I've tried investing in various things that didn't work out as I hoped. Now, I'm looking at ETFs as a more reliable option. What are the best 5 ETFs for a beginner looking to invest a lump sum?
In no order: 1) VOO 2) QQQM 3) SCHG/VUG 4) VTI 5) SCHD/DGRO. Personally I put down 1.2m$ on few ETFs, still diversifying. it was this time last year I made my first break through with a liquid 370k. Handed it to a trader here in TX, I get weekly pay out which I put back on long term ETF's. Tesla will be a huge buy for me when the market bottoms.
I met Jennifer Kristie for the first time last year at a women's conference here in Pennsylvania, and my life has changed for the better since then. God bless her!
Bang on! If you are relatively young, goodness knows how old you’ll have to be before the government lets you access it and they’ll still tax you on it later. ISA can be accessed anytime and is always tax free!
At 1:43 Just a note that you cannot put £5000 in a lifetime ISA… the limit is £4000. The additional 1000 government contribution doesn’t count towards the 20k annual limit so is irrelevant in the example. Otherwise, loved the video Chris!
1:41 Good summary, but a minor correction: one can only put £4000 in a Lifetime ISA in a tax year and to the best of my knowledge the 25% top-up from the government doesn't count towards the £20k annual ISA limit.
Being able to retire when I want is more important to me than having £100k more. I don’t trust the government to let me have my SIPP before 65. I’m currently maxing out an ISA every year (sadly only 2 years in a row so far) and putting £1,200 a month in a pension. Maybe I should swap that round, but I’m worried I won’t be able to retire before 57 if I don’t invest more in an ISA, and I’m worried the government will put the private pension age up to 65 or 70. Essentially, I find the fact the government are allowed to control the pension age abhorrent-it just fills me with worry because we can’t trust them to care about soon-to-be-retirees.
Gov definitely will increase the age up. Mine went from 65 to now 67 and I’ve still got over 30+ years to hit 67. It’s going to be 72-74 by the time I retire. Mofos!
I pay into both but I’ve definitely been favouring the ISA even as a higher rate tax payer. The ISA is so simple to understand with no strings, where the SIPP is alot more complex. You get the relief for basic rate but then you have to do a self assessment tax return for the rest, which thankfully I already have to do but most people I know wouldn’t know where to start. THEN it’s the restriction of when you can take it and the tax on the way out. So many variables to account for. ISA is 20k allowance completely tax free on gains and you have complete freedom of when you access it.
@@OldyellowbrickI think many employers offer salary sacrifice, since it can save them some National Insurance. If Labour increase employers NICs it will be even more attractive. Btw, I was able to claim tax relief on higher tax rate without doing a tax return, I just wrote to HMRC.
The explanation is very convoluted. There are so many parameters to factor in like other incomes, state pension, political risks ( with pension rules).
Have you ever tried wthdrawing from a sipp? It's a massive pain and isa's are simple. i've learnt this the easy way dealing with my mum's pension. thank god.
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some really good info there Chris - I always prioritise the work pension first, then an ISA. My next big decision will be drawdown or annuity, ad I'll be seeing pro advice just so I can weigh up all the options and approaches 🙂
Every financial advisor will recommend keeping your emergency fund in a cash isa or a quick access savings account, this is for after that step or building both simultaneously.
@@andypayne2743 @wiggles1993 I dont think hes saying he is using it as an emergency fund, just if something 'massive occur' he can quickly withdraw it if needed, unlike a SIPP which will mean huge fees.
A flexible ISA you can take and add from in the same tax year is the Vanguard platform. That is why i kept my ISA and SIPP with them, when i was going to move to HL or A J Bell but they are not flexible ISAs.
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Hello Chris great video, thanks! Can you do a video for public workers who can buy DB pensions? The cost is 10 times the yearly payment that you'll get in retirement (after retirement age) and it is CPI adjusted. So with 5k you buy a 500£ yearly DB pension and with 50K a 5k yearly DB.
Great Video Chris!, I've said this on a number of platforms, I currently earn £50K and am potentially getting a pay rise to £60K, would it be best to take a salary sacrifice of the extra £10k and get my company to put that into a HL SIPP for me?. would I be able to get the full £10k + 3% company contribution and then Government top up?.
The government will keep increasing the age on when you can access your SIPP. Its going upto 57 but will likely get pushed in line with a state pension over the future
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8:18 Shouldn't the comparison being made between an ISA and SIPP, for a Higher Rate Tax Payer, have the SIPP Tax Relief at 40% rather than remaining at 25%? Surely that would push the total value above £725k making the gap larger?
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Thank you for sharing your insight, Chris. It's very informative and well-mapped. However, one point you fail to mention is that you can only access your pension when you reach the minimum retirement age which will increase steadily over the years. Although I understand a long-term investment strategy is important, you must factor in the security of having liquid investments.
100% - I touch more on this in my strategy video (get the SIPP sorted first then use the ISA to buy years off it). It's such a strong pulling point toward the ISA though (mostly why I focused on it so much for 10 years honestly).
@@tancreddehauteville764 For those exploring SIPP's I would assume they'd be diligent enough to keep their investments locked away for the long term anyway. The issue here is that it's inaccessible until a period many people can't fathom reaching. I'm 22 and the idea of locking away tens, possibly hundreds, of thousands of pounds for the next 35+ years is insane. I'm already enrolled on a generous workplace-defined benefits pension. So, speaking on behalf of myself, I believe maxing out my ISA allowance every year is the priority and perhaps then I could look into investing in a SIPP.
Not sure if I'm just missing it but I think you forgot to add the link to the calculator to the description. Thanks for the video. I am 9 months into my first grad job and have been investing steadily each month into my ISA but this definitely has made me question that decision. I'm only 23 so perhaps the SIPP is the better option. One question I do have however is can you get the SIPP tax relief if you are employed by a company? I already have a matched pension plan with my employer so unsure if that makes me exempt from the SIPP.
I wonder whether it's better to just pump more in to your employer scheme, it has the same effect, other than fees which may vary and the choices of investments.
There are other downsides to an ISA too. You can't write off losses against profits and if any company you invest in ends up being delisted but still active, if you make any profits you will then pay CGT on top of the income tax you paid in the first place to invest in the ISA.
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I earn between 28k-40k. Is my max pension contribution between those figures or can I put in the full 60k? (or can I not even put 60k in because that also includes what tax relief you get back too?). I will also have a huge capital gains tax bill this year (100k+) so will that be taken into consideration? Basically I just want to know what's the most I can put in right now. I fill my isa up already and just want to put a lump sum into a Sipp now and forget about it.
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What if you pay into a SIPP from pretaxed income? I.e. gross income. Do you then not get the government tax relief ? Is the government tax relief to make up for the fact that most will be paying into a SIPP from taxed income ?
I'm confused about the £60K annual allowance. I understand that this is the upper limit, beyond which returns from your SIPP are subject to income tax, is that correct? There is another limit, to how much you can invest, which is your annual gross income... So, if I earn £50K PA from a PAYE job and sale of stocks from a general investment portfolio combined, can I put all that £50K into a SIPP, or just the PAYE portion of it, or can I top it all up from savings to make it £60K? Sorry if this is a bit long winded, but I seem to have a gap in my undertstanding, and I get the feeling I'm not likely to be the only one.
With invest engine, is the SIPP tax relief automatic or do you have to claim it (Basic rate tax payer).. & would the wife get tax relief as a non tax payer.
Good video. But I dont like the comparions. Easier for me to understand this as lower/higher rate tax payer on the pension option rather than the ISA. Should just be one ISA option in the comparison. Doesnt change the story outcome though!
Genuine question that might have an obvious answer but I’m fairly new to personal finance. If I max out my ISA this year and have the highest % of pension contributions selected with my employer, and have an emergency fund, what should I do with the rest of it? Should I set up a SIPP and contribute to that for the rest of the tax year? Or maybe put it in a ~5% interest rate savings account and put that into my ISA in the new tax year? I’m not a higher rate tax earner.
Tim, just because you contribute enough % salary to get the maximum employer match doesn't mean you can't increase your side of the contributions. For instance when I was working I had to contribute 5% to get the max employer contribution of 10%. But I regularly contributed 20% plus and still got the max 10% from the employer. In those days it was limited at £40k gross but now £60k gross. This reduced my taxable salary to approx £70k and put £40k gross into my group personal pension. I was using salary sacrifice too.
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My S&S ISA was something I built up in case I needed to bridge until I could access my personal pension. Not for a FIRE scenario, more like worst case scenario of losing my job and not getting another one for a while. As a soon-to-be 52-y-o, I'll need less reserve each year to bridge the gap to 55, should that latter scenario play out. I've just opened a SIPP on InvestEngine and my plan is to move funds from the S&S ISA into the same investments inside the SIPP over the next few years up to my annual limit. Almost immediate 25% gain from the uplift. When I go into the drawdown phase (hopefully around 60), even with paying the tax on the taxable portion, I'm looking at a minimum of 6.25% gain over holding the same funds in an ISA.
Sorry to be that guy but, You can only put 4000 in a lifetime ISA and the government adds 1000 to make it 5000 but this only used 4000 of your allowance
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Hi Chris. When you calculated the tax on the SIPP you calculated a straight 20% on the taxable value. When you have retired you won’t be working and will still have your personal allowance and won’t pay tax on the first £12,570 a year. I think you have over-calculated the tax burden on this portion.
I’m pleased that I saved hard into my pension, allowing me to retire early last year. I do wish I’d put more into my ISA though, since I hate paying tax on my pension drawdown.
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What happens when you reach the sipp retirement age, does your sipp account carry on collecting interest whilst being able to withdraw or does it stop once you have retired?
There’s different strategies but the idea of you want to keep the funds invested so they continue to gain a return as you withdraw some people like to mix in bonds so some is fixed and some goes with the market
Thanks for your reply. My thought process was to just solely invest in stock/shares isa to avoid tax and get a large enough pot to live off the interest. Apart from paying tax on withdrawals, Would a sipp still be the way to go to do this?
The S&P 500 has returned just over 10% per year since its inception. The Nasdaq around 15%. Even the FTSE has delivered around 8%. The S&P 500 has returned 26.74% so far this year!
For parents who earn over £60k, worth mentioned that using SIPP can be much more beneficial as pension payments can reduce adjusted net income and allow parents to keep child benefit rather than lose it
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I’m new to the SIPP, and have missed the ‘register for self assessment’ which should’ve been done by October 5th, am I able to backdate the additional 20% tax relief? Thanks for any help
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I think a LISA is more comparable to a SIPP. I would be interested to see the comparison and differences. I know you can only put in £4k a year into a LISA until age 50 but a lot of listeners maybe not have more than this disposable income to invest. Especially if they have already maxed out their employer pension.
@@SupermanOG So, max your employer match pension, then, anything above £50270 stick in the SIPP for 40% tax relief, then fill your LISA (same top-up as a pension 2025%) but tax free on the way out, then SIPP the rest or ISA - having some ISA savings has the advantage of flexibility, both before retirement and during if you want to tweak your tax rates drawing down / pension has the 25% tax free allowance. If you get close to retirement age, smack your ISA savings into a pension and get your tax back, is also an option.
The idea that an isa is tax free is a fallacy, being taxed on the way in is far more costly than being taxed on the way out, as you've demonstrated. Im prioritising my pension, LISA, and mortgage over payments.
Worth noting that the 25% SIPP tax free when you extract from the SIPP has a limit of £268,275. Since this was a new limit introduced from the 6th April 2024, I kind of get the feeling that this (and future governments) may see reducing this limit as an easy way to raise more tax revenues. Who knows though...I guess we'll know more at the next budget.
@@PaulB-q3d Remember that your SIPP will also grow (hopefully :-) during the drawdown phase. That is, you may actually drawdown much more than the total you have at the point of retirement. I've done the spreadsheet for myself; although I retired on far less than a million pound, I will drawdown much more than a million if my health holds out. The issue is that I retired early on a plan that assumed I'd get 25% tax free on the whole pension. Now I find that there is a £268,275 limit, I will incur additional tax for which I'd not originally planned. There are mutterings that the 25% tax free limit could be cut to as low as £100,000 (search internet for mutterings). If they did that, then I think a lot of people will drawdown more than £400,000 from their pension and so will incur the additional tax. Given that the (previous) government introduced a limit from a position where there wasn't one, I think it is an easy threshold for this and future governments to tweak, as they've done with savings, capital gain and dividend allowances. It is also a tax that most people won't feel in their pocket immediately and probably don't understand anyway, and so isn't going to be a vote loser. I have a 70:30 SIPP:ISA split and so try to hedge my bets on potential future SIPP/ISA rule changes.
Remember that your SIPP will also grow (hopefully :-) during the drawdown phase. That is, you may actually drawdown much more than the total you have at the point of retirement. I've done the spreadsheet for myself; although I retired on far less than a million pound, I will drawdown much more than a million if my health holds out. The issue is that I retired early on a plan that assumed I'd get 25% tax free on the whole pension. Now I find that there is a £268,275 limit, I will incur additional tax for which I'd not originally planned. There are mutterings that the 25% tax free limit could be cut to as low as £100,000 (search internet for mutterings). If they did that, then I think a lot of people will drawdown more than £400,000 from their pension and so will incur the additional tax. Given that the (previous) government introduced a limit from a position where there wasn't one, I think it is an easy threshold for this and future governments to tweak, as they've done with savings, capital gain and dividend allowances. It is also a tax that most people won't feel in their pocket immediately and probably don't understand anyway, and so isn't going to be a vote loser. I have a 70:30 SIPP:ISA split and so try to hedge my bets on potential future SIPP/ISA rule changes.
Maybe, but that limit is still far higher than what the vast majority of people will be able to claim. You would need to have a fund of over £1M to be affected.
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You forgot to add that they keep raising pention age and they want you to work till u die andddddddddd you can't touch the pention till you retire..... so again, a stocks and share isa most logical choice oh and also very much doubt pentions will even excist in 10 years
Personally I'd take the 50/50 approach. Assuming a basic-rate taxpayer throughout, the only reason SIPP beats ISA is the 25% tax free allowance, and there's been much talk about the new Labour government ditching that. The utilisation of your Personal Allowance is only a benefit if you properly retire and start drawing down your pension before state pension age. For most basic-rate working people, either they reduce work, do a bit of something to tide them over, using their PA against that, or start drawing from their SIPP at normal pension age along with their State Pension, which uses up the PA. Consequently for basic-rate taxpayers, SIPPs are a bit better on the numbers, but do offer less flexibility. For HR taxpayers, no-brainer (for now...Rachel Reeves) but then they should all be taking tax advice anyhow.
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Superb video....ive been kicking the can for the past 5 month...currently lucky enough to be maxing out my s&s ISA for last couple of years...considering possibly a SIPP instead...you make a very compelling argument for a SIPP...HOWEVER....these slippery fuckers at the top can alter the pensions and tax rules whenever they see fit....Im gonna keep on keeping on with my s&@s isa...(for the time being)!
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This market has been brutal. No matter what I try, I keep losing. I'm scared to hold anything at this point. What’s your strategy for avoiding losses? Down 55k this week, feeling hopeless 😢😭.
I'm not sure which market you're referencing, but time is on your side. Hold until you're in profit, and consider a stop-loss plan of up to 10% for swing trading. It took me four years to realize that chart predictions are futile; you never know what will happen. Those years were tough without a mentor. Now, I keep things simple and disciplined, averaging $47k per week with minimal trading. I'm especially grateful to Ryan Brooks for his insightful 1-on-1 sessions, which have deepened my understanding of market dynamics and eased my trading fears.
@@Johnygo1 I appreciate this recommendation and hope that by hearing about it I can gain some insights into the direction of the market and strategies to combat the downtrend.
Look for the following post on the UK personal finance subbreddit which maps this out in more detail: PSA: Pension Tax Efficiency / Return on Investment - April 2024
surely anyone who is in a position to be considering either S&S ISA or a SIPP is savvy enough to do basic math and understands the merits of tax relief and compounding. Decent channel though - like the content
@@stuartogden1660fairly sure she won’t mess too much with personal taxation on pensions. As an apparent trained economist she must know about laffer curves and the like.
@@hughiemg2 yes absolutely. wouldn't put it past her to give the public sector a carve out. already active discussion in the media about employers ni charged on pension contribution but just for the private sector
I've tried investing in various things that didn't work out as I hoped. Now, I'm looking at ETFs as a more reliable option. What are the best 5 ETFs for a beginner looking to invest a lump sum?
In no order: 1) VOO 2) QQQM 3) SCHG/VUG 4) VTI 5) SCHD/DGRO. Personally I put down 1.2m$ on few ETFs, still diversifying. it was this time last year I made my first break through with a liquid 370k. Handed it to a trader here in TX, I get weekly pay out which I put back on long term ETF's. Tesla will be a huge buy for me when the market bottoms.
Thank you, I already added VOO and QQQM, can you share this Pro with me.
Yeah, Jennifer Kristie Taylor use her name to look her up.
I met Jennifer Kristie for the first time last year at a women's conference here in Pennsylvania, and my life has changed for the better since then. God bless her!
Scammer bot!
Good information, probably better to have both. With a SIPP the government control when you retire, With an ISA you control when you retire
Yeah I have both for that reason, I don't trust our Government in the slightest!
Bang on! If you are relatively young, goodness knows how old you’ll have to be before the government lets you access it and they’ll still tax you on it later. ISA can be accessed anytime and is always tax free!
Well said.
Yes good point
I’m also wondering if the government will say people with a sipp won’t need a government pension! Nothing would surprise me.
Please make a video on how to/ what is the process to claim higher tax for SIPP through self assessment
Write to hmrc if you don’t do a tax return, just tell them how much you contributed.
I would love this also keep up the good work
At 1:43 Just a note that you cannot put £5000 in a lifetime ISA… the limit is £4000. The additional 1000 government contribution doesn’t count towards the 20k annual limit so is irrelevant in the example.
Otherwise, loved the video Chris!
Thanks Rosso! I made a mistake there😅think I said it wrong and didn't pick up on it in the edit
@@chrispalmer24 no you didnt make the mistake you can put more than 4000 in however you dont get the bonus
1:41 Good summary, but a minor correction: one can only put £4000 in a Lifetime ISA in a tax year and to the best of my knowledge the 25% top-up from the government doesn't count towards the £20k annual ISA limit.
Being able to retire when I want is more important to me than having £100k more.
I don’t trust the government to let me have my SIPP before 65.
I’m currently maxing out an ISA every year (sadly only 2 years in a row so far) and putting £1,200 a month in a pension. Maybe I should swap that round, but I’m worried I won’t be able to retire before 57 if I don’t invest more in an ISA, and I’m worried the government will put the private pension age up to 65 or 70. Essentially, I find the fact the government are allowed to control the pension age abhorrent-it just fills me with worry because we can’t trust them to care about soon-to-be-retirees.
And this precisely why ISAs should be removed. Why should you have the right to retire when you want? Are you chronically lazy or what?
@@tancreddehauteville764 What's the alternative, work till we die? I know why too many who didn't make it to 67 some not even 57
Gov definitely will increase the age up. Mine went from 65 to now 67 and I’ve still got over 30+ years to hit 67. It’s going to be 72-74 by the time I retire. Mofos!
@@tancreddehauteville764no one gets your sarcasm 😂
What’s to say they won’t take away your right to a pubic pension because you have a sipp? This will happen for sure and your moneys at their mercy!
I pay into both but I’ve definitely been favouring the ISA even as a higher rate tax payer. The ISA is so simple to understand with no strings, where the SIPP is alot more complex. You get the relief for basic rate but then you have to do a self assessment tax return for the rest, which thankfully I already have to do but most people I know wouldn’t know where to start. THEN it’s the restriction of when you can take it and the tax on the way out. So many variables to account for. ISA is 20k allowance completely tax free on gains and you have complete freedom of when you access it.
You only need to do a self-assessment if your employer doesn't offer salary sacrifice.
@@tancreddehauteville764 isn’t that if an employer pays directly into your SIPP, which from my knowledge is quite rare?
@@OldyellowbrickI think many employers offer salary sacrifice, since it can save them some National Insurance. If Labour increase employers NICs it will be even more attractive. Btw, I was able to claim tax relief on higher tax rate without doing a tax return, I just wrote to HMRC.
The explanation is very convoluted. There are so many parameters to factor in like other incomes, state pension, political risks ( with pension rules).
Have you ever tried wthdrawing from a sipp? It's a massive pain and isa's are simple. i've learnt this the easy way dealing with my mum's pension. thank god.
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This is the best video I have found explaining the differences between the two, thank you!
Glad it was helpful 😊
some really good info there Chris - I always prioritise the work pension first, then an ISA. My next big decision will be drawdown or annuity, ad I'll be seeing pro advice just so I can weigh up all the options and approaches 🙂
Great Video. Just my opinion, if you are young, you need an ISA and pensions, if you are 55 just do pensions.
I prefer an ISA, as I can access it without penalty should a massive emergency occur.
The fees and 0.15% worth taking into account too.
Every financial advisor will recommend keeping your emergency fund in a cash isa or a quick access savings account, this is for after that step or building both simultaneously.
Using a stocks and shares ISA as an emergency fund? 🤦♂️
@@andypayne2743 Did I say that? 🤦🏻♂️
@@andypayne2743 Did I say that? 🤦🏻♂️
@@andypayne2743 @wiggles1993 I dont think hes saying he is using it as an emergency fund, just if something 'massive occur' he can quickly withdraw it if needed, unlike a SIPP which will mean huge fees.
Thank you so much Chris. I have been debating this stuff in my head for weeks but you broke it down. I now know what to do.
A flexible ISA you can take and add from in the same tax year is the Vanguard platform. That is why i kept my ISA and SIPP with them, when i was going to move to HL or A J Bell but they are not flexible ISAs.
wow I wonder how they get away with that
Hi Chris. Great video. Can you provide the link to the calculator you mentioned in the video??
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Hello Chris great video, thanks!
Can you do a video for public workers who can buy DB pensions?
The cost is 10 times the yearly payment that you'll get in retirement (after retirement age) and it is CPI adjusted.
So with 5k you buy a 500£ yearly DB pension and with 50K a 5k yearly DB.
Great Video Chris!, I've said this on a number of platforms, I currently earn £50K and am potentially getting a pay rise to £60K, would it be best to take a salary sacrifice of the extra £10k and get my company to put that into a HL SIPP for me?. would I be able to get the full £10k + 3% company contribution and then Government top up?.
What are the difference in charges from HL & Invest Engine for the SIPP?
Thanks! Yep that’s the best way to do it so you minimise your NI liability 😊
The government will keep increasing the age on when you can access your SIPP. Its going upto 57 but will likely get pushed in line with a state pension over the future
And then if you have a sipp they’ll tell you you’re not entitled to a state pension! Mark my words!
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8:18 Shouldn't the comparison being made between an ISA and SIPP, for a Higher Rate Tax Payer, have the SIPP Tax Relief at 40% rather than remaining at 25%? Surely that would push the total value above £725k making the gap larger?
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Thank you for sharing your insight, Chris. It's very informative and well-mapped.
However, one point you fail to mention is that you can only access your pension when you reach the minimum retirement age which will increase steadily over the years.
Although I understand a long-term investment strategy is important, you must factor in the security of having liquid investments.
100% - I touch more on this in my strategy video (get the SIPP sorted first then use the ISA to buy years off it). It's such a strong pulling point toward the ISA though (mostly why I focused on it so much for 10 years honestly).
But withdrawing too early is a bad idea. This is why the government has imposed a minimum age.
Hi Chris. You mentioned a calculator in the video but I can't find a link?
@@tancreddehauteville764 For those exploring SIPP's I would assume they'd be diligent enough to keep their investments locked away for the long term anyway. The issue here is that it's inaccessible until a period many people can't fathom reaching.
I'm 22 and the idea of locking away tens, possibly hundreds, of thousands of pounds for the next 35+ years is insane.
I'm already enrolled on a generous workplace-defined benefits pension. So, speaking on behalf of myself, I believe maxing out my ISA allowance every year is the priority and perhaps then I could look into investing in a SIPP.
Not sure if I'm just missing it but I think you forgot to add the link to the calculator to the description. Thanks for the video. I am 9 months into my first grad job and have been investing steadily each month into my ISA but this definitely has made me question that decision. I'm only 23 so perhaps the SIPP is the better option. One question I do have however is can you get the SIPP tax relief if you are employed by a company? I already have a matched pension plan with my employer so unsure if that makes me exempt from the SIPP.
I wonder whether it's better to just pump more in to your employer scheme, it has the same effect, other than fees which may vary and the choices of investments.
There are other downsides to an ISA too. You can't write off losses against profits and if any company you invest in ends up being delisted but still active, if you make any profits you will then pay CGT on top of the income tax you paid in the first place to invest in the ISA.
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LISA maximum deposit in a year is £4000 but you get 25% bonus so in essence it's £5000 if that's included
You can deposit more than £4000 in a year, the max bonus you can get is £1000 though.
Great video, you mention you'll link the calculators for this below but I can't see them?
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In Scotland the higher rate kicks in at lower earnings and also is 41%. Could you do one of these vids for the Jocks?
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I earn between 28k-40k. Is my max pension contribution between those figures or can I put in the full 60k? (or can I not even put 60k in because that also includes what tax relief you get back too?). I will also have a huge capital gains tax bill this year (100k+) so will that be taken into consideration? Basically I just want to know what's the most I can put in right now. I fill my isa up already and just want to put a lump sum into a Sipp now and forget about it.
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Awesome work! Thanks. Invest engine here I come! 😊
What if you pay into a SIPP from pretaxed income? I.e. gross income. Do you then not get the government tax relief ?
Is the government tax relief to make up for the fact that most will be paying into a SIPP from taxed income ?
I'm confused about the £60K annual allowance. I understand that this is the upper limit, beyond which returns from your SIPP are subject to income tax, is that correct? There is another limit, to how much you can invest, which is your annual gross income... So, if I earn £50K PA from a PAYE job and sale of stocks from a general investment portfolio combined, can I put all that £50K into a SIPP, or just the PAYE portion of it, or can I top it all up from savings to make it £60K? Sorry if this is a bit long winded, but I seem to have a gap in my undertstanding, and I get the feeling I'm not likely to be the only one.
With invest engine, is the SIPP tax relief automatic or do you have to claim it (Basic rate tax payer).. & would the wife get tax relief as a non tax payer.
Good video.
But I dont like the comparions. Easier for me to understand this as lower/higher rate tax payer on the pension option rather than the ISA. Should just be one ISA option in the comparison.
Doesnt change the story outcome though!
Genuine question that might have an obvious answer but I’m fairly new to personal finance. If I max out my ISA this year and have the highest % of pension contributions selected with my employer, and have an emergency fund, what should I do with the rest of it?
Should I set up a SIPP and contribute to that for the rest of the tax year? Or maybe put it in a ~5% interest rate savings account and put that into my ISA in the new tax year?
I’m not a higher rate tax earner.
Put in gilts which are tax free. Or premium bonds
Tim, just because you contribute enough % salary to get the maximum employer match doesn't mean you can't increase your side of the contributions. For instance when I was working I had to contribute 5% to get the max employer contribution of 10%. But I regularly contributed 20% plus and still got the max 10% from the employer. In those days it was limited at £40k gross but now £60k gross. This reduced my taxable salary to approx £70k and put £40k gross into my group personal pension. I was using salary sacrifice too.
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@@Chris_Palmer-24 thanks I just sent you 100k. I understand you make -100 percent gains for your victims 😂
My S&S ISA was something I built up in case I needed to bridge until I could access my personal pension. Not for a FIRE scenario, more like worst case scenario of losing my job and not getting another one for a while. As a soon-to-be 52-y-o, I'll need less reserve each year to bridge the gap to 55, should that latter scenario play out. I've just opened a SIPP on InvestEngine and my plan is to move funds from the S&S ISA into the same investments inside the SIPP over the next few years up to my annual limit. Almost immediate 25% gain from the uplift. When I go into the drawdown phase (hopefully around 60), even with paying the tax on the taxable portion, I'm looking at a minimum of 6.25% gain over holding the same funds in an ISA.
Sorry to be that guy but, You can only put 4000 in a lifetime ISA and the government adds 1000 to make it 5000 but this only used 4000 of your allowance
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Mind you if you are a high earning person with the new rules apparently coming in from liebour it does not work out as good by the time you pay fees
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Hi Chris. When you calculated the tax on the SIPP you calculated a straight 20% on the taxable value. When you have retired you won’t be working and will still have your personal allowance and won’t pay tax on the first £12,570 a year. I think you have over-calculated the tax burden on this portion.
Thanks for pointing it out - I didn't go too much in to it here just a quick mention at 10:58 - tried to keep it a little more simple for this one
Really valuable video, cheers Chris
As usual very informative and more importantly really well explained. Keep them coming 👍
I’m pleased that I saved hard into my pension, allowing me to retire early last year. I do wish I’d put more into my ISA though, since I hate paying tax on my pension drawdown.
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What happens when you reach the sipp retirement age, does your sipp account carry on collecting interest whilst being able to withdraw or does it stop once you have retired?
There’s different strategies but the idea of you want to keep the funds invested so they continue to gain a return as you withdraw some people like to mix in bonds so some is fixed and some goes with the market
Thanks for your reply. My thought process was to just solely invest in stock/shares isa to avoid tax and get a large enough pot to live off the interest. Apart from paying tax on withdrawals, Would a sipp still be the way to go to do this?
Great info thanks. Aren’t the government looking to change elements to the Pension schemes from Oct Budget?
Recoding a video on it all this week about what we can expect. Then I’ll have coverage of the budget too 😊
just reminded me to top up the pension, thanks :)
please let me know where I can get 7% on an ISA? I don't believe I have ever had 7% :)
The S&P 500 has returned just over 10% per year since its inception. The Nasdaq around 15%. Even the FTSE has delivered around 8%.
The S&P 500 has returned 26.74% so far this year!
For parents who earn over £60k, worth mentioned that using SIPP can be much more beneficial as pension payments can reduce adjusted net income and allow parents to keep child benefit rather than lose it
For lot of people state pension can use personal allowance
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Isa are great for a bit saving, but pensions are hard to beat, and the time in is massive. it's all about compound
I’m new to the SIPP, and have missed the ‘register for self assessment’ which should’ve been done by October 5th, am I able to backdate the additional 20% tax relief? Thanks for any help
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I think a LISA is more comparable to a SIPP. I would be interested to see the comparison and differences.
I know you can only put in £4k a year into a LISA until age 50 but a lot of listeners maybe not have more than this disposable income to invest. Especially if they have already maxed out their employer pension.
Agree. I wonder if a combination of ISA and LISA works better.
@@SupermanOG So, max your employer match pension, then, anything above £50270 stick in the SIPP for 40% tax relief, then fill your LISA (same top-up as a pension 2025%) but tax free on the way out, then SIPP the rest or ISA - having some ISA savings has the advantage of flexibility, both before retirement and during if you want to tweak your tax rates drawing down / pension has the 25% tax free allowance. If you get close to retirement age, smack your ISA savings into a pension and get your tax back, is also an option.
Also ISAs are considered part of the estate for inheritance tax, afaik SIPPs are not.
12:51 ISA, SIPP, and LISA... the holy trinity!
Thought LISA were 4000 per year limit
Lisa is even better if you're self employed, no tax but still get the bonus. 60 is age you can withdraw though.
The idea that an isa is tax free is a fallacy, being taxed on the way in is far more costly than being taxed on the way out, as you've demonstrated. Im prioritising my pension, LISA, and mortgage over payments.
Worth noting that the 25% SIPP tax free when you extract from the SIPP has a limit of £268,275. Since this was a new limit introduced from the 6th April 2024, I kind of get the feeling that this (and future governments) may see reducing this limit as an easy way to raise more tax revenues. Who knows though...I guess we'll know more at the next budget.
If you have a million pound pension, chances are you have some idea what you're doing...
@@PaulB-q3d Remember that your SIPP will also grow (hopefully :-) during the drawdown phase. That is, you may actually drawdown much more than the total you have at the point of retirement. I've done the spreadsheet for myself; although I retired on far less than a million pound, I will drawdown much more than a million if my health holds out. The issue is that I retired early on a plan that assumed I'd get 25% tax free on the whole pension. Now I find that there is a £268,275 limit, I will incur additional tax for which I'd not originally planned. There are mutterings that the 25% tax free limit could be cut to as low as £100,000 (search internet for mutterings). If they did that, then I think a lot of people will drawdown more than £400,000 from their pension and so will incur the additional tax. Given that the (previous) government introduced a limit from a position where there wasn't one, I think it is an easy threshold for this and future governments to tweak, as they've done with savings, capital gain and dividend allowances. It is also a tax that most people won't feel in their pocket immediately and probably don't understand anyway, and so isn't going to be a vote loser. I have a 70:30 SIPP:ISA split and so try to hedge my bets on potential future SIPP/ISA rule changes.
Remember that your SIPP will also grow (hopefully :-) during the drawdown phase. That is, you may actually drawdown much more than the total you have at the point of retirement. I've done the spreadsheet for myself; although I retired on far less than a million pound, I will drawdown much more than a million if my health holds out. The issue is that I retired early on a plan that assumed I'd get 25% tax free on the whole pension. Now I find that there is a £268,275 limit, I will incur additional tax for which I'd not originally planned. There are mutterings that the 25% tax free limit could be cut to as low as £100,000 (search internet for mutterings). If they did that, then I think a lot of people will drawdown more than £400,000 from their pension and so will incur the additional tax. Given that the (previous) government introduced a limit from a position where there wasn't one, I think it is an easy threshold for this and future governments to tweak, as they've done with savings, capital gain and dividend allowances. It is also a tax that most people won't feel in their pocket immediately and probably don't understand anyway, and so isn't going to be a vote loser. I have a 70:30 SIPP:ISA split and so try to hedge my bets on potential future SIPP/ISA rule changes.
It's not really a new limit. It was based on taking 25% of the old lifetime allowance.
Maybe, but that limit is still far higher than what the vast majority of people will be able to claim. You would need to have a fund of over £1M to be affected.
This is indeed uncommonly good information 👏👏👏
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SIPP > LISA > ISA (based on income tax bands).
Hi Chris you can only invest £4,000 into a LISA your example at the start of the video is £5,000 😮
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Don’t forget company ‘match’ policies
I pay equally into my Invest Engine SIPP and ISA, but love seeing the government top up my SIPP every six weeks
This only works if you're intending to retire at 55 or later. If you're planning to retire earlier you're screwed with the SIPP
But can you really retire before 55 without a decent sipp?
@@edc1569 you can retire before 55 with a decent isa though
Excellent video
You forgot to add that they keep raising pention age and they want you to work till u die andddddddddd you can't touch the pention till you retire..... so again, a stocks and share isa most logical choice oh and also very much doubt pentions will even excist in 10 years
Which account are you focusing on building? 🤔 (I'll be dropping an update of both my ISA and SIPP very soon)
Brilliant video …
Thanks Will!
Personally I'd take the 50/50 approach. Assuming a basic-rate taxpayer throughout, the only reason SIPP beats ISA is the 25% tax free allowance, and there's been much talk about the new Labour government ditching that.
The utilisation of your Personal Allowance is only a benefit if you properly retire and start drawing down your pension before state pension age. For most basic-rate working people, either they reduce work, do a bit of something to tide them over, using their PA against that, or start drawing from their SIPP at normal pension age along with their State Pension, which uses up the PA.
Consequently for basic-rate taxpayers, SIPPs are a bit better on the numbers, but do offer less flexibility. For HR taxpayers, no-brainer (for now...Rachel Reeves) but then they should all be taking tax advice anyhow.
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Superb video....ive been kicking the can for the past 5 month...currently lucky enough to be maxing out my s&s ISA for last couple of years...considering possibly a SIPP instead...you make a very compelling argument for a SIPP...HOWEVER....these slippery fuckers at the top can alter the pensions and tax rules whenever they see fit....Im gonna keep on keeping on with my s&@s isa...(for the time being)!
I'm eagerly awaiting the budget! - But a bit like this 🙈
I only pay into a ISA otherwise it could end up like Robert Maxwell 😊
I thought only the 4k you put into a LISA counts towards the 20k yearly limit, no?
It does count towards it yep
@@chrispalmer24 the ISA gov boost counts towards the 20k limit?
@@paulb2340the gov boost does not count towards. Only what you contribute.
@@paulb2340 Thanks Paul, it doesn't I noticed the error in the video now, good spotting!
Primary is SIPP but ISA is focus for next few years
Great idea, I’ve split mine 2:1
@@chrispalmer24mine are 4:1 ATM. SIPP is mostly veve and ISA is mostly vhyl
I max out my LISA every year for the 25% gov top up. Overall I split 1:1 between ISA and pensions.
Only have to contribute 32,000 pounds?
I don't even earn that a year🤷
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This market has been brutal. No matter what I try, I keep losing. I'm scared to hold anything at this point. What’s your strategy for avoiding losses? Down 55k this week, feeling hopeless 😢😭.
I'm not sure which market you're referencing, but time is on your side. Hold until you're in profit, and consider a stop-loss plan of up to 10% for swing trading. It took me four years to realize that chart predictions are futile; you never know what will happen. Those years were tough without a mentor. Now, I keep things simple and disciplined, averaging $47k per week with minimal trading. I'm especially grateful to Ryan Brooks for his insightful 1-on-1 sessions, which have deepened my understanding of market dynamics and eased my trading fears.
I've also heard a lot about Ryan, but no one shares his details. please can youshare?
He is still active on Telegram
@RyanBrooksFA :That's his Handle!
@@Johnygo1 I appreciate this recommendation and hope that by hearing about it I can gain some insights into the direction of the market and strategies to combat the downtrend.
Look for the following post on the UK personal finance subbreddit which maps this out in more detail:
PSA: Pension Tax Efficiency / Return on Investment - April 2024
The tax relief benefits higher earners, which is why I hope in this Budget the Chancellor considers equalising the pension tax relief.
Your biggest mistake is waiting until your 60's to retire 🤮
surely anyone who is in a position to be considering either S&S ISA or a SIPP is savvy enough to do basic math and understands the merits of tax relief and compounding. Decent channel though - like the content
Thanks David! It’s surprising how easy it is to get wrong 😂 I completely overlooked the numbers wanting to avoid tax
Let’s see what happens in the 30 October Budget though …
@@stuartogden1660fairly sure she won’t mess too much with personal taxation on pensions. As an apparent trained economist she must know about laffer curves and the like.
@@davidg9057 I think more than the laffer curve will be fear of the potential backlash from the public sector who have pensions too!
@@hughiemg2 yes absolutely. wouldn't put it past her to give the public sector a carve out. already active discussion in the media about employers ni charged on pension contribution but just for the private sector