your own calcs, but I am now taking my investment risks outside of a pension wrapper.

Why not give Buy-To-Let a go? This is a sector where cash is king - although it does carry risk to capital. Or try one of the social lending sites for a better return on cash. Again, some risk but good returns - and UK borrowers will thank you for stepping in where our blasted banks fear to tread!

Good luck!

Gary
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Frank Wright on 06/03/2013(UTC)
James Burn
Posted: 05 March 2013 19:46:36(UTC)
#4

Joined: 13/03/2010(UTC)
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I have one SIPP with Alliance Trust and another one with HL. The reason I have two is because if there is a big fraud at one of the places, I will avoid losing everything. However, I am not sure if this is worth the additional fees from having two providers.

I did recently consider moving the HL one to III to save annual charges, but I dediced it wasn't worth it with all the transfer fees.

HL do provide a better service in terms of information, have an easier to use website, and they also reclaim the tax on bond funds accumulation units.

BTW, I am sure you are aware that as well as the 2.5k reclaimed by the SIPP provider (based on a 10k contribution), you would also be able to claim back 2k of higher rate tax paid. Further based on a 3.4% dividend yield, you would save 0.9k of higher rate tax on dividends over the 12 years.

Note that the 55% tax is basically 25% more than the 40% rate for inheritance tax (0.6*0.75), so is still less tax overall for a higher rate taxpayer.
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Frank Wright on 06/03/2013(UTC)
snoekie
Posted: 05 March 2013 19:52:00(UTC)
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Joined: 26/08/2008(UTC)
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Frank, NEVER.

If you survive beyond 75 the State will skim off 55%, and then add the remainder to your estate and rob you of another 40% (I think).

It will be a sitting duck for Gordon Brown Mk II, and if Balls has anything to do with it, he will raid your SIPP fund, as sure as there are little green apples.

Once in a SIPP, unless you move abroad where you may be able to unscramble it, but then they may change that wrinkle, better to use ISAs etc.

It looks attractive because currently there is no CGT, but you have the likes of siliband waiting in the wings and greedy for more money to squander and removing the CGT exemption is easy, without much fuss as his voters are unlikely to have any SIPP funds.
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Frank Wright on 06/03/2013(UTC)
DGL
Posted: 06 March 2013 09:31:06(UTC)
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As always - IT ALL DEPENDS....
I think most are agreed
1. ISA better than SIPPs
2. How long are you going to live ?
3. Other likely pension income ( company, state etc)

IF you can get the other pensions to GT £ 20k you can opt for 'flexible drawdown' - i.e. take as much as you want from the SIPP in any year (albeit income tax to be paid) so run it down to zero before death...
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Frank Wright on 06/03/2013(UTC)
James Burn
Posted: 07 March 2013 22:24:33(UTC)
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Just to clarify the 55% tax on death while in drawdown is instead of 40% IHT not in addition to it. There is no 55% in the case of a dependent who continues the drawdown.
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1 user thanked James Burn for this post.
Frank Wright on 10/03/2013(UTC)
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