Starting out with Sipps?

A reader has £100,000 and wants to invest in a self-invested personal pension.

Our pensions expert, Tom McPhail, a leading commentator on pensions at Hargreaves Lansdown with broad experience of pensions and investment related issues, takes him through the problem.

Robert from Hinckley asks:

I have about £100,000 and want to manage SM listed equities in a SIPP envelope. Where do I start?

Tom replies:

Assuming your £100,000 is already in a pension fund, you will need to transfer it into a Sipp (back to this in a moment), once it is in the Sipp you can start trading.

If the money isn’t yet in a Sipp then you will have to pay it in as a contribution. You are eligible for tax relief on pension contributions up to 100 per cent of your income (capped at £235,000 in the current tax year). This means that if you wrote out a cheque for £100,000 and sent it to a Sipp company, then they would claim tax relief taking your total fund value up to £125,000.

In addition, if you are a higher rate tax payer then you would be able to claim a further £25,000 tax relief through your tax return.

As for which Sipp to use, you can either employ the services of an independent financial adviser (in which case ask them!) or you can set up your Sipp directly with the company. There are a few Sipp providers that may be suitable, including
Hargreaves Lansdown, Sippdeal, James Hay and Alliance Trust.

Which one works best for you will depend on what investments you plan to hold and how frequently you want to trade them.

If you have a pension question for Tom McPhail go to the myfinances.co.uk ask the pensions expert section.

Hargreaves Lansdownis one of the UK’s leading independent financial service providers and asset management specialists. Hargreaves Lansdown is authorised and regulated by the Financial Services Authority.