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I'd like to start investing a small % of money each year. Have heard opening a SIPP and investing in global index trackers is a good idea.
I have 2 concerns.
1) If the majority of my income is solely classed as gambling winnings and as such not taxable, I am classed as a non-earner and my pension contribution limit is £3,600 gross - a payment of £2,880 to which the taxman adds £720.
2) Won't be able to access the funds until I'm around 60.
Initially £3,600/yr would be alright but ideally I'd be looking to invest much more than that in later years.
I'm not sure I quite understand why people even bother with SIPPs? Is it just because they get a 20% or 40% boost from their tax and means they are investing more?
Does it not just make sense for me to invest in S&P 500, FTSE 100, Nikkei, DAX etc. on my own terms, meaning I can have access to my funds whenever and I'm not capped at how much I can invest?
Sorry if I'm missing something obvious. I've no experience with pensions or stocks.
I have 2 concerns.
1) If the majority of my income is solely classed as gambling winnings and as such not taxable, I am classed as a non-earner and my pension contribution limit is £3,600 gross - a payment of £2,880 to which the taxman adds £720.
2) Won't be able to access the funds until I'm around 60.
Initially £3,600/yr would be alright but ideally I'd be looking to invest much more than that in later years.
I'm not sure I quite understand why people even bother with SIPPs? Is it just because they get a 20% or 40% boost from their tax and means they are investing more?
Does it not just make sense for me to invest in S&P 500, FTSE 100, Nikkei, DAX etc. on my own terms, meaning I can have access to my funds whenever and I'm not capped at how much I can invest?
Sorry if I'm missing something obvious. I've no experience with pensions or stocks.
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http://monevator.com/sipps-vs-isas-best-pension-vehicle/
Explains some of the advantages of Sipps - although as a non-taxpayer the conclusion doesn't apply to you.
Explains some of the advantages of Sipps - although as a non-taxpayer the conclusion doesn't apply to you.
http://moneyweek.com/sipps-take-control-of-your-pension/
Worth a read also.....
Worth a read also.....
You can have a SIPP AND select your and manage your own investments. For example Xafinity Simply SIPP. With average fortune you may build a substantial sum for later in life when you will benefit from tax-advantages under the aegis of a SIPP. For example, 25% is available tax free through the lifetime of a SIPP.
It solves a lot of legacy problems. Of course, as a gambler, it may be your ambition to die penniless.
It solves a lot of legacy problems. Of course, as a gambler, it may be your ambition to die penniless.
Before you consider anything with a tax break, make sure you've already used up what's available.
First there's your income allowance. Relevant for people with little or no income.
Separate from this is your Capital Gains Tax allowance, which is worth about £10k per year. Although spread betting is already tax-free, the cost is in the wider spread. It may be more profitable to trade directly with a good broker (even allowing for commission) until your allowance is used up. Net losses can be carried forward into future years.
Don't forget that a lot of tax-break vehicles erode your gains with various fees.
Also look into the Enterprise Allowance scheme.
First there's your income allowance. Relevant for people with little or no income.
Separate from this is your Capital Gains Tax allowance, which is worth about £10k per year. Although spread betting is already tax-free, the cost is in the wider spread. It may be more profitable to trade directly with a good broker (even allowing for commission) until your allowance is used up. Net losses can be carried forward into future years.
Don't forget that a lot of tax-break vehicles erode your gains with various fees.
Also look into the Enterprise Allowance scheme.
To answer the original poster's question, what is the alternative? You put your money in the hands of fund managers who invest in a broad (boring?) spread of shares and bonds according to their own rules and charge you fees that erode much of your gains. What they won't do is invest a load of cash in one stock whose price has crashed but which you feel could make a spectacular recovery leaving you a possibly massive tax rebate-enhanced profit, although you might prefer to pay the tax on the money up front (i.e. as income tax) and use a Shares-based ISA instead to shield the entire gain.
If I were you I would be putting the max 20,000 a year into a share based ISA, you can withdraw anytime and all gains are tax free.
Put your £2880 pa into a SIPP holding a fund of funds like Vanguard LifeStyle, L & G Multi-Asset or HSBC Global Strategy. Will only cost you around 0.20% pa. Hold it with a low cost SIPP provider. Hargreaves Lansdown will charge 0.45% but there are cheaper ones out there.
Govt give you £720 p.a.
Use this as a base for you retirement planning and add ISAs in similar passive funds as finds permit.
Govt give you £720 p.a.
Use this as a base for you retirement planning and add ISAs in similar passive funds as finds permit.
I'm not sure I quite understand why people even bother with SIPPs? Is it just because they get a 20% or 40% boost from their tax and means they are investing more?
Does it not just make sense for me to invest in S&P 500, FTSE 100, Nikkei, DAX etc. on my own terms, meaning I can have access to my funds whenever and I'm not capped at how much I can invest?
If your savings goal is for pension then having access to funds whenever can be a downside to your ultimate goal.
Why not use both giving you the tax advantages of the SIPP and the no cap/access any time of a unit trust.
What many dont realise is your actual boost is 25% or 66.6% for higher tax bracket earners.
Where else can you get those returns instantly on your investment
Does it not just make sense for me to invest in S&P 500, FTSE 100, Nikkei, DAX etc. on my own terms, meaning I can have access to my funds whenever and I'm not capped at how much I can invest?
If your savings goal is for pension then having access to funds whenever can be a downside to your ultimate goal.
Why not use both giving you the tax advantages of the SIPP and the no cap/access any time of a unit trust.
What many dont realise is your actual boost is 25% or 66.6% for higher tax bracket earners.
Where else can you get those returns instantly on your investment
The clue is in the name geoff.
YOU control a Self Invested Personal Pension.
You don't control a company pension.
So it depends on your outlook. I converted a defined benefits pension to a SIPP and I am very content that I have made the right choice long-term.
I don't intend ever to draw from it, in which case I can grow it and pass it on as a legacy, largely free of the grasp of the taxman.
However, as Chekov said "Man proposes, God disposes."
YOU control a Self Invested Personal Pension.
You don't control a company pension.
So it depends on your outlook. I converted a defined benefits pension to a SIPP and I am very content that I have made the right choice long-term.
I don't intend ever to draw from it, in which case I can grow it and pass it on as a legacy, largely free of the grasp of the taxman.
However, as Chekov said "Man proposes, God disposes."
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