Legal & General Share Discussion Threads

[panshanger1] 10/5/2021 13:40

Cassini Can't have been in the civil service long thenNot many of them are tiny !!My issue with public sector pensions - which are mostly defined benefit - (gold plated that is ) is they way they calculate the LTA by multiplying the final pension by 20 - 50 k = £1 M LTAYou try getting that with your Sipp pot if your lucky enough to reach £1M

[imastu pidgitaswell] 10/5/2021 13:38

mt - I don't disagree and while I did contribute all I could last year into the SIPP (within the £40k total annual contribution, plus brought forward unused) the investment performance (£300k to c£750k 6th April 2020 to 5th April 2021 - but higher from the trough of 20th March 2020 or so to the current peak) was a step change from previously and made me think that I might reach/breach it, hence tweaked the strategy to ISA only from now on.

It's one of the reasons people do have a problem with the LTA - good investment performance can make you breach it rather than high earnings or high contributions - but frankly, so what? If you have done that well, pay the bloody tax, same as you would on earnings, bonuses etc etc.

[cassini] 10/5/2021 13:27

Ha! Everyone on here trying to avoid higher rate tax! I'll be trying to avoid ordinary rate income tax by staying under the personal tax allowance 12.5k limit by topping up my tiny civil service pension with my SIPP income. I daresay I will cash in the tax free 25% of it as a lump sum to avoid getting over the personal tax allowance and stick that in an ISA as some other poster mentioned.
Thanks for the clarification on when financial advice is necessary - my other two work pensions are defined contribution so apparently then I can access the cash in them without needing to jump through hoops. I have some other money in an ISA and precious metals but there is no cgt on gains there so should escape the taxman - at my level of retirement income every penny not paid to the taxman is significant...

[marktime1231] 10/5/2021 12:19

Well said, unfortunately there is an anti-social section of the population and media with influence over the government who object to the fair idea of the wealthy shouldering a higher tax burden. Very sorry Sunak has so far failed to level things up between working families and rentiers.

Surely the best way to manage your way around the LTA is to not exceed it in the first place. Stop contributing once your pot is sufficient to a) sustain you b) threaten to grow towards the LTA. In a SIPP you can of course make some deliberate moves to keep under the LTA, eg shift your portfolio from growth or high risk high yield to capital preservation and low risk low yield.

I suspect most people who continue with pension savings while flirting with the LTA and the tax penalties which follow are not saving for retirement but are avoiding income tax or seeking to preserve wealth outside the IHT regime. And they have probably enjoyed the maximum tax relief on contributions for a long time. In which case, while there are some exceptions, not much sympathy from me ... including very highly paid NHS surgeons etc complaining that they cannot continue working without breaching the LTA because their super-generous workplace DB schemes are so valuable. Well of course they can opt out and pay higher rate tax on their income as intended rather than hide it in pension contributions. A tiny super-endowed group attracting too much attention.

My instinct is that the equivalent of an LTA on ISAs will emerge eventually. Hopefully in a much simpler form.

[imastu pidgitaswell] 10/5/2021 12:00

POR - I see where you're coming from, but turning down an instance 50% return available on a SIPP contribution (20% tax relief into the SIPP, 20% back in your bank account in tax paid refunded, plus c10% child benefit refund) is not something to do lightly.

As always, the best approach is a combination of both SIPP and ISA, if you can.

[imastu pidgitaswell] 10/5/2021 11:57

I've no particular issue with the LTA - other than that they keep messing with it. If it is above £1.17m when I get there, I'll pay the tax. As should everyone. It's what pays for the NHS etc.

Some of the ridiculously over complicated schemes to get people out of paying tax are frankly immoral, and I'm amused when they go wrong and they go whining to the papers about their lost pots - which they usually inherited anyway and were seeking to keep all of it by adopting some complicated tax avoidance scam flogged to them by an expensive adviser.

Besides, regarding pensions and the LTA - it's only tax above the threshold. If your pot is £1.5m, it is still higher after tax than if it was £1.2m and on the threshold.

[marktime1231] 10/5/2021 11:45

On the bright side .... !!!!!

[woodhawk] 10/5/2021 11:41

Let's keep talking pensions then!

[williamcooper104] 10/5/2021 11:14

Given that LGENs up while we've being all talking pensions - that's no bad thing :)

[yachtmaster2] 10/5/2021 11:10

Interestingly skinny I stopped funding my SIPP in 2015 as I just found out about LTA,s
At that time it was worth about 300K and now approx 500K. So purely on growth. My point is don’t put too much in if you have a long time frame as the LTA is only about 1M now.it’s all a big government scam to get your money

[skinny] 10/5/2021 10:52

yachtmaster - that sounds like a 'problem' that I'd like to have!

[yachtmaster2] 10/5/2021 10:45

All very good unless you exceed your LTA. I’ve just retired last month. My joint pensions amounted to 1.7M I had 2016 personal protection capped at 1.2M. As a result I’ve used the 1.2 up with my work pension and just left my SIPP untouched to avoid being clobbered with tax.
On the bright side if I die before 75 the SIPP is outside my estate and not liable for inheritance tax. I’ve just turned 60.

[skinny] 10/5/2021 10:39

Some excellent posts!

I've forgotten why I came on here for now 🙄

[rcturner2] 10/5/2021 10:25

I think it is complicated for those with different schemes and indeed different types of schemes. For someone like me with a single SIPP it is incredibly simple. I have a pot of money that I invest as I choose and when I retire I can access that money. Any money I pay in to the SIPP gets 40% tax relief which of course is massive. I put £12k a year in and HMRC adds £8k.

ps I should add that in my case the tax relief is actually even more then 40% because of the taper on the personal tax allowance

[panshanger1] 10/5/2021 09:48

One other thing before we get back to LGEN !!Always important to get a state pension forecast as retirement approaches especially if as like me you were contracted out for a number of years I think I am a few years light of sufficient contributions to get full state pension so I am now looking at the possibility ( and viability) of buying back those years

[imastu pidgitaswell] 10/5/2021 09:19

Great discussion - I am nearly 53 and have just retired (or have been retired by my employer...) largely thanks to gains in my SIPP over the past 12-14 months. The plan being to take the 25% and as others have said, take an annual amount that at least uses up the personal allowance each year, and certainly stays below the 40% threshold. Maybe recycle the c£4k, annually, maybe not. And putting all I can into the recently started ISA pot for me and Mrs P - this year (and last) already in. Great point about taking c£50k from a SIPP and an ISA and only paying c£8k tax.

Was delayed putting money into ISAs as I thought being relatively close to 55 meant it was worth putting all I could into the SIPP, to get the tax relief into the SIPP, the further 20% tax rebate into the bank account (so 40% overall), plus (if the thresholds and a mounts work) getting the child benefit by taking taxable income below £50k through making the pension contributions. So no money left for ISAs until last year.

One issue was always getting through to 55 - while desperately wanting to stop working. Always a balance between 'having enough' and allowing for a rainy day / nice to haves. Everyone is different.

I have a hybrid employer scheme - part defined benefit and part defined contributions. Currently in the (laborious) process) of getting the defined contribution element transferred to my SIPP. It is truly painful. The defined benefit part, along with the state pension (x 2) is a key part of plans - the certainty of a defined benefit base to meet living costs, with everything else being variable on top. But that's all c14 years away - for now it's about getting there, now without a salary...

[uppompeii] 10/5/2021 09:11

Cassini, just one thing.You only have to legally see an advisor if you are transferring out of a final salary scheme.If you're already in a personal money purchase scheme there is no requirement at 55 to take advice.Fwiw, I structure mine so that I use part of the tax free cash each year and then draw up to the personal tax allowance so I get the benefit of being completely free of income tax.If I have surplus, that goes in the ISA.I also put 2880 in each April which is topped up to 3600 by the taxman.

[fletcher270] 10/5/2021 08:08

I used to be with Equiniti their website used to crash particularly when Caesar bid for William hill and I missed out on a fair bit of extra profit also they forgot to send me the voting forms for William Hills takeover

[rcturner2] 10/5/2021 07:25

I have always been happy with ajbell in terms of how good their website is and their admin and phone services but they have a serious issue around their dealing desk which is that they do not seem to be able to handle the size of business that other brokers can handle. They are sometimes unable to make trades that I can make with II and their web dealing crashed recently on a very busy stock market day (I think when the first vaccine news came through) which left a lot of people angry with them. I think they were offline for all or at least most of the day which is pretty unforgiveable.

[adejuk] 10/5/2021 06:54

wow. thx for this informative discussion. i think i would have had to pay £5k for all this info from an indy FA. brilliant.

[rcturner2] 10/5/2021 06:40

I have a SIPP with ajbell and the charge is £10 a month. I have about £350k in there at the moment so the charge is minuscule. Originally I could access that at 50, which has been moved to 55 and now currently 57 but may well go to 58 as my state pension age is 68 and the stated aim is to have the private pension age 10 years behind.

As others have stated once you get past the age limit you can take 25% tax free and then do what you like with the rest of the money but you have to pay tax on it as income. I intend to take the 25% and then ideally take income up to the 40% tax bracket as long as that does not diminish the capital. I'm 49 and intending to retire at 60, the current pension pot prediction at 60 for me is £875k.

[cassini] 09/5/2021 22:34

Interactive Investor combined SIPP plus ISA account is £240/year, flat rate. They used to charge £10/month in addition after 'drawdown' began on the SIPP but they did away with that extra charge last year.

That means (obvs) it takes £24k to get down to 1% charge, £48k to get 0.5% charge etc. Anyone with any significant amount of money in their scheme will hardly notice the annual charges.

[williamcooper104] 09/5/2021 21:58

I think the tax hit of taking cash out of a SIPP prior to being 55 is pretty penal You lose the compounding returns on the cash you take out Makes sense though to move them all into one pot The average pension scheme will charge you about 1 percent per annum (or 20-10 percent of your likely annual returns - total robbery) whereas a SIPP is a few hundred a year