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SIPPs
Aminatidi
Posted: 06 April 2018 15:49:54(UTC)
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Tom Mozy;60244 wrote:
Aminatidi - you can have as many Sipp's as you want but must adhere to the rules for contribution and size limits etc

From experience its alot easier dealing with a company online such as HL or AJ Bell than trying to top up a company scheme.

I often move my company SIPP (when it gets to a certain level) into my HL SIPP (takes a week with HL) as the platform my company SIPP is with (aegon) is the worse thing ive ever seen. You cant even pull up a graph of a fund from the portfolio view or see a P&L view.


Tom thank you, that makes sense and whilst I'm trying to find out more info I believe the Royal London scheme is a good one.

Having access to the entire range of funds and trusts out there is something I wouldn't have with Royal London.

I think the question I need to answer is the matter of the money being locked in.
sloccy123
Posted: 06 April 2018 16:40:53(UTC)
#24

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I have both my SIPPS with Hargreaves Lansdown-not the cheapest option but brilliant service.
If you are cost conscious,then try AJ Bell ,who are cheaper.
S_M
Posted: 06 April 2018 16:59:25(UTC)
#22

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Theo Shackleton;60245 wrote:
Can anybody help? I'm finding conflicting info about this online.

Is it possible to have my employer (once I have one) transfer my pre tax salary into my SIPP, and therefore save on tax and NI contributions? Or, do I have to transfer the post tax salary into the sipp myself and leave the platform provider to claim the tax relief?

Also, I understand that the limit for tax relief is £40,000. Does that mean I can put 40k in and then get 8k added in basic rate tax relief?

Also, this is a long shot. Nobody ever knows the answer to this and I cannot find it online. If I go to Canada to live and work for a while, would any growth within my sipp be safe from Canadian tax? I know that isa interest can be taxed there, but what about a sipp? Does anybody know a Canadian citizen who I could ask?

Thanks!


Quite a range of questions but I will aim to help.

It seems your first question related to "Salary Sacrifice", which operates on the principle of you exchanging your salary in return for an employer-sponsored benefit.

In essence, you reduce your salary by the amount of contributions you wish to pay into the pension. The net effect as you have suggested is that you pay less tax and national insurance, your employer will also save on National Insurance and may if they wish to pass these savings onto you to pay into your pension plan.

This sounds too good to be true right? Well, there are some very important factors to take into account, your national insurance contributions are used to build up an entitlement to state benefits such as the state pension. Reducing your salary drastically could affect your entitlement to such benefits. You also cannot sacrifice salary below the current minimum wage level. It is very unusual for most people to sacrifice a large proportion of their salaries.

Also if you are in a Death in Service scheme (essentially where your employer pays your nominated beneficiaries a multiple of your salary on death), the scheme will need to recognise the salary sacrifice or you could find life insurance cover under the scheme being significantly reduced. Another important factor is if you are trying to apply for a mortgage, again if you are using salary sacrifice this could affect the amount you are allowed to borrow.

https://www.moneyadvices...alary-sacrifice-schemes

See the above link for more details Please be aware that HMRC/Government are constantly looking at the tax treatment of such schemes and the current rules may change. If you are a high earner, whilst I have covered the basics you will need specialist advice.

With regards to tax in Canada, it's quite complex so I am hesitant to go into too much detail. This sort of thing should be discussed with a pensions professional perhaps in Canada and or the UK.

Benefits within the SIPP will continue to accrue tax-free until you draw benefits.

Hope this helps.
4 users thanked S_M for this post.
Tim D on 06/04/2018(UTC), Theo Shackleton on 06/04/2018(UTC), Alan Selwood on 08/04/2018(UTC), Mike L on 09/04/2018(UTC)
xcity
Posted: 06 April 2018 17:58:19(UTC)
#23

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Theo Shackleton;60245 wrote:
Also, I understand that the limit for tax relief is £40,000. Does that mean I can put 40k in and then get 8k added in basic rate tax relief?

The 40k is gross.
so 32k net.
Esthomizzy
Posted: 07 April 2018 08:10:59(UTC)
#25

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My first thought is that it would come under a double taxation agreement (where these apply you don’t get taxed on the same income twice).

https://moving2canada.co...canada-british-citizen/
Theo Shackleton
Posted: 08 April 2018 15:29:48(UTC)
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Hi S_M,

Thanks for that really helpful response. Can I just clarify the situation to be sure we are talking about the same thing? Any input from others who know about sipps would also be welcome.

A) My employer would not make contributions to my sipp, however, they have said they can transfer my salary to the sipp for me before income tax is deducted. They would charge me £5 a time for this (they are an umbrella company). I'm not sure if the guy I spoke to is right. Is this correct, or does it have to be me who transfers net salary into the sipp from my own bank account? All of the information I can find online seems to assume the pension holder does it themselves.

It seems to me that having my employer transfer gross salary for me, even with no top up from them, would be far more efficient.

Supposing I earn £80k. I could have my employer transfer the £40k allowance into the sipp. No tax or NI paid. Then for the remaining £40k of my salary, I'd get the usual tax free allowance and then only pay the basic rate. I wouldn't have to submit any tax return either to claim the higher rate back.

If, however, I transfer my net salary into the sipp and have the platform provider claim the tax relief, I won't save on NI contributions and would need to submit a tax return for higher rate relief, as my total salary would have been £80k.

Does that make sense?

B) I would like to carry forward contributions from the last financial year. I understand the restrictions on doing so. The rules are that to carry forward you need to have not exceeded the contribution allowance for that year, been a member of a pension scheme, and have enough salary in the current year to cover the pension contributions proposed.

I did not make any pension contributions in the previous financial year, and would like to carry forward £20k. I was a member of the Now: Pension scheme in the previous financial year after being auto enrolled, but only for a brief period before opting out of it. Am I still eligible to carry forward contributions? In other words, would my brief membership of that pension scheme count as having been a member of a scheme for the purpose of tax rules?


philip gosling
Posted: 08 April 2018 21:53:51(UTC)
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Theo Shackleton;60357 wrote:
Hi S_M,

Thanks for that really helpful response. Can I just clarify the situation to be sure we are talking about the same thing? Any input from others who know about sipps would also be welcome.

A) My employer would not make contributions to my sipp, however, they have said they can transfer my salary to the sipp for me before income tax is deducted. They would charge me £5 a time for this (they are an umbrella company). I'm not sure if the guy I spoke to is right. Is this correct, or does it have to be me who transfers net salary into the sipp from my own bank account? All of the information I can find online seems to assume the pension holder does it themselves.

It seems to me that having my employer transfer gross salary for me, even with no top up from them, would be far more efficient.

Supposing I earn £80k. I could have my employer transfer the £40k allowance into the sipp. No tax or NI paid. Then for the remaining £40k of my salary, I'd get the usual tax free allowance and then only pay the basic rate. I wouldn't have to submit any tax return either to claim the higher rate back.

If, however, I transfer my net salary into the sipp and have the platform provider claim the tax relief, I won't save on NI contributions and would need to submit a tax return for higher rate relief, as my total salary would have been £80k.

Does that make sense?

B) I would like to carry forward contributions from the last financial year. I understand the restrictions on doing so. The rules are that to carry forward you need to have not exceeded the contribution allowance for that year, been a member of a pension scheme, and have enough salary in the current year to cover the pension contributions proposed.

I did not make any pension contributions in the previous financial year, and would like to carry forward £20k. I was a member of the Now: Pension scheme in the previous financial year after being auto enrolled, but only for a brief period before opting out of it. Am I still eligible to carry forward contributions? In other words, would my brief membership of that pension scheme count as having been a member of a scheme for the purpose of tax rules?




Is this Tax Evasion - Looks a bit like it to me?

I would guess that HMRC would clamp down quickly - sounds a bit like BBC news readers etc getting their salaries paid overseas and/ or into special companies to avoid not just income tax but national insurance contributions - but they still want to benefit from police, hospitals, schools, roads, armed forces etc just don't want to contribute like the rest of us.

Luckily tax office staff read these forums too.
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Guest on 12/04/2018(UTC)
Theo Shackleton
Posted: 08 April 2018 22:40:14(UTC)
#29

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Well hopefully the tax office staff will respond so I can understand how their byzantine system works.

Do you consider it tax evasion that millions of people benefit from salary sacrifice, into pension schemes, and therefore pay less tax and national insurance? Why should those, such as myself, with no access to company pensions schemes, not receive similar benefits?
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Tim D on 09/04/2018(UTC)
xcity
Posted: 08 April 2018 23:22:34(UTC)
#30

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Employers can pay directly into a SIPP. As you say this would be gross (before tax) and would not incur National Insurance for employer or employee.

Rather than asking here, it would probably be more informative to ask the question of any SIPP provider you were considering. I would expect a decent provider to answer very quickly.

Not sure why you would want to opt out of an auto-enrolment scheme as it would come with an extra employers contribution.
3 users thanked xcity for this post.
Theo Shackleton on 09/04/2018(UTC), Tim D on 09/04/2018(UTC), dlp6666 on 10/04/2018(UTC)
S_M
Posted: 11 April 2018 19:00:26(UTC)
#28

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Theo Shackleton;60357 wrote:
Hi S_M,

Thanks for that really helpful response. Can I just clarify the situation to be sure we are talking about the same thing? Any input from others who know about sipps would also be welcome.

A) My employer would not make contributions to my sipp, however, they have said they can transfer my salary to the sipp for me before income tax is deducted. They would charge me £5 a time for this (they are an umbrella company). I'm not sure if the guy I spoke to is right. Is this correct, or does it have to be me who transfers net salary into the sipp from my own bank account? All of the information I can find online seems to assume the pension holder does it themselves.

It seems to me that having my employer transfer gross salary for me, even with no top up from them, would be far more efficient.

Supposing I earn £80k. I could have my employer transfer the £40k allowance into the sipp. No tax or NI paid. Then for the remaining £40k of my salary, I'd get the usual tax free allowance and then only pay the basic rate. I wouldn't have to submit any tax return either to claim the higher rate back.

If, however, I transfer my net salary into the sipp and have the platform provider claim the tax relief, I won't save on NI contributions and would need to submit a tax return for higher rate relief, as my total salary would have been £80k.

Does that make sense?

B) I would like to carry forward contributions from the last financial year. I understand the restrictions on doing so. The rules are that to carry forward you need to have not exceeded the contribution allowance for that year, been a member of a pension scheme, and have enough salary in the current year to cover the pension contributions proposed.

I did not make any pension contributions in the previous financial year, and would like to carry forward £20k. I was a member of the Now: Pension scheme in the previous financial year after being auto enrolled, but only for a brief period before opting out of it. Am I still eligible to carry forward contributions? In other words, would my brief membership of that pension scheme count as having been a member of a scheme for the purpose of tax rules?




Hi Theo, no worries always happy to help. I was previously authorised as an Employee Benefits Advisor, so this is an area that I am familiar with.

I need to be careful about the detail I go into, as you are presenting a specific financial scenario which really requires specialist financial advice (which your employer should instigate). However, within my understanding of what you have said I will try to provide factual information which is readily available if you research the internet.

The treatment of your contributions is key here, under normal circumstances employee contributions into a SIPP would be deducted using the "net pay" system. That is to say, any employee contributions would be made after all deductions and then receive 20% tax relief once paid into a SIPP. You would then claim any additional tax relief at your highest marginal rate through your tax return.

From what you have said, deducting contributions from gross salary as I have alluded to previously does sound like some sort of salary sacrifice arrangement. If this is the case all contributions would be paid by the employer. This involves a contractual reduction in salary (it has to be documented with your employment contract as well), which as I mentioned previously can have other ramifications.

With regards to carry forward, yes you can utilise previous years unused relief but again in the context of what you have said a specialist should really look at your personal circumstances especially if you are going down the salary sacrifice (it's also known as salary exchange these days) route.

I'm sorry if I come across as vague here, but it's not impossible for me to have completely have misunderstood what you are trying to present. Hence my caution.
1 user thanked S_M for this post.
Theo Shackleton on 11/04/2018(UTC)
S_M
Posted: 11 April 2018 19:05:45(UTC)
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xcity;60364 wrote:
Employers can pay directly into a SIPP. As you say this would be gross (before tax) and would not incur National Insurance for employer or employee.

Rather than asking here, it would probably be more informative to ask the question of any SIPP provider you were considering. I would expect a decent provider to answer very quickly.

Not sure why you would want to opt out of an auto-enrolment scheme as it would come with an extra employers contribution.


A SIPP provider would very likely not get involved in answering these questions, unless they have a financial advice arm.
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Theo Shackleton on 11/04/2018(UTC)
xcity
Posted: 11 April 2018 19:40:55(UTC)
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S_M;60494 wrote:
A SIPP provider would very likely not get involved in answering these questions, unless they have a financial advice arm.

AT & HL both say on their websites that employers can pay in.
1 user thanked xcity for this post.
Theo Shackleton on 11/04/2018(UTC)
S_M
Posted: 12 April 2018 04:31:26(UTC)
#33

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xcity;60496 wrote:
S_M;60494 wrote:
A SIPP provider would very likely not get involved in answering these questions, unless they have a financial advice arm.

AT & HL both say on their websites that employers can pay in.


It depends on what context the employer is making these contributions. I think you are missing the point of the OPs original questions. Employers have always been able to make contributions into approved pension arrangements, but we are talking potentially about salary sacrifice/exchange. Totally different ball game.
xcity
Posted: 12 April 2018 09:32:22(UTC)
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S_M;60502 wrote:
I think you are missing the point of the OPs original questions. Employers have always been able to make contributions into approved pension arrangements, but we are talking potentially about salary sacrifice/exchange. Totally different ball game.

I don't think so.
By mentioning it on the website, they are effectively inviting questions about whether it is OK as a salary sacrifice in their SIPP. As OP says, it is a common arrangement in employers own schemes.

What no-one will be able to say is what HMRC might do down the line (for all 'salary sacrifice' options; possibly nothing given that the numbers are high and the sums small). And they won't answer questions.
Theo Shackleton
Posted: 12 April 2018 10:35:10(UTC)
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I've called a couple of umbrella companies about this and they both confirmed they can pay gross salary into a SIPP. They wouldn't contribute themselves, in terms of top-up, but would direct my salary there. These are both well known companies and are quite risk averse in relation to expense claims and so on. Also, it appears that sipp providers allow this to happen. It stands to reason given that the sipp is supposed to be a pension pot and those with generous employer schemes get to benefit from tax relief when paying into those.

However, I'm not sure I can rely on HMRC being reasonable. Are you guys suggesting that the umbrellas and sipp providers could have it all wrong and that hmrc could come along later and ask me for all the tax I got relief on? Like they could either change their minds or clarify their position? The scary part about that, amongst other things, is that I'd then have a load of money trapped in a sipp, without the main benefit of using it in the first place. Or would my employer/sipp provider be liable?
xcity
Posted: 12 April 2018 11:19:40(UTC)
#36

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Theo Shackleton;60509 wrote:
However, I'm not sure I can rely on HMRC being reasonable. Are you guys suggesting that the umbrellas and sipp providers could have it all wrong and that hmrc could come along later and ask me for all the tax I got relief on? Like they could either change their minds or clarify their position? The scary part about that, amongst other things, is that I'd then have a load of money trapped in a sipp, without the main benefit of using it in the first place. Or would my employer/sipp provider be liable?

The problem is that HMRC can come after any of us at any time for anything, and their approaches have moved increasingly towards taking the money first and arguing about it later. You only have to look at what has happened to the BBC presenters (required by the BBC to work through a company to be 'employed' at all) and the footballers/film investors. Both approaches seemed legitimate at the time (not so sure about the BBC presenters who only had one 'employer' - but that is what they were told), but equally targeted at tax reduction. Government policies change, HMRC policies change, HMRC campaigns switch targets.

SIPPs are probably protected because they don't avoid tax as such, they simply change payment times. OTOH salary 'sacrifice' is undoubtedly a wheeze to reduce tax payments by employers and employees; apparently accepted currently; might never be an issue because it is so prevalent and sums are usually small.

I think you have to make your own mind up about any risks that might be involved. I have no expertise in this area. Financial advisers & tax experts don't have special insights into future policies either, as can be seen from the cases above.

PS Personally, I would tend not take any action that I would not feel comfortable defending at a tax tribunal.
I'd be unsure about taking half my income as pension, unless it was for a limited period of my working life, or I anticipated my working life being limited.
1 user thanked xcity for this post.
Theo Shackleton on 12/04/2018(UTC)
Theo Shackleton
Posted: 12 April 2018 11:49:48(UTC)
#37

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All good points, xcity, and thanks for sharing them.

From my point of view, half of my salary into a pension scheme this year, is less than the equivalent had I been paying into a pension for the past fifteen years, which I haven't been. My motivation now is to make up for lost time, and it only seems fair that I benefit from the same tax relief I would have otherwise had. It's not tax avoidance on my part, just wanting to have a pension in the future. The government seems to encourage people to pay into pensions and gives tax breaks for doing so, whether that's by means of a sipp or other type of pension scheme. So to my mind, there is no harm here, in terms of the moral high ground or just basic reasonableness, based on the rules of the game that most employees and employers are acting in accordance with. I'm no tax expert myself, but this is how it seems to me.
xcity
Posted: 12 April 2018 12:11:51(UTC)
#38

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That seems very reasonable to me.
And company directors have been had huge payments into their pension schemes for a very long time, so nothing different.
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Theo Shackleton on 12/04/2018(UTC)
Keith Hilton
Posted: 12 April 2018 15:22:57(UTC)
#39

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Salary sacrifice is probably one of the reasons behind lowering the annual allowance to £40000 and the LTA to £1M. These limits will restrict the amount you can "sacrifice" so I wouldn't be concerned, so long as you stay within these limits.
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Theo Shackleton on 12/04/2018(UTC)
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