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Thread: Advice from the financial savvy on here.

  1. #101
    Grand Master RustyBin5's Avatar
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    Quote Originally Posted by Parabola View Post
    I did an In Specie from HL to AJB last year

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    AJB accept inspecie but vanguard sipp may not facilitate it from their end.

  2. #102
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    Quote Originally Posted by domwells View Post
    This thread is a really good read. Certainly made me think about investment options.
    I've started reading the long and short of it book recommended earlier it's good to see that the comments on this thread echo what I think I've understood from the book so far!

    At the moment I just have a PAYE pension, looks like some form of S&S ISA will be a good addition in the not too distant future.

    The thing I'm not sure about is, does it make more sense to overpay the mortgage or invest some / all of that money into a fund as mortgage rates are so low?


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    Rule of thumb is if the interest you would save on the mortgage is more than the interest/growth you would get on your capital, then you are better off paying off the debt. Provided of course you maintain sufficient emergency fund. So for example if your mortgage was 4.5% and your money is on deposit in your bank earning 0.5% then you should pay a chunk off the loan.

  3. #103
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    Quote Originally Posted by RustyBin5 View Post
    Rule of thumb is if the interest you would save on the mortgage is more than the interest/growth you would get on your capital, then you are better off paying off the debt. Provided of course you maintain sufficient emergency fund. So for example if your mortgage was 4.5% and your money is on deposit in your bank earning 0.5% then you should pay a chunk off the loan.
    Makes sense, mortgage is 2.79% and no other debts.
    Trick is estimating the interest on an investment I guess?

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  4. #104
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    Quote Originally Posted by domwells View Post
    Makes sense, mortgage is 2.79% and no other debts.
    Trick is estimating the interest on an investment I guess?

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    Well you could try shaving a bit off the mortgage rate first - shop around - should be able to get it closer to sub2% unless you are tied into a deal with penalties of course.

  5. #105
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    2.79% is a little bit high but depends on your term and LTV. If you have above 40% equity you should be much closer to 2%.

  6. #106
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    Quote Originally Posted by RustyBin5 View Post
    Well you could try shaving a bit off the mortgage rate first - shop around - should be able to get it closer to sub2% unless you are tied into a deal with penalties of course.
    I'm tied for the next 12 months unfortunately but could over pay to bring the LTV down for renewal time.

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  7. #107
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    Don't forget you are also getting a 20%, 40%, 45% or 60% (depends on earnings) top-up on the pension contribution via tax savings so the mortgage would have to go some way to beat that immediate profit margin!

  8. #108
    Grand Master wileeeeeey's Avatar
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    Stupid question - when you PAYE guys open up a SIPP what's generally the main reason? Is it so you have more control or is there a other reason? Can you max out a work pension?

    I called payroll today and they said "so long as you're not earning millions you can put whatever % you want in". Currently I put in 5% and they put in 5% but thanks to this thread I checked my payslips and its only 5% of my basic, not my actual earnings so I've upped it to 7.5% for now.

  9. #109
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    Quote Originally Posted by domwells View Post
    Makes sense, mortgage is 2.79% and no other debts.
    Trick is estimating the interest on an investment I guess?
    Well Vanguard LS40 (lowish risk) did 13% last year & Fundsmith (bit of a rollercoaster) was up 27%.

  10. #110
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    Always worth checking if your employer will match higher contributions before setting up a separate plan as some might.

    Also you never know if you salary sacrifice more of your income into your pension and you ask your employer they may let you have the employers NI saving as a top up - used to do that a lot years ago and some employers would do it as it was almost like a small pay rise.

    If I had extra monies left over, first of all I’d build up a cash reserve (not I’m the stock market or watches :-) ) for emergencies, then I’d probably split it into pensions and overpaying the mortgage - splitting security for today and for the future. If I had loads then I’d consider ISA’s. Pensions really are a no brainer though, especially if you pay higher rate tax.

    As for the choice of funds I’d be splitting them. Vanguard is excellent and I invest with them quite heavily, but things can change. Eggs I’m one basket and all that.

  11. #111
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    Quote Originally Posted by Devonian View Post
    Always worth checking if your employer will match higher contributions before setting up a separate plan as some might.

    Also you never know if you salary sacrifice more of your income into your pension and you ask your employer they may let you have the employers NI saving as a top up - used to do that a lot years ago and some employers would do it as it was almost like a small pay rise.

    If I had extra monies left over, first of all I’d build up a cash reserve (not I’m the stock market or watches :-) ) for emergencies, then I’d probably split it into pensions and overpaying the mortgage - splitting security for today and for the future. If I had loads then I’d consider ISA’s. Pensions really are a no brainer though, especially if you pay higher rate tax.

    As for the choice of funds I’d be splitting them. Vanguard is excellent and I invest with them quite heavily, but things can change. Eggs I’m one basket and all that.
    My employer won't match any further unfortunately.

    Workplace pension is with Aegon and has a fee of 1.05% IIRC, would it make sense to open up a separate pension with someone like Vanguard when they launch their SIPP? Presumably I could choose for the pension pot to be invested in something like the LS80 fund?
    Excuse my ignorance on this topic, I'm trying to learn! :)

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  12. #112
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    Quote Originally Posted by domwells View Post
    My employer won't match any further unfortunately.

    Workplace pension is with Aegon and has a fee of 1.05% IIRC, would it make sense to open up a separate pension with someone like Vanguard when they launch their SIPP? Presumably I could choose for the pension pot to be invested in something like the LS80 fund?
    Excuse my ignorance on this topic, I'm trying to learn! :)

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    In the past pensions had policy fees as well as AMC’S and fund charges so having more than 1 pension could be costly. As they don’t have policy fees having two pensions charging 1% is no different than having one charging 1%. So if you want to go with Vanguard it should be fine. Just check if Aegon can offer the funds you want and double check the charges. They may be reduced on a higher fund value or may have lower charges for different funds.

  13. #113
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    Quote Originally Posted by Devonian View Post
    In the past pensions had policy fees as well as AMC’S and fund charges so having more than 1 pension could be costly. As they don’t have policy fees having two pensions charging 1% is no different than having one charging 1%. So if you want to go with Vanguard it should be fine. Just check if Aegon can offer the funds you want and double check the charges. They may be reduced on a higher fund value or may have lower charges for different funds.
    Sounds sensible, thanks

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  14. #114
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    Advice from the financial savvy on here.

    I have sorted my pension out into HL sipp thanks to this forum and they are doing pretty well.

    Now the wifes...

    Does anyone have any advice on what to look for in an older Sun Life (now Aviva) with profits fund when determining whether to move it.

    Wifes policy. It’s a dormant policy from ‘97. no contributions being made. Value around 35k. Five years from 55. 1% fee. Not sure on fund fees (can’t login).

    Her last statement shows fund value of 35k buts goes on to states a transfer value of 44k with the paragraph ...

    ...“” this is how much the plan would have been worth if you had moved it to another provider, it’s different from the fund value because it includes an exit charge £468 and a final bonus of £8857.””..

    Does this mean they are encouraging her to transfer it by showing any bonus applied to date? Seems odd wording, didn’t think a transfer value would be more than fund value.


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    Last edited by T1ckT0ck; 21st January 2020 at 21:55.

  15. #115
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    Quote Originally Posted by wileeeeeey View Post
    Stupid question - when you PAYE guys open up a SIPP what's generally the main reason? Is it so you have more control or is there a other reason? Can you max out a work pension?

    I called payroll today and they said "so long as you're not earning millions you can put whatever % you want in". Currently I put in 5% and they put in 5% but thanks to this thread I checked my payslips and its only 5% of my basic, not my actual earnings so I've upped it to 7.5% for now.
    I'm not a pension expert, but know enough to say your payroll aren't telling the whole story as the % might not be capped but the £ figure is, at £40k pa but then starts tapering down for every £ over £150k earnings, down to £10k for those earning £210k or over. Realise that's not a problem for many, but is an issue for some.

    Copied from the pensions advisory service site:

    The tapered annual allowance came into force as of 6 April 2016 for high earners. For every £2 of income above £150,000 per annum, £1 of annual allowance will be lost. The maximum reduction will be £30,000 meaning that anyone earning over £210,000 will have their annual allowance capped at £10,000.

  16. #116
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    Quote Originally Posted by T1ckT0ck View Post
    I have sorted my pension out into HL sipp thanks to this forum and they are doing pretty well.

    Now the wifes...

    Does anyone have any advice on what to look for in an older Sun Life (now Aviva) with profits fund when determining whether to move it.

    Wifes policy. It’s a dormant policy from ‘97. no contributions being made. Value around 35k. Five years from 55. 1% fee. Not sure on fund fees (can’t login).

    Her last statement shows fund value of 35k buts goes on to states a transfer value of 44k with the paragraph ...

    ...“” this is how much the plan would have been worth if you had moved it to another provider, it’s different from the fund value because it includes an exit charge £468 and a final bonus of £8857.””..

    Does this mean they are encouraging her to transfer it by showing any bonus applied to date? Seems odd wording, didn’t think a transfer value would be more than fund value.


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    Difficulty to say other than the final bonus will increase in all likelihood. You need to get hold of the terms and conditions to check on retirement date, terminal bonus etc.

    https://www.aviva.co.uk/content/dam/...t-feb-2019.pdf

    https://www.aviva.co.uk/investments/...t/fund-guides/

    oh and you could have chosen a less expensive provider than HL.
    Last edited by craig1912; 21st January 2020 at 22:10.

  17. #117
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    Quote Originally Posted by luckyal View Post
    I'm not a pension expert, but know enough to say your payroll aren't telling the whole story as the % might not be capped but the £ figure is, at £40k pa but then starts tapering down for every £ over £150k earnings, down to £10k for those earning £210k or over. Realise that's not a problem for many, but is an issue for some.
    Ok thank you, not necessarily perfect advice from payroll then. I did think it was weird to give that advice without taking my name or looking me up on the system when I'm one of 30k employees it maybe she could tellfrom my voice that I am just a lowly oik who doesn't earn £150k plus.

  18. #118
    Craftsman T1ckT0ck's Avatar
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    Quote Originally Posted by craig1912 View Post
    Difficulty to say other than the final bonus will increase in all likelihood. You need to get hold of the terms and conditions to check on retirement date, terminal bonus etc.

    https://www.aviva.co.uk/content/dam/...t-feb-2019.pdf

    https://www.aviva.co.uk/investments/...t/fund-guides/

    oh and you could have chosen a less expensive provider than HL.
    Thank you for the links, I will look into it.

    Went with HL as they had great customer service for a newbie but i will move to Vanguard as and when.


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  19. #119
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    If you are PAYE, you might want to start a SIPP as you have control of it and what to invest in - my company scheme matches my contribution to a certain % only, and you have to use the company they specify (and that one doesn't offer the Vanguard funds I want)

  20. #120
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    Quote Originally Posted by thenikjones View Post
    If you are PAYE, you might want to start a SIPP as you have control of it and what to invest in - my company scheme matches my contribution to a certain % only, and you have to use the company they specify (and that one doesn't offer the Vanguard funds I want)
    My company gives 5% max if I give 5%. I've just changed this to 7.5% on my side 5% theirs.

    Would I be better off staying at 5% my side and putting the other 2.5% in Vanguard? I'm imagining Scottish Widows charge more than Vanguard.

  21. #121
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    Quote Originally Posted by wileeeeeey View Post
    My company gives 5% max if I give 5%. I've just changed this to 7.5% on my side 5% theirs.

    Would I be better off staying at 5% my side and putting the other 2.5% in Vanguard? I'm imagining Scottish Widows charge more than Vanguard.
    Unlikely, as you are getting tax relief on your contribution, so that 2.5% is not really costing you 2.5% net.

    ETA: I am far from an expert on pensions. There will be other variables I am sure.

  22. #122
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    Quote Originally Posted by Boss13 View Post
    Unlikely, as you are getting tax relief on your contribution, so that 2.5% is not really costing you 2.5% net.
    Doh, forgot about that.

    Would be interesting to know some general reasons why PAYE people open SIPPS then. I get the control aspect but how much would you spend to have control? Is it when you've maxed your work pension out?

  23. #123
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    Quote Originally Posted by wileeeeeey View Post
    Doh, forgot about that.

    Would be interesting to know some general reasons why PAYE people open SIPPS then. I get the control aspect but how much would you spend to have control? Is it when you've maxed your work pension out?
    Yes, that is one of the reasons I am following this thread to understand why there is such an appetite for non employer schemes. I suspect for those who want to invest very large sums, it may make sense to open something separated which they can control. Also, as was said above the workplace schemes will also charge a fee. I checked mine, they charge c. 0.6% of all contributions made. I am guessing if you are planning to chuck £100k into a scheme you may consider alternative options.

  24. #124
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    Could you claim a tax refund if you pay separately into a SIPP?

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  25. #125
    Quote Originally Posted by wileeeeeey View Post
    Doh, forgot about that.

    Would be interesting to know some general reasons why PAYE people open SIPPS then. I get the control aspect but how much would you spend to have control? Is it when you've maxed your work pension out?
    Being self-employed for many years my pension was poor. Now with a combination of employed and freelance work, I have maxed out the employers scheme but have a HL SIPP (soon to be moved to Vanguard) for extra contributions and choosing my own route. I like the idea of making my own choices and decisions. In all cases i'm in low cost global trackers..

    As for the tax contribution uplift on the HL SIPP - i usually receive this a couple of months later after paying in.
    Last edited by vulcangascompany; 22nd January 2020 at 15:20.

  26. #126
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    Quote Originally Posted by wileeeeeey View Post
    Doh, forgot about that.

    Would be interesting to know some general reasons why PAYE people open SIPPS then. I get the control aspect but how much would you spend to have control? Is it when you've maxed your work pension out?
    You still get tax relief on the contribution to the sipp, however you would be making the payment from your nett pay. One of the benefits of the company scheme payment is that it’s taken from your pay before NI is taken, so you would save NI if paying to the employer scheme. Some employers will pay into a personal arrangement via a salary sacrifice arrangement with the same result but must employers won’t do it since it’s an admin ballache for them

  27. #127
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    Quote Originally Posted by wileeeeeey View Post
    My company gives 5% max if I give 5%. I've just changed this to 7.5% on my side 5% theirs.

    Would I be better off staying at 5% my side and putting the other 2.5% in Vanguard? I'm imagining Scottish Widows charge more than Vanguard.
    Yes, purely from a cost perspective.

    As a rule of thumb: invest with your company’s scheme up to the max amount they match - looks like 5% in your case so you receive their matching 5%

    The other 2.5% that you pay extra I would rather invest in a SIPP with Vanguard if
    a) your company’s scheme charges higher fees than Vanguard (management fees for running the scheme on your behalf and/or management fees for the underlying funds you are invested in) and
    b) the extra hassle of opening and maintaining a SIPP separately from you company is justified if those ‘2.5% extra’ are a mesningful amount. I wouldn’t do it if 2.5% are less than 50£ a month. It’s probably still cheaper going the Vanguard route but maybe not worth the hassle if the actual £££ amount is very small.

  28. #128
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    Quote Originally Posted by wileeeeeey View Post
    Doh, forgot about that.

    Would be interesting to know some general reasons why PAYE people open SIPPS then. I get the control aspect but how much would you spend to have control? Is it when you've maxed your work pension out?
    I generally like to keep one larger pension pot, and manage that as one through my SIPP for a number of reasons:

    Better choice of funds generally than a company pension, the latter tend to have that silly default option 50% UK equities, 50% global equities - not dissing the UK, but weight should be smaller than 50%

    Also when I move companies/switch employers the first thing I usually do is close down the company pension and transfer it into my SIPP.

    Lastly I just like to look at my global assets in one place (currently AJ Bell for me, soon Vanguard) rather than having to manage various pension pots across multiple providers.

  29. #129
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    Ok, beginning to understand.

    So once you have left an employer you're able to take that pension and put it elsewhere? You don't have to have one pension per past employer? I'm guessing if that's the case you can only move past employer pensions into your own SIPP, but not your current?

    You couldn't for sale of argument match your employer's contribution and then put an extra 5-10% into a SIPP? That would probably breach the work pensions rules or be too complicated for payroll?

  30. #130
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    Quote Originally Posted by domwells View Post
    Could you claim a tax refund if you pay separately into a SIPP?

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    Yes. I’m also no pensions expert, just know enough to be dangerous I guess. But from my own experience, you get ‘topped up’ to basic relief and claim the rest through self-assessment

    Anyone please correct me if that is no longer the case.

    In the past if I invest 1000£ in my SIPP (which is post tax), then the SIPP provider would claim 20% tax relief from HMRC directly (assuming you are eligible) so 200£ would be added to your SIPP by them.

    If you are a higher rate tax then you would claim the difference between that 20% relief that you get directly into the SIPP and what your marginal tax rate is (40% currently I believe) through your self assessment with HMRC, so in the above example you would claim another 200£ that would reduce your tax bill for the year.

  31. #131
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    Quote Originally Posted by wileeeeeey View Post
    Ok, beginning to understand.

    So once you have left an employer you're able to take that pension and put it elsewhere? You don't have to have one pension per past employer? I'm guessing if that's the case you can only move past employer pensions into your own SIPP, but not your current?
    Yes, it’s your money (well it’s ring-fenced until you reach pension age) so not linked to your employer.

    The advantage of joining the company pension plan tends to be in their contribution matching, but if/when you leave the company that argument no longer holds true.

  32. #132
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    I was made redundant about 5 years ago and have been an independent consultant ever since (director of a limited company). I now have a reasonably priced IFA and all my pensions transferred into a SIPP which I “co-manage” with the IFA.

    Redundancy means many things to many people (mostly bad to be fair) but I found it forced me to take a much more active role in managing my money. I now feel much more in control of my finances and really see it as a positive of being made redundant. Pensions are fantastic vehicles to be tax efficient and I enjoy tracking the funds now, and having some control over where my money goes.

    I think it’s great to see people in company schemes showing interest in SIPPs and the like. I wish I had done earlier when I was in full time employment but now hope I’m correcting that oversight. If you can afford to, funnelling any excess cash into a pension really is currently a no-brainer. I even managed to convince the Mrs to stick her annual bonus into her pension scheme(!).

    As always shout out to Devonian of this parish who was kind and patient enough to provide some excellent advice to me when I started out 👍

  33. #133
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    Quote Originally Posted by WolfiesPapa View Post
    Yes, it’s your money (well it’s ring-fenced until you reach pension age) so not linked to your employer.

    The advantage of joining the company pension plan tends to be in their contribution matching, but if/when you leave the company that argument no longer holds true.
    I have moved everything into one place now, but I believe there is often good reason to leave company pensions where they are simply because many larger schemes (maybe FTSE100 companies and the like) are pretty well run and, critically, cheap

  34. #134
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    Quote Originally Posted by Peck View Post
    I have moved everything into one place now, but I believe there is often good reason to leave company pensions where they are simply because many larger schemes (maybe FTSE100 companies and the like) are pretty well run and, critically, cheap
    Fair point. I haven’t had that experience - but it comes all down to the total COST of ownership - if a company scheme is cheaper than the available alternatives, then that’s the best of both worlds!

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  36. #136
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    Quote Originally Posted by WolfiesPapa View Post
    Fair point. I haven’t had that experience - but it comes all down to the total COST of ownership - if a company scheme is cheaper than the available alternatives, then that’s the best of both worlds!
    I have been researching Vanguard recently based on advice in this thread. On something like the lifestyle trackers, I get that the OCF (Ongoing Charge) is 0.22%. It then states transaction costs apply. I do not understand and cannot see a page on their site which quantifies what that might be. Can somebody point me in the right direction? Also, I assume the 0.22% is percentage of the whole pot (vs. my work pension, which has a 0.61% fee only of contributions made - no other fees at all which seems competitive to me). Difficult to compare which is more cost effective without more info on total cost of Vanguard.

    Good link in the post above, I did read that recently and it is helpful info, easy to understand. Interested to see what the Vanguard SIPP fees may look like in terms of fees. Given what you say above, all employer scemes can be transferred into the private SIPP - that is a big plus for me so that could be the deciding factor in wanting to open one (I have never liked the idea of having multiple pots, which would be hard to track come retirement!).

  37. #137
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    Quote Originally Posted by RustyBin5 View Post
    You still get tax relief on the contribution to the sipp, however you would be making the payment from your nett pay. One of the benefits of the company scheme payment is that it’s taken from your pay before NI is taken, so you would save NI if paying to the employer scheme. Some employers will pay into a personal arrangement via a salary sacrifice arrangement with the same result but must employers won’t do it since it’s an admin ballache for them
    Not correct (as pension contributions are subject to NI) UNLESS it is a salary sacrifice scheme (which quite a few are) but, salary sacrifice isn’t better for everyone.

    https://www.taxcafe.co.uk/resources/...insurance.html

  38. #138
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    Advice from the financial savvy on here.

    Quote Originally Posted by craig1912 View Post
    Not correct (as pension contributions are subject to NI) UNLESS it is a salary sacrifice scheme (which quite a few are) but, salary sacrifice isn’t better for everyone.

    https://www.taxcafe.co.uk/resources/...insurance.html
    You are quite correct. It is possible to ask for your extra contribution to be treated as such though, and it can make quite a difference, but I agree - not for everyone.

  39. #139
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    Quote Originally Posted by Andyg View Post
    Also don't forget that your LTA (Life time Allowance) is currently £1.055M - after which the Tax man will take 55% on every penny over. It's a nice problem to have, but still a problem.
    Not true. You will be taxed an extra 25% above your marginal rate only at a BCE (benefit crystallisation event) or 55% if you crystallise as a lump sum. A good adviser will manage you through this.

    https://www.gov.uk/hmrc-internal-man...nual/ptm088100

  40. #140
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    Quote Originally Posted by domwells View Post
    Could you claim a tax refund if you pay separately into a SIPP?

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    My Hargreaves Lansdown (HL) gets a basic rate payment in May. I am 40% taxpayer so Liam extra on my Self Assessment

    Wileeey - my company uses a scheme which does not offer Vanguard funds and I wanted to invest in them. I have chosen SIPP over ISA as I have turned 50 so could access it penalty free in 5 years - were I 30 I might choose a LISA instead. I have maxed my company contribution as I pay 4% and they add 6% - would be daft to miss an immediate 150% gain (pre the tax benefit)

  41. #141
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    Quote Originally Posted by Boss13 View Post
    I have been researching Vanguard recently based on advice in this thread. On something like the lifestyle trackers, I get that the OCF (Ongoing Charge) is 0.22%. It then states transaction costs apply. I do not understand and cannot see a page on their site which quantifies what that might be. Can somebody point me in the right direction? Also, I assume the 0.22% is percentage of the whole pot (vs. my work pension, which has a 0.61% fee only of contributions made - no other fees at all which seems competitive to me). Difficult to compare which is more cost effective without more info on total cost of Vanguard.
    Two points here:

    First ongoing charges. 0.22% per year for this Vsnguard fund sounds about right. That’s what the fund manager charges. On top of that are platform fees, so if I’m with Interactive Investor say then they also charge me a fee, for example 0.2% so In that case the total cost of ownership would be 0.22% + 0.2% per year, even though the money goes to two different companies.

    Vanguard has the advantage that it is owned by its own funds, allowing it to use profits after covering costs and business investments to lower its fees, rather than reward outside shareholders with dividends and buybacks. So that’s a virtuous circle, any profits created are used to lower their fees further.

    Anyway, might be worthwhile what these 0.61% your workplace scheme charges actually compromise. Is it just the platform fee, or also the ongoing charges for the underlying funds? Apples for apples? If so, then yes - 0.61% per year is competitive. But I doubt that that fee is only on contributions. Usually these fees are charges on total assets under management.

    Your second point, trading costs. That is indeed one of my bugbears tgatbthe fund industry gets away with not including trading costs in their ongoing charges! So these are usually on top and indeed very opaque, for every provider.

    The more the fund manager trades, the higher the charges. Good news is though that any passive funds tracks an index. So for example if your bought a FTSE 100 tracker than that fund would hold exactly the 100 stocks that compromise the FTSE100 index, in the same weight as the index.

    So say Shell has 6% weight in the FTSE100, then the index tracker would also hold exactly 6% Shell shares (there are variations, like buying FTSE futures or index swaps, but let’s ignore these here).

    These indices like the FTSE100, or Nasdaq or whatever usually rebalance only a couple of times a year (say every 3 months). What does that mean? Well, the FTSE 100 is supposed to compromise the 100 largest UK companies, so If a company would have lost market capitalisation and no longer be within the 100 biggest ones that it would be removed from the index at the next quarterly rebalance, and instead replaced whatever company is now within the top 100 instead (recently happened to Marks & Spencer for example - they lost their place in the FAtSE 100).

    But ultimately there would only be 4x trades a year for an index tracker like that, as they just buy and hold the index, and rebalance when the index does. So trading costs should be minimal. (From my experience Someone like Vanguard would pay no more than 0.02% per trade in commissions, so not very much at all).

    If you invest in an active fund though - and the fund manager managing that fund likes to trade in and out of shares then yes, trading fees can indeed be significant. Another reason to go passive...

  42. #142
    Quote Originally Posted by WolfiesPapa View Post
    Two points here:

    First ongoing charges. 0.22% per year for this Vsnguard fund sounds about right. That’s what the fund manager charges. On top of that are platform fees, so if I’m with Interactive Investor say then they also charge me a fee, for example 0.2% so In that case the total cost of ownership would be 0.22% + 0.2% per year, even though the money goes to two different companies.

    Vanguard has the advantage that it is owned by its own funds, allowing it to use profits after covering costs and business investments to lower its fees, rather than reward outside shareholders with dividends and buybacks. So that’s a virtuous circle, any profits created are used to lower their fees further.

    Anyway, might be worthwhile what these 0.61% your workplace scheme charges actually compromise. Is it just the platform fee, or also the ongoing charges for the underlying funds? Apples for apples? If so, then yes - 0.61% per year is competitive. But I doubt that that fee is only on contributions. Usually these fees are charges on total assets under management.

    Your second point, trading costs. That is indeed one of my bugbears tgatbthe fund industry gets away with not including trading costs in their ongoing charges! So these are usually on top and indeed very opaque, for every provider.

    The more the fund manager trades, the higher the charges. Good news is though that any passive funds tracks an index. So for example if your bought a FTSE 100 tracker than that fund would hold exactly the 100 stocks that compromise the FTSE100 index, in the same weight as the index.

    So say Shell has 6% weight in the FTSE100, then the index tracker would also hold exactly 6% Shell shares (there are variations, like buying FTSE futures or index swaps, but let’s ignore these here).

    These indices like the FTSE100, or Nasdaq or whatever usually rebalance only a couple of times a year (say every 3 months). What does that mean? Well, the FTSE 100 is supposed to compromise the 100 largest UK companies, so If a company would have lost market capitalisation and no longer be within the 100 biggest ones that it would be removed from the index at the next quarterly rebalance, and instead replaced whatever company is now within the top 100 instead (recently happened to Marks & Spencer for example - they lost their place in the FAtSE 100).

    But ultimately there would only be 4x trades a year for an index tracker like that, as they just buy and hold the index, and rebalance when the index does. So trading costs should be minimal. (From my experience Someone like Vanguard would pay no more than 0.02% per trade in commissions, so not very much at all).

    If you invest in an active fund though - and the fund manager managing that fund likes to trade in and out of shares then yes, trading fees can indeed be significant. Another reason to go passive...
    If rebalancing is done accurately, surely it’s not just replacing any shares that have left the FTSE100 but buying or selling many/most of them as their weight in the index is bound to have changed.

  43. #143
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    Quote Originally Posted by ryanb741 View Post
    Don't forget you are also getting a 20%, 40%, 45% or 60% (depends on earnings) top-up on the pension contribution via tax savings so the mortgage would have to go some way to beat that immediate profit margin!
    How do you get 60%?

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  44. #144
    Grand Master ryanb741's Avatar
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    Quote Originally Posted by Parabola View Post
    How do you get 60%?

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    If you earn between £100 and £120k you effectively pay 60% tax as you lose your tax free allowance by £1 for every £2 you earn between £100k and £120k. So this is specific to those earning between £100k and £120k only

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  45. #145
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    Quote Originally Posted by WolfiesPapa View Post
    Two points here:

    First ongoing charges. 0.22% per year for this Vsnguard fund sounds about right. That’s what the fund manager charges. On top of that are platform fees, so if I’m with Interactive Investor say then they also charge me a fee, for example 0.2% so In that case the total cost of ownership would be 0.22% + 0.2% per year, even though the money goes to two different companies.

    Vanguard has the advantage that it is owned by its own funds, allowing it to use profits after covering costs and business investments to lower its fees, rather than reward outside shareholders with dividends and buybacks. So that’s a virtuous circle, any profits created are used to lower their fees further.

    Anyway, might be worthwhile what these 0.61% your workplace scheme charges actually compromise. Is it just the platform fee, or also the ongoing charges for the underlying funds? Apples for apples? If so, then yes - 0.61% per year is competitive. But I doubt that that fee is only on contributions. Usually these fees are charges on total assets under management.

    Your second point, trading costs. That is indeed one of my bugbears tgatbthe fund industry gets away with not including trading costs in their ongoing charges! So these are usually on top and indeed very opaque, for every provider.

    The more the fund manager trades, the higher the charges. Good news is though that any passive funds tracks an index. So for example if your bought a FTSE 100 tracker than that fund would hold exactly the 100 stocks that compromise the FTSE100 index, in the same weight as the index.

    So say Shell has 6% weight in the FTSE100, then the index tracker would also hold exactly 6% Shell shares (there are variations, like buying FTSE futures or index swaps, but let’s ignore these here).

    These indices like the FTSE100, or Nasdaq or whatever usually rebalance only a couple of times a year (say every 3 months). What does that mean? Well, the FTSE 100 is supposed to compromise the 100 largest UK companies, so If a company would have lost market capitalisation and no longer be within the 100 biggest ones that it would be removed from the index at the next quarterly rebalance, and instead replaced whatever company is now within the top 100 instead (recently happened to Marks & Spencer for example - they lost their place in the FAtSE 100).

    But ultimately there would only be 4x trades a year for an index tracker like that, as they just buy and hold the index, and rebalance when the index does. So trading costs should be minimal. (From my experience Someone like Vanguard would pay no more than 0.02% per trade in commissions, so not very much at all).

    If you invest in an active fund though - and the fund manager managing that fund likes to trade in and out of shares then yes, trading fees can indeed be significant. Another reason to go passive...
    Informative post thank you.

    I am pretty sure that my work pension is 0.61% on contributions and no other fees. I have read the document over and over and that is all I can see.

    Seems I am correct in my apprehension due to the Vanguard fees transparency. To simplify this: does anybody have a Vanguard Lifestyle product and is willing to share what it has cost them in fees say over 1 year? (Percentages rather than actual £ is fine, so not to have to share what is in your personal pot!)

  46. #146
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    Quote Originally Posted by ryanb741 View Post
    If you earn between £100 and £120k you effectively pay 60% tax as you lose your tax free allowance by £1 for every £2 you earn between £100k and £120k. So this is specific to those earning between £100k and £120k only

    Sent from my SM-G950F using Tapatalk
    Ah of course, makes sense ta

    Sent from my SM-G903F using TZ-UK mobile app

  47. #147
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    Quote Originally Posted by Kingstepper View Post
    If rebalancing is done accurately, surely it’s not just replacing any shares that have left the FTSE100 but buying or selling many/most of them as their weight in the index is bound to have changed.
    That is correct, plus is also some rebalancing every time dividends are paid (if dividends are reinvested in the index), share splits, corporate actions etc. happen.

    Usually those can be neglected though from an overall trading cost perspective.

  48. #148
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    Hargreaves Lansdown have just sent me an email promoting their new SIPP transfer in bonus of £50-£500.

    guess they are trying to pre-empt the Vanguard SIPP launch.


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  49. #149
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    Quote Originally Posted by Boss13 View Post
    Informative post thank you.

    I am pretty sure that my work pension is 0.61% on contributions and no other fees. I have read the document over and over and that is all I can see.

    Seems I am correct in my apprehension due to the Vanguard fees transparency. To simplify this: does anybody have a Vanguard Lifestyle product and is willing to share what it has cost them in fees say over 1 year? (Percentages rather than actual £ is fine, so not to have to share what is in your personal pot!)
    It is almost certainly incorrect that your work pension has no ongoing fees. They may not charge it as a fee on assets (which I'd find very strange) but it'll certainly come off your returns. It may be that the pension provider charges only that fee but all underlying funds will have their own fees for invested assets.

    It's a little amusing (I don't mean it negatively) you are apprehensive of vanguard due to fee transparency when they are trying to be accurate as possible in their fee estimate (which can vary) but seem happy about another pension which don't mention any fees at all!

    As others have said vanguard is owned by their own funds, so they have no shareholders to pay out to. Their only goal is to provide the funds as efficiently as possible for as small a cost as possible. They're known to be the most transparent on fees and have moved the whole industry in this direction. I think it's easy to cause confusion now we see new fees mentioned. It's not that they are adding something new on top, it's just they are showing us fees which were always charged but we never knew about!

  50. #150
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    MiFID 2 has massively over complicated the whole area. Fees mustn’t be confused with costs, whether higher costs is in reality inherent to a better investment is a whole different area of discussion

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