Optimising Your Stocks & Shares ISA
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- Опубліковано 20 тра 2024
- In the UK we have two primary tax-efficient savings vehicles: ISAs and SIPPs. In this video, I’ll show you how the two actually work very well together and how you can use ISAs both before and after retirement to provide flexibility and boost your income in a tax-efficient way.
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Timestamps
0:00 Introduction
0:35 Types of ISA
1:50 Changes In The ISA Rules for 2024
3:17 Benefits of an ISA
4:30 Pre-Retirement Benefits & Contrasts With A SIPP
5:54 Illustration of Tax Efficiency of SIPP vs ISA
6:51 ISA vs SIPP fees
7:36 What To Invest In A SIPP
8:41 Complex So Advice or Our Membership May Help
9:40 Benefits of Combining an ISA & SIPP in Retirement
11:01 Illustration of ISA Growth and Income It Can Generate
12:58 Inheritance of ISAs and SIPPs
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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.
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It's worth mentioning that if you run a limited company, you can pay directly into your SIPP from the company account. This avoids corporation tax AND personal tax, but there is then no uplift from the government. However, it is the MOST tax efficient way to save into a SIPP, even better than 40% uplift paying in from your personal account.
60k a year too
What an excellent educational video Ramin. This should be shown to all school and university leavers entering the work arena. In fact I suspect 90% of the UK would benefit from your clear and well explained presentation.
In the last 3 months, my investments have returned over an average yearly salary which blows my mind. My ISA is up +16K, SIPP +£25K, LifeTime ISA +£5K, and GIA +£13K. 🤯
Wow Pamela! You’re killing it
A lot of Nvidia has helped 😂 also had quite a bit from growth stocks. The psychological aspect of this has been interesting (:
I’m keen to get a piece of the AI sector pie but I’m a bit worried that I’ve missed the boat. Should I be? Dunno, but I’m all about not losing as much as I am about trying to outperform. Annoyingly I was close to buying NVDA shares years ago, just because I liked their GPUs when I was building gaming rigs…. If only!!
Great episode Ramin as always, thanks. SIPPs and ISAs combined together are indeed a very powerful tool to financial independence. I think many people in UK including myself would be interested how these two efficient tax wrappers work when you move abroad, (for example popular Spain) for your retirement. Do you then need to close your SIPP/ISA, do you need to pay different taxes, can you still make contributions, and so on.There is very little information on that accross different blogs/vlogs that I follow, so maybe it is a good subject to consider for the future episode. All the best and keep up the good work Sir.
Once you're tax resident in another country, you fall under their taxation rules (for most things). I can answer for France rather than Spain. You can keep your ISA and SIPP, but any activity on them is NOT tax free. This includes withdrawals of course, but also dividends on say an Income fund and capital gains if you trade within the account. In general you therefore need to get advice in your country of tax residence to work out what's efficient (there are things, but it gets complex, quickly). Even more complex is if you need to be able to come back to the UK (or may have to as many ex-pat retirees do. That's an area which is much harder to find answers for (or at least I'm still trying).
@@stuartb3502 Thank You for taking an effort and replying to my post. Early retirement planing without emigration aspect is already complex enough. It seems like it's a enormous challenge if you move to another country and plan to rely in your SIPP/ISA alone. Calculating capital gains on SIPP/S&S ISA for tax purposes would be a nightmare. It basically sounds like professional advice plus an accountant would be a necesity and of course that would cost additional money.
I recently retired (aged 55) and if I could turn the clock back I would have maxed out S&S ISA for the last 10+ years. Unfortunately I only understood the tax efficiency 5 years ago, when I began maxing. I plan to take £16k per year from my SIPP tax free (as discussed in the video) and top up what I need from my ISA and premium bonds. This tax efficient approach should last me until I'm old enough to get state pension. My SIPP should also generate most of the £16k needed from annual dividends...fingers crossed!
Thank you Ramin, unfortunately didn’t have this knowledge earlier in life, but i can definitely help out my kids & family. Really appreciate your advice!.
Thanks for another terrific video. I retired recently and your videos have been invaluable for guiding my journey . Always objective and detailed information to help with my decisions. Thank you again.
This video was so slick!
Yet another video that is absolutely solid gold. Thanks, Ramin
Glad you enjoyed it @WobblycogsUk
Excellent - I’m now putting 30 % diversion of sipp money into isa global fund.
Great Video, not sure if its mentioned in other comments, but another factor for an employee when paying into a company pension, is that the company will also contribute
Hello Ramin, another very clear and informative video, glad the fractional shares has been sorted out ,saw a lot of videos about that issue last year , another concern is the state pension the ,amount if only on bare increases ,will soon be hitting the personal allowance, so you could end up paying tax on your state pension eventually.
Maxing out the isa allowance is just a dream for many , myself included, :} anyone you know working on time travel :} i want to rewind :}.
Great Video. I try max my ISA out but since the 60k SIPP increase I’ve switch this to try and max out that as much.
I agree it’s very tax efficient when using to withdraw with your 25% tax free sipp.
This is an excellent video. Thanks Ramin
Thanks @timetraveller3063
This is the exact strategy I have help set up my daughter with. She will have a DB pension through her job as a paramedic and she has a ISA's to give her options along with a GIA to help with car and holiday purchases. It' nice to know it's not a bad route to take when you are young.
Merci Ramin jaan, informative as always
Thank you @mehrdadbordbar3329
Very clear speaker
Thanks @AR-fy2qo
Very nice, simple and easy to watch and understand video.
Glad you liked it! @wegottagamer
Thank you for this video! What provider would be a good choice for opening a Lifetime ISA?
As always great work
Thank you so much 😀@giorgiagf
Thank you Ramin
My pleasure @gaborh7655
I was still a bit unclear last year if they were going to allow fractional shares as i thought they mentioned they'd be looking into it further. Good to hear it's being allowed
Great video as usual!
Glad you enjoyed it! @jonathangiles4854
Thanks for the video. Are you sure the fractional shares issue has been resolved? Last I heard the government was working with the providers to come up with a solution. You said that ETFs are aloud and I’m not aware of that.
Thanks for doing the video.
Do you think investing in a LISA in addition to a pension is more advantageous than investing in a pension only in the scenario where a salary sacrifice scheme is available for the workplace pension?
Fantastic video, really helpful
Glad to hear it! @user-we2gv2xs1w
Thanks Ramin
You're welcome @PAZPERDEE
Great video. Thanks 🙏🏽
Glad you liked it! @AS-yg5dt
Brilliant video, thank you
Glad it was helpful! @niceandcurly
Very helpful info for new investors 👍
I know you dont use HL but it would be great to see content for sip global ETFs / index funds for that platform
And ETF HL Stocks ISA
I'm all set up but I imagine there's a large part of the audience on there too
Ramin - would be great if you could do a vid backtesting Buffet's 90/10 strategy - would love to see how that would have fared historically.
Can you move money between different portfolios within the same isa wrapper without it contributing to your allowance? Thanks for another great video
Advantages of a SIPP (pension) are the 25% tax free PCLS (pension commencement lump sum) and tax treaties may protect individuals who spend time resident outside the UK.
A disadvantage of an ISA for individuals who spend time resident outside the UK is that other jurisdictions look through the ISA tax wrapper. Any funds, ETFs or ITs in the ISA when an individual becomes US resident will be subject to draconian PFIC rules.
Any idea which countries are most beneficial to be resident of in terms of tax when the Dual Tax Agreement is considered alongside a SIPP being held and drawn down on in the UK?
Your taxed at the end of the day isa isn't ever, pensions are and always have been a joke unless a goverment civil service leach on
@PensionCraft Thank you for the video! Looking at 12 mins 10 seconds. If I did have £661k in my ISA saved up. If I did take the £33k income per year, are you suggesting that the pot of £661k would not erode assuming a continued 5% return?
Hi Ramin, really struggling to find an answer on this one...will I be able to buy fractional shares in all Vanguard ETFs on Vanguard UK platform in 2024 in my SIPP and ISA? Thanks
❤. The Vid. Thanks.
Glad you enjoyed it! @livethegoodlife1740
Awesome.
Thanks! @ThomasBoyd-tx1yt
Can you do a video that shows where the 5% dividend funds that mentioned are please. You state that these are easy to find so showing some 6% funds should be possible too. Obviously, no covered call ETFs or dividend traps.👍
Great content love the info you provid. I'm looking at junior sipp's for my kids. What platform would you recommend for a junior sipp?
Fidelity's JSipp waives its platform fee so you can invest in funds and only pay the fund charge. They also offer some funds discounts to boot, so their own Index World Fund, for example, would mean a total 0.1% fee being paid while accessing almost 1500 underlying holdings.
The current 60k and 20k annual limits on these wrappers are extraordinarily generous
I am looking to use my ISA to generate monthly passive income, only 4%, so the rest continues to grow.
Is there a S&S ISA that allows you to set up regular payments out of the ISA so it either pays an automatic weekly/monthly sum into a current account, or automatically pays dividends into a current account?
I got a Cash ISA with Virgin Money @ 5.57%, seems pretty good to me!
If it's for the short term, cash is great and the rate is fine. People can also use regular savers (as high as 8% at Nationwide) and accounts like Santander's Edge (£4k at 7%).
However, in the long term cash won't maintain its value and will lose to inflation, which is why investing is used to beat inflation and get real returns.
Slight difference you can invest with in a LISA until 50 but you can only open them before 40.
And there is a price limit on the house you can buy with it which is now suffering from fiscal drag like every other threshold in the UK taxation system.
@@jam99true but they don't necessarily have to be used to buy a house. I had one that I used to buy my first property now I'm opening another one to use as an additional retirement fund to withdraw when I'm 60
@@jam99 yeah it's currently £450,000 which isn't enough for a house in many parts of the uk. (The average price of a 1 bed flat in my area is about £260,000 for perspective)
House prices haven't tracked inflation over the last few years, so this isn't such a big problem. In fact the situation has improved in the south east where house prices have fallen slightly.
@@IAMMARTICUS1470 It's a big problem if it applies to you.
Hi, I have 4 cash ISAS with Halifax. They are as follows.. 2 Instant ISA savers, 1 HBOS isa investor, and 1 Personal Investment plan. The 2 instant isa savers are not very big, whereas the other ISAS are pretty big! i wonder if i should close those instant savers and trnsfer them to the bigger ISAS?
Thanks for your video. It is very educational as usual. A quesion, if I put 20k in ISA saving account in tax year 1 for 2 years. Did such 20k also use up my ISA tax free quota in tax year 2.
No.
Once fractional etfs are officially allowed will vanguard change their policy to allow them to be bought on their site?
Will I still have to pay tax on my SIPP If I’m already paying into a workplace pension and I choose to top up my SIPP with part of my net salary? I would have already paid tax so why put that money back into a taxable account?
Is it possible to build this on behalf of a Ltd company? Or are ISAa and SIPPs only available for individuals? Have you thought about asset protection for example a limited by guarantee without share holders or a trust?
In this example are you considering a sipp also as an employer pension?
if i have a workplace pensions - should i take out 80% of the money each year and put it in a sipp to get the 25%?
They should definitely be upping the ISA annual limits, especially given the recent inflationary pressures on spending power.
If anything, they will be going down just like capital gains tax allowance. They are desperate for the tax!
@@freddiemoses467 nothing would surprise me. We could be doing with paying down some of the national debt but I don't think many people are willing to sacrifice much more than they already do, especially when you see how poorly our tax is utilised as it is, and the fact poverty is already on the up coupled with a larger and larger wealth divide.
@@rodgerq I would vote for you Rodger if you ran on reducing the national debt as its a massive concern of mine. The country is living way above its means and cuts need to be made. I may die before the bill comes due but my kids will be paying for it and there will be social unrest
@@freddiemoses467we have been living past our means for a long time. Plus we've sold the country down the river to private enterprise as opposed to investing in ourselves as a country and as a society.
Compound investing is a really great mechanism for building wealth and when I look at UK debt and what it costs merely to furnish the interest, it's a real worry, it feels like compound investing in reverse. It's got to reach critical mass at some point though, I see no way back at this point.
If Labour get in then they'll probably get their grubby hands on Isa's and make it worse for us.
When you compared the ISA and SIPP, you didn’t mention that when withdrawing money on the SIPP you pay tax, so surely the ISA is better?
Hi Ramin great vid as always, just one question if you had a choice of putting £20K into your ISA at the beginning of the financial year or putting in £1666/month for the year (i.e dca) which one would you choose ?
I believe 3/4 of the time, the lump sum would be expected to beat putting in monthly. However, if someone is at risk of poor investment behaviour should they happen to see a fall on their lump sum, then it's likely better to just feed in monthly.
I haven't bothered with IsAs for yrars as interest rates were so miserable. Wasn't worth it. Now things are looking a bit better interest wise.
Been banging 40k a year into ISA's for years with the help of using my son's allowance, pension sipp been maxing that out but only want a small pension to cover my yearly tax allowance when I start drawing that out. Who is the taxman never heard of him?
I though the junior ISA limit was £9,000? So the most you should be able to put in is £29,000? How does that work?
@@marthlikinte5607 Depends how old his son is, you're assuming he's a child.
@@kw8757 well yeah if the son is an adult then that’s for the son to make use of not the father no?
@@marthlikinte5607 Yes, if the son is of a mind to or in a financial position to pay into his own ISA. The father just better stay on good terms with the son. The son probably doesn't even know he's got an ISA 🤣🤣
@@marthlikinte5607 Maybe the son doesn’t have the money to make use of his ISA allowance or just isn’t of a mind to, maybe he doesn’t even know that he’s got an ISA, hope that the father keeps a good relationship with him 🤣🤣
There isn't much point investing in dividend funds. What matters is total return (capital growth + dividends), and that's the same for growth and income stocks. The best approach is to stay diversified by investing in the whole market, i.e. start in your global index tracker and withdraw an income from that at a safe withdrawal rate (around 3.5%).
I get a DB pension which uses up my annual tax allowance. Does putting money into a SIPP or a S&S ISA make more sense then? Great content as always. Thank you
One point to note is that pension payments do not qualify as 'earned income' for the purposes of paying into a SIPP. Consequently, unless you have 'earned income', you will be limited to paying no more than,£2,880 (plus tax rebate of £720 = £3,600 total) into a SIPP.
Anyone, regardless of income, can pay that sum in until they are 75.
@timg1246 although taking my DB pension, I have gone back to work part time so have earnings I can pay into the SIPP
@@timg1246 Does that mean that anyone currently working and actively contributing to a defined benefits pension scheme at source can also open an SIPP account but limited to a contribution of £3600 per annum?
1. Have opened one ISA account in HSBC ( LOY_ISA_Adv) ( In OCT 2023) and deposited 20000.00 GBP and withdraw 5000.00 GBP in March 2024 ?
2. I opened one more Cash ISA in NatWest in March 2023 and deposited 20000.00 GBP
3. Have opened one more ISA account and deposited 20000.00 GBP and withdraw all amount in one day in Halifax .
Here my question is can i have any tax issues or penalties from HMRC as i have two ISA accounts with 20000.00 GBP amount in each account ?
Requesting for your kind advice
What would u recommend?
I have the ISA.
You can invest in lifetime ISAs over the age of 40. You just have to have opened one before the age of 40, but you can invest in them until you're 50. I'm over 40 and currently invest the maximum 4k in mine each year.
This does limit the usefulness. Most people won't have extra money to put into an extra pension (above normal matched contributions) until they are older.
@@ice4142 I don't have a works pension, as I'm self employed, so this was a good option for me to build up an extra pension pot.
Enabled me to retire early. My isa account produces 35k a year tax-free in dividends. It's a long road of maximising the isa limit but worth it in the end.🙂 sipp is still compounding.
@dubsdolby9437 Congratulations! How much of a pot have you saved in your ISA to produce 35k a year? Is that pot reducing now that you've stopped contributing to it and taking out 35k a year??
@leonlee7292 Thanks, leon
My pot sits at around 400k . I don't sell off any investments. The income is from dividend payments. 👍
Hi how? Most div are 5% what stocks do u own?
Hi Ramin, with the ISA 2024 changes (thanks for highlighting this btw), if you have a LISA can you open a second one IF over 40?
I've not seen anything to suggest the rule on opening (before 40th birthday) is being removed. Have to see if anything changes.
Hi Ramin, great informative video as always. Which ETF or an index funds have you invested your SIPP in? Thanks
He covers that in some of the previous videos. I can't recall the exact funds but he usually goes with Vanguard but you would need to double check
@@freddiemoses467 I see. It would be good to see which fund? I will try to find the video. Thank you.
Vanguard FTSE developed world ex uk.
@@scorpionfitness1219thank you very much.
@@scorpionfitness1219 I think he switched recently
Can Lisa Income be from ISA profits? Like not earned income?
Hi, Can I trade as much as I want in a Isa investment , and not hold the shares for a minimum of 5 years ?
If you max out your ISA for 12 years with 60% stocks and 40% bonds, you could expect to get around 6000 per month when you start spending it. And it's tax free!
Use SIPP for US investments as no withholding tax (since you will pay effective 15% income tax on money taken out of the SIPP, but grows tax free in the meantime) whereas ISA incurrs15% withholding tax
Is this with regards to owning US company shares directly (e.g. Apple, Microsoft)? Not indirectly via something like a US focused ETF (e.g. Vanguard's VUSA S&P500 tracker)?
Is there a UA-cam video on this?It is not clear
Hi Ramin, as always, I love your content, but something you said at the start put me into a slight panic and I had to double check whether I was right! Maybe it's just me, but you state you currently can't pay into more than one type of ISA in the same tax year. I put £10k in a cash ISA this year and £10k into a S&S ISA and I then worried I had broken the rules! After double checking, I see that (under current rules) you only can't pay into two different providers of the SAME type of ISA in a given tax year (ie twp S&S ISAs), which is changing soon. Perhaps it would be useful if you could clarify this to your viewers?
You're right
Thank you, is the pension that my work has auto enrolled me into the same as the SIPP?
A pension is essentially a tax-wrapper, like an ISA is. Just like there are different types of ISAs, there are different types of pensions.
Yours sounds like what people would describe as a workplace pension. Your employer has likely chosen a scheme for all employees. They may have negotiated a discount on fees. This is assuming it's a DC (defined contribution) pension, not a DB (defined benefits) pension, the latter of which is seen in the public sector (local government, civil service, NHS, teachers etc.).
A Sipp is really one you set up and operate yourself, and my personal view would be that Sipps give 'whole market's access to investing. Hence, I would consider Vanguard to offer a 'personal pension' due to it's limited offering.
There are plenty of decent offerings in pensions that are not Sipps and people, in the main, shouldn't get too hung up 'sipps'. It largely comes down to contributing sufficiently to a pension, choosing a good investment offering, and keeping fees down when possible.
@@adrianl5899 thank you for your time for the thorough explanation! That clears a lot up.
Pensions really are an inequitable way of saving for those on high incomes.
I have an employer pension which I have already made the contribution with matching employer contribution. If I want to save more in the pension pot, do I increase contribution in my employer pension or set up a new SIPP? What would be the difference in these two approaches? Thanks.
Hi, I match my employers contributions into my employers pension until employer won't add any more....in my case if I input 6% of my gross monthly salary my employer will do 14,%. These inputs are by salary sacrifice ie neither me or employer pays NI on the inputs nor do I pay income tax. Because ss is such a huge advantage I then make additional voluntary contributions (AVCs) again by ss onto my employer's pension. I ss my gross monthly salary down to Nat min wage level eg 35 hrs x £11.42 × 4.3 weeks....this means I pay hardly any ni or income tax. To be fair I can do this because mortgage is paid ioff. Then out of my residue earnings I make an input into my SIPP pension of (0.8 x my gross earnings for the tax year) this then attracts 20% tax top up from HMRC.
My SIPP has better choice of investment funds so it is only because of the advantage of ss that I pay the AVCs into my employer pension.....otherwise I'd pay jnto my sipp. I've recently taken redundancy....it was good news because I was going to retire anyway so I've ended up with 2 years worth of wages and pension for not having to work those 2 years.....but im bow going to transfer all my work pension into my sipp.
March 22 tesla 20k April 22 rolce Royce 20k and 20k all in arm float I just cashed out at 200k yesterday
Hi. I’m a bit confused about when you say we can spread the 20k allowance over a few accounts. Can it be the same type of account. So if I currently have a stocks n shares ISA in vanguard. And next tax year I open about stocks and shares isa with say trading 212 am I allowed to use both. For example for 2024/25 I open another but same type of account with trading 212. cud I put 10k in vanguard and 10k in trading 212. Or will they say no cos it’s the same type of account.
Yes I think that’s what he’s saying. Worth noting Ramin wasn’t quite right when he said about current contribution rules. You can currently contribute to a regular stocks & Shares ISA, lifetime ISA and Cash ISA in the same tax year.
@@MacroHikerI noticed that as well, I don’t think Ramin was incorrect so much as it was unclear. I have a cash isa and stocks and shares isa for this tax year which together don’t break the £20,000 limit.
So fractional shares are gonna be allowed from April 2024? Because as of now I’m still not able to buy any fractional shares
Let's just hope that the Government doesn't succumb to lobbying by the self-interested UK fund management industry and force us all to invest in a 'Great British ISA'! In my view, UK retailer investors should not be made to pay for the failings of the London stock market.
I’ve currently got a workplace pension managed by True Potential and it’s grown in total by just over 5% in over 3 years … way behind inflation. Can I instruct my Employer to change providers? I’m wondering if I can just have a Vanguard global ETF … rather than portfolio managers trying to beat the market … and failing miserably … with my retirement 😢
It's unlikely your employer will set up a new scheme for you, unless it's a tiny employer and you're very important. This is because of the cost of doing it and the chance others start wanting their choice of scheme too.
Realistically you could:
1. Check what investment options you have with the current pension. For example, if they have several options and you're in a 'default' one, it may be completely unsuitable. Perhaps it's too cautious for you, filled with bonds etc. if you can, find one that's suitable to you.
2. If there is only a default option, is it using lifestyling (reducing risk over time). Again, if that's the case perhaps you can set your retirement age later to stop it de-risking too soon for your liking. (Setting a retirement age in a pension is just a number, it doesn't have to be when you actually want to retire).
3. Does the scheme allow partial transfers? If they do, maybe you can take most of the fund across in a transfer to a pension you set up whilst not losing your future employer contribution etc.
As someone in the US I'm just watching this because I'm curious about how other countries create savings incentives. Do the ISA require income from the current year to contribute? One of the irritating restrictions in the US is that the big savings vehicles that allow $22.5k+ in contributions, e.g., 401k and 403b plans, are tied directly to plans set up by your employers, or by yourself only if you earned consulting or gig economy income. The more limited savings vehicles that aren't tied directly to an employer, IRAs, are limited to only roughly $7k per year (the limits are adjusted for inflation).
The Isa contribution is not linked to your income for the year, it can come from anywhere e.g income, savings, family gift.
For the SIPP (pension) contributions are indeed tied to your income for the current tax year, although, as mentioned, there is "carry back" of up to three years of unused allowances. For the ISA, it is bound to the current tax year, not income - so as mentioned, it's "use it or lose it". :)
Many people make monthly contributions but you can also pay in from existing savings, lump sums, inheritances, the proceeds of selling a business etc.
Our UK tax saving vehicles are currently more generous than US it seems. We can contribute 60k from pre tax/gross income a tax year into a SIPP and if we didn’t use that 60k allowance in previous 3 years we can use it in current tax year. We also get 25% of our total sipp pension pot tax free (capped at £268,275) when we retire which we can take at once or in bits.
Our stocks and shares ISA which is equivalent to your ROTH IRA, we are allowed to put maximum 20k per tax year but if you don’t use it in any tax year you lose it. There is no carry over from previous years.
ISA allowance has not risen with inflation so each year it is less in reall term. We have Inheritance tax and the ever present risk governments will change the rules. Our Labour Party is socialist but includes Marxists so we don't know what they might do. Even our Conservative party has idiotic factions but fortunately the bond market reacted and sanity was restored.
The best way to create saving and investment incentives is to keep the system simple, understable and don't keep changing it.
Guys I’m confused . So Freetrade and trading 212 all this time have been offering fraction shares on isa? Will we get done?!
I’ve got a work place contributions option. Only problem is I can’t access it till I’m 65. I’d go all in on it if I could access it at say 57 but even with the tax relief of using it the fact I can’t access it till then is somewhat off putting.
Odd, is it a DC or DB scheme. Most schemes show you claim your pension early but with a reduced payout
@@ice4142I get a final salary pension which I can only get at 65, this comes along with scheme which I can salary sacrifice to save in but the downside is I can’t access that till 65 either.
Sounds like a DB scheme, which are incredibly valuable to their members. In many cases, to hope to achieve the guaranteed benefits you're guaranteed, it would cost members 20-33% of their annual salary into a DC pension.
Sometimes people try to build separately into ISA/other pension as well as having their DB pension, so they can retire early, 'bridging the gap' between say 55-65 or 60-65 without having to take a reduced offering from the DB scheme.
@@adrianl5899 How much can a high tax rate payer on the DB scheme contribute to the SIPP account per annum
to bridge the gap from 57 to 68 state pension age without touching the DB scheme until the normal pension age?
Will a tax relief be appropriate since it will not be at source since it's a PAYE payroll system?
Great video as always - I am 55 and would like to retire at 60 - should I start transferring my ISA into a SIPP? - I have more money in my ISA's than my SIPP - thank you
From a taxation point of view, it's far more efficient to leave your money in the ISA. Anyway, you can't just simply "transfer" monies into a SIPP like that anyhow. In other words, stay as you are, putting as much money into both the SIPP and the ISAs as you can (up to the available limits.)
@@trickyrat483 I can add up to £60K per year into a SIPP no? would that build wealth quicker?
@@christiansoldier1118If you earn £60k or more then you can pay £60k into a pension. If you earn over £60k, you may also be eligible to use carry forward. If you earn under £60k, you can put 100% of earnings. If you are a non-earner, you can pay £3600 gross (£2880 net) into pensions.
@@trickyrat483Unless you know the other poster's tax band, it's not possible to know about the tax efficiency of his situation.
Hi Ramin,in your £16000 SIPP withdrawal example do you get the £12000 personal allowance straight away or do you have to claim it back when doing your self assessment? Thanks
In year one of your retirement, you may have to fill in the form (think it's P55) to get overpayments back. Once the pension provider has your correct tax code, they will automatically take your TFA into account (£12,570). The figure you can withdraw tax-free is actually £16,760 (as 25% tax free from the pension off that amount leaves the TFA of £12,570.)
@@trickyrat483 nice one, thanks!
After the age of 55 I took five lump sum payments to the max, currently, as stated £16,760. I had no other earnings.
The entire lump sum was paid out in one hit. The pension provider/taxman withheld a sum for tax, which was refunded in the following summer. The sum withheld was always completely different, going up and down without apparent reason..
@@trickyrat483
Is that using ufpls or flexible drawdown options?
@@timg1246
Was that using ufpls or flexible drawdown?
I am confused about fixed isas. They don't seem to follow the tax year? I took one out in December. Does that mean then I cant add anything until that matures? I.e mu 2024 allowance?
It's every tax Yr April to April 5th 6th your fixed usa starte when tou open it and ends the next Yr to the day it doesn't stop you having another after April so one open in March a dither open in April is fine
can you pay money into a SIPP via your personal account and then also make contributions directly from your business account whilst keeping it below the 40k threshold?
I believe yes. Last year I transferred my company pension (Scottish Widows) to a SIPP and then paid in £20k more from my personal savings... 6 weeks later received £5k top up thanks to tax relief. My SIPP is with interactive investor btw.
Lovely
Thanks @ukawesomelife3987
Might be a silly question, but are the JISA and Stocks & Shares ISA allowances seperate? So it’s £9k max for JISA & £20k max for my personal isa, meaning £29k total?
Adults have £20k ISA allowance in this tax year. If they have a child under 18, their child has their own £9k allowance. In your question, you could put £20k into your own ISA and £9k into your child's, yes. If you had more than one child, each child has their own £9k allowance separate to your adult allowance.
Further, if the child happens to be 16 or 17, the child can not only have £9k invested into a JISA this tax year, but they can also have a further £20k invested into an adult cash ISA in their name. This very specific quirk of the ISA allowances - giving 16 and 17-year-olds a cumulative £29k ISA allowance! - is ending at the end of this tax year when the loophole is closed.
The flexability I really want is to be able to move my capital from a stocks and shares ISA into a cash ISA during a market downturn.
Why? On a downturn you can buy stocks/funds/ETF’s for cheaper and reap the benefits when they go back up.
I have a Vanguard S&S ISA. If I want to sell out of equity funds and wait safely whilst receiving interest, I put the cash into the money market fund, which beats bank interest and keeps the money within the ISA.
You’ve always been able to shift between those product types, you might need to sell your investments before going to a cash isa though
The best I've found is Trading 212 who will pay you 5% on uninvested capital by putting it in a money market fund. However, unlike a cash ISA there is no FSCS protection.
I'm praying for a downturn to move my previous years worth of cash ISA instalments into a stocks and shares ISA.
Seems we are wanting the opposite things 😬
Best to have alternatives in addition to SIPPs and ISAs...publuc finances are going yo be absolutely dire in 20 years and the government will be going after them!
What’s with all the bots on all these finance videos now. 😫
You can only invest into 1 type of isa? Who says?
I’ve a trading account with Interactive Investor.
Left U.K. 2.5 years go and now live in Cyprus.
When I start drawing from my portfolio next year I hope to take advantage of having no CGT to pay due to being resident here.
How exactly does that work, I thought you would be liable for any capital gains tax or maybe even income tax depending on how much income you get from the investing account, in the UK still. I realise if you are UK resident there's no tax to pay on stocks & shares isa account, bit you are no longer UK resident
@@fredatlas4396
Before I draw down I will be getting more advice from a tax specialist, but, as I understand it once you become resident in Cyprus you aren’t liable to pay CGT on S&S.
“Cyprus capital gains tax is only charged on the sale of Cyprus property. Gains from shares and the sale of overseas property are exempt - making Cyprus a very attractive tax regime for retirees.”
Would speak with an accountant as you wouldn't want to trip up on this. The UK Gov will do anything to get your hard earned cash
“Requirements for tax residence in Cyprus:
In order for a person to be a Cyprus tax resident the following conditions must be met:
Reside in Cyprus for at least 60 days per tax year, Not reside in another country for more than 183 days per tax year,Not be tax resident of any other state, Conduct any type of business/work hold an office (e.g. as director) or be employed in Cyprus, Maintain an owned or rented permanent residence in Cyprus.
Capital gains, VAT & other taxation:
The only activity at which capital gains tax applies is at the sale of immovable property situated in Cyprus or the sale of shares in companies owning immovable property (with the exception of shares listed on a recognized stock exchange). The taxation rate is 20%. Gains from the sale of immovable property situated outside Cyprus are tax exempt. The normal VAT rate is 19%, however, it is reduced in some cases. VAT for the construction or purchase of a property to be used as the primary residence is 5%. The 5% rate applies for the first 200 square meters of property (excluding basements) and the full rate of 19% applies for the rest square meters of the property. A reduced VAT application must be submitted to benefit from the 5% VAT rate on the residential property. The immovable property tax has been abolished from January 2017. Estate Duty (Inheritance Tax) has also been abolished, since January 2000. Withholding taxes do not apply for dividends, interests, or royalties paid to non-residents of Cyprus.”
If you are on state sickness or employment benefit, means tested, you can have max. £16,000 in savings before all benefit ceases. Does that mean that if you are long term sick, you can only ever save £16,000 in a private pension??
No. The £16k refers to capital outside of your pension, such as in ISAs, bank accounts, a home you don't live in etc. This is why those on low incomes are often going to be best putting into pensions and not ISAs because they will uickly disqualify themselves from pre-retirement support.
Only if you've reached pensionable age will the pension pot be considered as to whether it impacts benefit entitlements, such as for pension credit.
The tax credits system, which is being phased out, and its replacement (Universal Credit) remain favourable to those investing in their pension - in fact, by using pension investing people can access Universal Credit when they might otherwise not be able to, because the calculation is done so to deduct pension contributions from income (it's quite involved, but that's a basic summary).
There are a host of benefit calculators online and sites like turn2us or entitledto have explanations about this topic.
One thing to note, everyone (including non-earners) can pay £2880 per year into a pension (and receive £720 tax relief each year to 75). To put more in that £2880, you have to have earned income, such as from a job. Thus people without earned income, even if they have savings, can't just put what they want into a pension.
Does Vanguard offer a SIPP?
Hi @livethegoodlife1740 yes they do offer a SIPP. Thanks
Small point perhaps. At 1 min 15secs-ish, you say you can only invest in a LISA if under 40, this isn't right. You can only open a LISA if under 40, but can still invest in it up to 50.
Ramin, I'd love to see a comparison between contributing to an Occupational DC Scheme vs investing in a LISA for young, lower income earners.
For young people earning under 25k annualy as an example, who may be only able to contribute say £2,000 maximum p/y - I feel like the initial 25% Gov bonus outweighs an auto-enrolment scheme with employee matching only say 5-6%. In my mind it just makes more sense to fully commit to a LISA in this position until earnings go up.
It depends how much you are contributing. If you max the employer contributions this is a 100% top up plus the tax relief. So for pension purposes can't be beaten. Any additional money above the match could be put in a LISA but the top up is the same as the tax relief on a pension
One thing to be aware of for low earners or those on more precarious positions employment wise, is that pensions do not disqualify from pre-retirement benefits like Universal Credit. Once you have £16k capital/savings outside a pension (includes ISAs of any kind), you cannot claim Universal Credit. Unfortunately a lot of people went into LISAs, are hardly well-off in terms of income, can't access their LISA until 60 (unless for a house with mortgage or by taking penalty to do it/losing money), and have no safety net of UC either.
@adrianl5899 that is a very good point. Thank you for bringing this to light, although it is a shame for these people...
Could someone give me an example of a vanguard fund which pays roughly...
(5% real total return dividend yield 5%) 🙏
Vanguard ftse UK equity income index fund is paying just over 5% yield. But it's not very diversified being all in UK. Ongoing fund charge just 0.14%
Thank you ill have a look at that...
Although I would always prefer to be globally diversified
@@montyloads In that case there is the Vanguard ftse all world high dividend yield index etf, ticker. VHYL. But it only pays about 3.4% currently , but I think it may have better potential for some growth than the UK only fund, which could boost income in time
@@montyloadsLook at VWRL.
You were always allow to have a L-ISA and Cash/S&S ISA up to £20k total. £4k/£16k Right?
Correct. Ramin was incorrect. £20000 allowance can be split across for e.g. £10000 in a cash isa and £10000 in a stocks and shares isa! So you can have two isas in one financial year as long as you do not exceed the £20000 total isa allowance.
Can you have a SIPP and a work place pension?
Yes
@@King_Law1so there’s no real reason not to have one then if you’ve got left over income, young and a bit savvy on the investing?
@@jamesgriffith3480 Contributions to a workplace pension might be made via Salary Sacrifice. Furthermore many workplace schemes have relatively low fees i.e. you only pay the fund charge and there is no platform fee.
@@jamesgriffith3480well you’re not sure when you might be able to access it if you’re young it might not be to 60. Unless you’ve brought a home I wouldn’t put too much in a sipp.
You may be able to get matching contributions from an employer if you want to contribute more. That is worth looking into, depending on circumstances.
Finding a fund with a yield of 5% is easy. Finding a fund that yields 5% AND grows at 5% is the tricky bit!
What happens to your isa if you retire abroad?
Before moving, find out if there are tax implications in the new country regarding holding ISAs in the UK.
On the UK-side, tell the ISA provider/s you're non-resident asap. Assuming you're not a Crown employee or their spouse, you must stop contributing new money after the tax year you move. You can still do ISA transfers though.
@@adrianl5899 Appreciate the detailed response.
Did some digging and no other jurisdiction seems to recognise ISAs