Is my understanding of pensions correct?

[davetza]

I've been doing some reading on the site around pensions and I want to make sure I've got the correct understanding of how it works.

As far as I can see my Ltd can make contributions to my personal pension up to 100% of my salary. You could also contribute up to £255k pa but the rules around this seem unclear so the safest bet seems to be keep to 100% of salary or below.

The recommendations from this forum seem to be setting up a SIPP and putting your money in the lowest cost trackers you can find. The recommended SIPP providers seem to be

Hargreaves Lansdown
SIPPDeal
Alliance Trust Savings

and IR35 Avoider has a very strong opinion that Alliance Trust Savings is the best as they refund all initial and trail commission which adds up to a lot of the length of the pension.

Does this sound correct? My only question is can I also do this for my wife who os on the company payroll but not a director or only myself.

[Fred Bloggs]

You're now limited to annual contributions of upto £50k. But previously unused years can be carried back. If you want to invest in unit trusts/OEICs I suggest HL take a lot of beating. The HL web platform is very, very good and the customer service dept is excellent. For direct equity or other investments, look elsewhere due to costs imposed by HL for holding these investments in a SIPP. I do not believe in the trackers story. There are some very good actively managed funds out there who consistently out perform. These days it is not difficult to find out the funds they manage.

[malvolio]

There are different and much more relaxed rules for Directors of companies, with an upper limit probably a bit beyond what most of us are going to make in a career. Despite its apparent simplicity it can be a bit of a minefield. Get a good paid-for IFA and ask them.

[davetza]

There are different and much more relaxed rules for Directors of companies, with an upper limit probably a bit beyond what most of us are going to make in a career. Despite its apparent simplicity it can be a bit of a minefield. Get a good paid-for IFA and ask them.

Thanks for the advice but my personel experience of IFA is that they are just fancy salesmen and are only interested in selling you what is going to make you the most money.

[mudskipper]

Thanks for the advice but my personel experience of IFA is that they are just fancy salesmen and are only interested in selling you what is going to make you the most money.

That's what you want isn't it?

[d000hg]

Our independent financial advisor strongly recommended against SIPPs unless you are going to be playing a very active role in managing your pension, since they have the highest fees and are much harder to downgrade to a simpler, cheaper option; whereas you can upgrade a simpler option (like stakeholder) to a SIPP easily once you have a big chunk of money invested to play with.

I recently sorted myself out a standard Stakeholder pension and am funding it purely from MyCo. I was also told not to put more than 100% salary in. One source said you're not allowed, another said you have to clear it first but overall it sounds a bit dodgy if you don't like to push things. This becomes a problem if you pay a very low salary and want to put a lot away, but by the time I'm saving £15-20k for my and my wife's ISA each year, an extra £5-7k in the pension doesn't seem too little.

[Fred Bloggs]

It is simply wrong to generalise and say that SIPPS have higher charges than stakeholders. Some may do, many do not. Look at those by HL, Alliance, SIPP Deal and many others. A SIPP is certainly the lowest cost, most flexible pension you can buy, provided you do your home work. You don't need IFA's, do your own research and be your own IFA. There is nothing difficult about setting up your own SIPP and having your Ltd Co pay into it. To set one up with HL probably takes about 15 minutes. (My SIPP is with HL and I'm very happy with it).

[d000hg]

I think I'll take the word of a certified finance person over yours. He outlined 3 types, on a scale with stake-holder at one end and SIPP at the other... I forget the middle one's name right now. Choice and flexibility increased from former to latter, with a SIPP giving you basically unlimited control over investing in virtually anything whereas a stakeholder lets you choose maybe only 20 funds or so.

What does your SIPP cost you? Is it done as a simple % monthly/annually?

[Fred Bloggs]

I think I'll take the word of a certified finance person over yours. He outlined 3 types, on a scale with stake-holder at one end and SIPP at the other... I forget the middle one's name right now. Choice and flexibility increased from former to latter, with a SIPP giving you basically unlimited control over investing in virtually anything whereas a stakeholder lets you choose maybe only 20 funds or so.

What does your SIPP cost you? Is it done as a simple % monthly/annually?

You can believe what or who you want, it's OP I'm trying to help here. HL charge nothing for my SIPP, yes, that's a big fat 0. The underlying funds (which you will pay for on any platform you choose whether SIPP or anything else) charges are anything between about 0.2% pa for basic trackers to 1.5% pa for specialist funds. HL are funded out of the fund manager revenue, which, yes the punter pays indirectly. IMO, nobody needs an IFA unless they have more complex financial affairs.

[d000hg]

So what you're saying is you don't know exactly how much they're taking? A question, what if you don't use your SIPP for funds but use it to buy things you can only buy in SIPPs, like shares or something... how do they make money then? A simple commission on the sale?

I don't care that you're 'only' trying to help the OP, I'm telling them a professional disagrees with you. As long as they investigate rather than take either of as as legitimate sources that's fine with me.