How to top up your National Grid pensions with a SIPP

With more of us living longer, it’s more important than ever to plan for retirement and make sure you have adequate savings to last into old age.

In the UK, the state pension age is set to increase to 67 by the year 2028, meaning that many people are now looking for ways to top up their existing pension(s) or consolidate previous pension schemes in one place.

You can use a Self-Invested Personal Pension (SIPP) to top up your National Grid pension, or combine existing pension schemes into one single, simple account so you can control exactly where your money’s being invested.

What is a SIPP?

A Self-Invested Personal Pension is a type of pension that allows you to manage your investment options and save for your retirement pension pot in a tax-efficient and flexible way.

A SIPP can be a great way to top up your UK state pension and take advantage of the tax benefits offered by the government as an incentive for you to do so. Plus, you can control your own investment decisions!

A SIPP is designed to let you:

• Save for retirement in a tax-efficient and flexible way
• Build a pension fund to give you an income and a tax-free lump sum
• Take control of your pension and choose your own investments
• Make transfers from other suitable pension arrangements
• Specify the beneficiary for your policy

How does a SIPP work?

SIPPs work in much the same way as other personal pensions, allowing you to add money either through regular annuity contributions or a lump sum.

There are a range of SIPPS offered, but you can think of them as a kind of packaging for investment trusts or funds. These investments will normally contain a mix of stocks and shares and bonds, which can then be used to fund your retirement or to buy a commercial property.

A SIPP is slightly different to a workplace pension (where your pension contributions may be matched to a certain percentage by your employer). With a SIPP, the UK government pays an extra 20% in the form of basic tax relief on your pension savings.

Higher rate taxpayers can still claim the extra amount via their self assessment tax return, but once it’s in a SIPP your money will be exempt from UK capital gains and UK income tax.

How does a SIPP pay out?

Any benefits are regulated by UK pension laws. This includes a limit on the amount of tax relief you can claim, the earliest age you can take benefits, and a cap on the benefits which can be taken without incurring tax penalties (incl. the amount that can be taken as tax-free cash).

You can start taking money out of your SIPP from the age of 55 (though this is set to rise to 57 from 2028).

Do I get tax relief on my SIPP contributions?

Yes, contributions to your SIPP may be subject to tax relief, depending on any relevant tax rules relating to your individual circumstances.

All eligible UK citizens can pay up to £3,600, or 100% of their earnings each tax year (subject to any applicable Annual Allowance), whichever is greater.

The Scheme Administrator claims tax relief from HMRC and invests this additional amount into your pension plan. For example, a contribution of £10,000 to your SIPP would only actually cost you £8,000 in real-terms. This is because the Scheme Administrator reclaims the £2,000 of income tax that you initially paid (assuming a 20% basic rate of UK income tax).

If you pay a higher rate of income tax you can claim the extra tax relief through your self-assessment tax return on your personal contributions.

Can I set up a SIPP myself?

It’s really easy to create a SIPP yourself using an app like Plum.

Regulated by the Financial Conduct Authority (FCA), Plum allows you to consolidate your previous pensions by transferring them into Plum, and make additional contributions to your Plum SIPP through the app.

You can do this via the Plum ‘brain’ in 3 ways:

1. Single contribution from your Plum Balance

2. Single contribution from your linked bank account

3. Regular deposits controlled by Plum Auto-saving rules

There is no minimum or maximum amount, though transfers from pension funds that are already in drawdown are not currently accepted.

What investments can I choose in my Plum SIPP?

The Plum SIPP has been designed to make saving and investing for your future as simple and as straightforward as possible.

You can choose from a range of investment funds, typically containing a diversified bundle of Exchange Traded Funds (ETFs) or mutual funds.

Target Retirement Date Fund 🏖

This portfolio will be automatically updated for you, based on the amount of time before your specified retirement age.

Over the longer term, investment choices with a potentially higher risk (and a chance for greater reward) can pay off... however, there might be many fluctuations in the short-term value of those along the way.

A Target Retirement Date Fund helps ensure that more money is allocated to lower risk/reward investments as you near your chosen retirement date.

Global Growth Fund 🌍

This fund invests in a broad range of company shares from across the world, ensuring your pension is diversified in a wide range of investment.

Future Planet Fund 🌱

This fund invests in businesses that meet certain ecological and environmental criteria, so you can invest with a clear conscience.

Are there any charges for a Plum SIPP?

The Plum SIPP is low-cost because it’s just one part of the overall platform, which helps you save money, lower bills, budget and invest simply.

Plum SIPPs are available for free to all Plum customers, and exclusive from any other platform fees (i.e. you do not have to subscribe to one of the paid tiers, either Plum Plus or Plum Pro).

However there are other SIPP charges to consider:

• Product SIPP provider fee: 0.45% per year. This fee is charged annually, billed monthly and deducted from your SIPP investments.
• Fund management fee: The manager of the funds you choose for your Plum SIPP will charge a fee for this service.

Note: each fund may have slightly different charges, typically a percentage of your investment. Fund managers will automatically deduct their fees from the fund they manage.

Each fund has a Key Investor Information Document (KIID), provided by the fund manager. These documents give details of the fund, including fees.

How to consolidate pensions with a SIPP

You can transfer and combine existing pensions into a Plum SIPP, allowing you to manage your retirement savings from a single app 📲

The process is super easy, and can be completed by simply entering a few personal details (such as national insurance no.) along with the names and account numbers for your past pension providers

For any specific questions or for help transferring pensions to Plum you can speak to our customer support team via ‘chat to human’ in the app, or by emailing help@withplum.com (though please note that we are unable to provide financial advice).

If you need help planning your pension then you should look for a reputable financial adviser in your local area.

To learn more about Plum you can check out our website.

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