Get this right BEFORE You Start Investing

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.

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.

SIPP > LISA > ISA (based on income tax bands).

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.

Found most platforms that offer a sipp are a bit to limited with the instruments to invest in. Invest Engine seems one of the better ones but doesn't offer the etfs I want.

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.

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.

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!

Really valuable video, cheers Chris

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.

you have no control accessing your sipp until the mighty government allows you to....after they put the age up 3 times in your lifetime and then you are at the mercy of the mighty UK government if they havent decided to change the rules to tax you more. the UK is a craphole. just get out asap

All well and good until Labour constantly raid that 25% tax free on the sipp. If they are already eyeing up capping it at 100k tax free where do you think we will be in 20 or 30 years time.

Pensions are the 2nd biggest store of wealth behind real estate so are always going to be the easiest juicy low hanging fruit.

Please make a video on how to/ what is the process to claim higher tax for SIPP through self assessment

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?

Awesome work! Thanks. Invest engine here I come! 😊

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.

LISA maximum deposit in a year is £4000 but you get 25% bonus so in essence it's £5000 if that's included

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.

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

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.

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.

As usual very informative and more importantly really well explained. Keep them coming 👍

Good information, probably better to have both. With a SIPP the government control when you retire, With an ISA you control when you retire

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

Great Video. Just my opinion, if you are young, you need an ISA and pensions, if you are 55 just do pensions.

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.

I only pay into a ISA otherwise it could end up like Robert Maxwell 😊

Your biggest mistake is waiting until your 60's to retire 🤮

Vanguard & Trading 212 both offer Flexible s&s ISAS. Invest engine doesn't at the moment.

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.

just reminded me to top up the pension, thanks :)

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Makes perfect sense. I only have a cash ISA of £35k, while my SIPP is £690k. ISAs are a tax fiddle con-trick invented by the Tories to bribe people into voting for them - time we got rid of them.

Great info thanks. Aren’t the government looking to change elements to the Pension schemes from Oct Budget?

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?

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?.

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please let me know where I can get 7% on an ISA? I don't believe I have ever had 7% :)

The explanation is very convoluted. There are so many parameters to factor in like other incomes, state pension, political risks ( with pension rules).

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

Don’t forget company ‘match’ policies

Lisa is even better if you're self employed, no tax but still get the bonus. 60 is age you can withdraw though.

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 🙂

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

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Only have to contribute 32,000 pounds?
I don't even earn that a year🤷

This is indeed uncommonly good information 👏👏👏