HL SIPP

You get nothing for nothing. Make your own investments with after tax money. Do not trust anyone but yourself to provide your income in retirement.

A SIPP *is* about making your own investments. There are also good reasons to use a SIPP rather than, or as well as, using after tax money to invest.

Not used them, but I think it only seems to be too good to be true because most personal pension plans are a rip off.

Could well be - as I've always thought PPs were a huge rip off maybe you have the reason I am feeling uneasy at being presented with what looks like a fair deal :-) mikej

Because the rules on when and how you can take your pension keep changing, you are not in control. See this comprehensive comparison of pensions vs. ISA's -

Daytona

A reasonable summary, but a few points I'd make...

He writes: "Either way, the income you take from a pension is taxed at the standard rates - 10% starting rate, 22% basic rate, 40% higher rate. It doesn't matter how that income was generated inside the pension fund, because it is taxed on the way out from the pension to you, not on the way into the pension. In particular, the lower taxation rates for dividends (which are effectively 0% starting- and basic-rate and

25% higher-rate after you've taken the tax credit into account) will not be used. "

This is misleading as it implies you get a worse deal from dividend income within a pension. This is not true, because you are receiving dividends on a larger sum in a pension assuming the same net investment. Eg assuming basic rate tax on the way in and the way out, every 100 you invest in a SIPP will be grossed up to 128, so you get 28% more in dividends. If this is all taxed at 22% on the way out you break even. But it isn't, as you get 25% of it is tax free, so you get better tax treatment of dividends within the pension.

Also:

"For example, if you're a higher-rate taxpayer now, tax relief boosts your pension contributions to 1.667 times as much in the pension as you contributed. If the contributions you're thinking of making will affect your basic-rate income in retirement, that downgrades the value of those 1.667 times your contributions to

0.835 * 1.667 = 1.392 times your contributions. If you reckon the restrictions downgrade the value to you further by a third, the overall value to you is 0.667 * 1.392 = 0.928 times your contributions. Not a good bargain as far as you're concerned!"

Other than not being able to get at the money until 50/55, there are no restrictions on 25% of the value of your pension fund. So reducing that part by a third is clearly nonsensical. Even for the rest, the restrictions reducing the value by a third is a bit over the top, the restrictions can actually be beneficial (as he did point out, although no mention of means tested benefits).

I've got one too, which I started after reading recommendations in this fine newsgroup. No problems so far, though they do send skiploads of marketing junk mail.

But seriously - how safe is this, or any other SIPP? A possible reason for HL's low costs may be an over-aggressive and over-risky investment strategy. I've no idea if that's true - just speculating. So in a serious stock market downturn they might be more exposed than competitors.

Might be a good idea to freeze your current SIPP every 3-4 years and start a new one with a different provider, to spread the overall risk.

Eh? You seem to misunderstand the whole concept of SIPPs. Self Invested gives a clue.

*You* choose the investment, it could all be in cash if you want.

What have you invested yours in?

Bitstring , from the wonderful person news outlook said

Depends, what did you invest it in?

?? What do you suppose the 'SI' in SIPP stands for? You invested it yourself, all HL do it provide the wrapper necessary to satisfy the government (unless you picked some HL fund to invest in).

Having been on their mailing list for about 10 years, my opinion is that HL are sales orientated and were pushed into, rather than embraced, low cost pensions such as stakeholders and SIPP's. At every opportunity they will try to sell managed funds with large initial and ongoing commission so that they can crow about the discounts they give. They do a fair job of making SIPP's seems like with profits funds what with their selection of 'recommended' funds. You can of course do your own thing and invest in equities, Investment Trusts and Exchange Traded Funds, but they don't publicise that nearly as much.....

Daytona

You're correct - my apologies.

I have one with them (and some smaller ones elsewhere for comparison) and they seem fine so long as you choose your own funds and don't just follow their advice. They're certainly a fair bit cheaper than places like Fidelity's FundsNetwork - for non-pension investments - so their SIPP should be good value too (as it's just a wrapper).

The only criticism I'd make is that their online fund valuations are slow to update. Most places have fund prices updated by early evening but HL take till the following morning.

-Neil F.

One question that this chat has provoked is - how secure is a SIPP? What happens if the provider of the wrapper goes broke?

Also as I'm nearer to drawing a pension than starting one I make the assumption that investment performance is not as important as getting an average return. Is this reasonable? mikej

You will find that Hargreaves Lansdown (or any insurance company) do not actually "own" the assets within your SIPP or your pension plan.

These are either segregated into a Trust or Nominee Account. If they went broke, your assets could not be touched.

Overall, I think the HL SIPP is a very good option if you just use their execution-only services, make your own decisions, and ignore / recycle all the fund marketing bumph that they inundate you with.

mike.james wrote: