Vanguard Pension: How to Open a Vanguard SIPP Account

Vanguard has just launched its new Self-Invested Personal Pension (SIPP). In this video, I discuss how Vanguard's SIPP compares with the prices of its competitors and talk you through how to set up a Vanguard Pension step by step.
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[@ravindersingh4822]

As always, great video Ramin. You are my personal finance hero!

[@Pensioncraft]

Hi Ravi, I've never been called a hero before, so thank you! Ramin.

[@daveschmarder-1950]

Nice video as always, Ramin. I've had taxable, tax-free (Roth) and the tax deferred IRA (Individual Retirement Arrangement) for 25 years here in the US. One thing about Vanguard is they've reduced their fees on everything over the years. I can see the same happening in the UK. I started with all mutual funds, but in my taxable account, I've switched slowly to ETFs over the last 9 years. My retirement accounts are still all mutual funds. I'm a happy customer.

[@iandavies9154]

ETFs are the way to go. Usually lower AMCs and platforms fees than UTs.

[@daveschmarder-1950]

@@iandavies9154 Yes, that is how I found it. Also, I have lots of unrealized capital gains. This makes for good estate planning as my unrealized gains won't be taxed.

[@Pensioncraft]

Hi Dave, thanks for sharing your experience with Vanguard in the US. We've already had one "round" of fee cuts on Vanguard UK funds and as it scales its Assets Under Management that will probably happen again. My biggest gripe with the UK version of Vanguard is the limited set of funds. I know that the choice is much wider in the US and that you can trade ETFs from other providers. For example, there are no REITs available on Vanguard's UK platform. But that will improve over time I expect. Thanks, Ramin.

[@RealStAndrews]

Many thanks for the informative video Ramin.

[@Pensioncraft]

Hi Scotland Watcher thank you! Ramin.

[@enginedavey]

Thanks for the useful information. Video suggestion: Your thoughts on transferring old personal pensions that have investments in "with profits" funds?

[@alexbruce2405]

Great video, Great channel, Thankyou!

[@Pensioncraft]

Thanks alex bruce, I'm pleased you liked it! Ramin

[@ukamateurinvestordiary6620]

7:55 Interactive investors service plan gives you 12 trades. So that break even you gave is for 12 trades so the break even of £159k only goes up from trade 13 and onwards.

[@Pensioncraft]

Hi UK Amateur Investor Diary this page www.ii.co.uk/our-charges shows that the £9.99 per month "Investor" service plan gives "£7.99 credit a month to buy or sell any investment". Does a SIPP account entitle you to 12 trades? Thanks, Ramin.

[@ukamateurinvestordiary6620]

@@Pensioncraft"Our Investor plan is £9.99 per month - most people start on this plan. Add a SIPP for only £10 a month extra" So that is saying that the other aspects of the SIPP are the same, just add £10pcm for the SIPP. So yeah, the 3 plans they have are the same for SIPP as for ISA and general account.

[@MarcCotterill]

Great video. Is there a specific pension app that you’d recommend from the point of view of benefiting from as low fees as possible?

[@gerry2345]

I like this vid. Good insight

[@person.X.]

I use ii. Not expensive but an awful website. This video is very helpful as an into to the Vanguard SIPP.

[@Pensioncraft]

Hi person X thank you! Ramin.

[@yiguanas812]

Does paying into a Vanguard SIPP have any bearing upon the amount I can contribute to and ultimately receive from the UK State Pension ? It feels to me like it should. (I have a few years' worth of voluntary contributions left to pay). Many thanks for this excellent channel, Ramin, and I just felt I had to let you know in this first-time comment that on the bookshelf behind me now sits a dated, but venerable "Numerical Recipes" which would no doubt get along nicely with your copy, even though mine is in Pascal.

[@marcusm9147]

Thanks for the video Ramin. What is the point in the average worker opening a SIPP if they already have a workplace pension? Because they can just increase their contributions to their workplace pension and get 'tax relief at source' in the process.

[@TM-vg4mx]

for the general account, do I need to pay tax if profit less than 12k, if I have a salary which already taxed, thanks for the great video.

[@barnstar2077]

Thanks, this is exactly what I was looking for!

[@Pensioncraft]

Hi Barn Star I'm glad! Thanks, Ramin.

[@roystevens2840]

Ramin, thank you for taking the time to construct this detailed video. I would be grateful if you could please clarify a fee question that I have. Let’s say I want to invest in VWRL within my SIPP. Am I right in thinking that I would have to pay 0.15 for the SIPP and a further 0.15 for the VWRL holding? I would be grateful for your clarification.

[@Pensioncraft]

Hi Roy yes that's right. The "custody fee" for all assets in the SIPP (or the ISA) is 0.15% and the fee for the VWRL fund is 0.22 according to the description page www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-ucits-etf-usd-distributing So the total fee would be 0.15% + 0.22% = 0.37% The fund fee is subtracted from the daily returns so you never physically pay it, but the platform fee of 0.15% is a cash payment that appears in your "Transactions -> Cash Statement" page in your Vanguard account. Thanks, Ramin.

[@oliverdesvaux]

Thanks for this really informative video - you have a new subscriber! :) I have a quick question.... I have a collective retirement account (£60k from my only two jobs) with a different provider with no fees for leaving, but wonder if moving that fund across to this SIPP is a "done" thing? Do people have all their eggs in the SIPP basket so to speak?

[@GH-he5wf]

With SIPPs that include income funds, are you able to recieve the dividends before retirement age from a SIPP? If not, is it then not worth buying income funds in SIPPs and just focus on growth funds? Thanks so much! :D

[@battj1]

Quick question, with a Vanguard SIPP, can you mix fund options, e.g. 50% in one fund and 50% in another fund? I can do this with Scottish Life and Royal London, just wondered if it was possible with Vanguard.

[@Guna_cocktail]

Hi Ramin! I am a beginner in investing. started watching your videos really helpful. I have a question on Pension transfer. I am currently holding pension with scottish widows (pension pens portfolio two) initially opened from employer..later turned to self-employed. and last 4 years its my personal contribution from my limited company. I am looking to transfer to Vanguard pensions. Can I have pensions in 2 platform one with Scottish and open new one with vanguard? I think it best to transfer into vanguard as one account. any suggestion if i am doing the right thing?

[@chrisr3606]

Interactive Investor is even cheaper than described if the number of trades on the account is low, because they give you a trading credit of £7.99 every month. I use this for new trades, re-investment of dividends etc and so far I've never gone above the number of trades that would exceed my credit. I've only got four funds in my account and I'm more buy-and-hold than intensive trader, so Interactive Investor is definitely the best platform for me. However, my son and daughter each have a small pension pot in index trackers with Hargreaves Lansdown, so even just in terms of monthly cost a switch to Vanguard looks like a good move.

[@fitzroyw1]

Hi Is it possible to trade US traded Equity stocks and ETFs from one of vangards SIPPs accounts. Thanks

[@presterjohn71]

I have a pretty good works pension which I am more than happy with (I'm 55). I also have three small pensions from previous jobs that total about £50k. If I were to port them over to one of these and pump in a small monthly investment of £50 would I get all these tax benefits and would it work as an efficient backup pension to my main pension or would I be better off opting for a Vanguard target retirement fund?

[@MattRoszak]

Super useful comparison!

[@Pensioncraft]

Hi Matt, thank you! Ramin.

[@ukamateurinvestordiary6620]

do check the detail though. Interactive Investor £240 a year comes with 12 trades so the comparison he makes here is not right. £159k cut off point is for 12 trades not zero as the presentations show. iWeb is cheaper than II anyway.

[@stephen6262]

Ramin great video. So well explained signed up what do you think of life strategy 20 fund low risk

[@Pensioncraft]

Personally I'm very cautious at the moment (weak US earnings growth & GDP growth & PMI indicators combined with the highest forward P/E ratio since 2003). So that's why I only have a 20% equity allocation. LifeStrategy 20 was just somewhere quick to park my investment that's in line with my equity allocation in my ISA. Thanks, Ramin.

[@stephen6262]

Thanks for answer and also thank you for all your great videos

[@falloverpete]

If additional voluntary contributions are available at work, would it be anymore tax efficient to choose those or would the tax savings be the same? The only difference, i can see is the independent choices you can make on funds and withdrawing the pension, when the time comes.

[@djmorris103]

I'm wondering this too. I think my Pru AVC has quite high fees and I don't believe you can do flexible drawdown, unless anyone knows different. I'm considering transferring to this SIPP.

[@drmsgp]

Hi, thanks a lot! I have never known about the SIPP until today and I really advise my friends to follow your channel. is there a way to move my employer pension into vanguard SIPP? if not, are there any drawbacks to request my employer to give me back my pension contribution during the last 2 years (I understand that they'd be taxed), and then deposit them in the SIPP (and claim that taxed amount back)?

[@Pensioncraft]

Hi mina sedhom, i'm sorry I can't give pension advice but thank you so much for watching and recommending me to your friends. Ramin

[@C4sp3r123]

Thanks for the video. I have what is likely to be a basic question from someone new to SIPP's. At what point is the tax relief added to the account and invested. In your example you get £25 tax relief but it isn't clear when that £25 goes into your account and when it purchases the fund you selected. Is it at the same time as your £100 or at some later date, perhaps at the end of the tax year?

[@Pensioncraft]

Hi C4sp3r the extra 25% went into my account immediately. That means the tax relief at the basic rate was immediately available for fund purchases. Thanks, Ramin

[@C4sp3r123]

@@Pensioncraft Thank you for your reply. It looks like you were lucky as I have now found in the "Vanguard Personal Pension - Key Features" document the following is stated: ""When will tax relief be added to my Contributions? We expect to receive tax relief around 6-10 weeks after the date the Contribution was made to your account. On receipt of this, we shall invest the tax relief in accordance with your original investment instructions (if the amount of tax relief received is insufficient to buy a whole share in an ETF, the tax relief amount will remain in your Pension Account as cash). However in circumstances where basic rate relief would still be outstanding when full encashment of the benefits was requested, (e.g. on retirement or death of a member) We may, at our discretion, pre-fund any tax-relief we believe is due to ensure a full settlement can be made without delay."

[@jbullionaire2749]

I opened one of these SIPPS recently. Love the simplicity of the fees compared to AJ Bell. Any idea why the tax relief on £100 is £25. Surely 20% of £100 = £20??

[@Pensioncraft]

Hi J BULLIONAIRE if you lose 20% in tax it takes a 25% top-up to take you back to the amount of money you had before you paid tax e.g. (1-20%)*(1+25%)=1 There's a similar argument which shows that a 50% loss requires a 100% gain to recover to its starting point. Thanks, Ramin

[@jbullionaire2749]

@@Pensioncraft Ah, got you. So the pretax income is £125. 20% knocked off takes it to £100, then you need 25% of that £100 to take you back up to the original £125. Thanks for helping me understand that!

[@Pensioncraft]

My pleasure @@jbullionaire2749!

[@johndupont8596]

@@Pensioncraft Hi Ramin, can I contribute £2,880 (if I don't earn any income) to a SIPP (for example Vanguard SIPP)? And will it be topped up to £3,600 automatically?

[@KOLAFlipper]

AJ Bell have a “regular investor” option so that you are only charged £1.50 (rather than the £9.99)to buy FTSE 350 Stocks, ETFs and a Investment Trust that you pre select to trade on the 10th of the month.

[@Pensioncraft]

Hi KOLA Flipper, thanks for sharing that, I'll try and remember to mention it if I make a video about AJ Bell in future. Thanks, Ramin.

[@Bonk-A-Lonk]

Has anyone ever heard of "true potential" ? The app logo is like a purple circle with a line through it. Someone set up for me a while ago but i have no idea on fees or anything ?

[@planum412]

Thank you! Very helpful!

[@seanhutcheson7638]

Amazing video! As a 19 year old student with no income would I be able to benefit from the tax relief?

[@Pensioncraft]

Thank you Father Jerry! See the section "Tax relief if you’re a non-taxpayer" on this page for more detail www.moneyadviceservice.org.uk/en/articles/tax-relief-on-pension-contributions It's as Steven Clark describes in his comment - thank you Steven! Ramin.

[@seanhutcheson7638]

@@stevenclark9987 Perfect thank you so much! Really helpful info

[@noobztubes]

Hi can I open an sipp and get tax relief even though I have a work place pension that both parties contribute in.

[@iandavies9154]

NoobzTubes Yes, as long as you haven’t max-ed out your contributions for the year.

[@solidn6]

@@iandavies9154 What is the max contributions for a SIPP account per year?

[@AidanFij]

@@solidn6 £40,000 maximum pension allowance for a year, £1mil lifetime allowance (before you start getting taxed) the yearly pension allowance does decrease if you earn over a certain amount (£200k now I think)

[@joankawenja8032]

Who manages the investments you pick if you open up a vanguard account? or is it a must that you have to do it yourself?

[@dougie-wj8dn]

Hi, I am part of an investment Scheme and they have suggested Aegon as my ISA and pension provider. In terms of the actual profit of using the ISA, are they still a decent provider to be with? Excluding any facts that their portal may be atrocious. Thanks!

[@Pensioncraft]

Hi dougie 1809 take a look at "TO RETIREMENT, AND BEYOND: THE LIFETIME COSTS OF INVESTING" by the Lang Cat (it's free but you might have to register on their website. www.langcatfinancial.co.uk/product/to-retirement-and-beyond-the-lifetime-costs-of-investing/ When compared with other providers they show that Aegon is expensive as a platform. Thanks, Ramin.

[@itsmesaltax]

Hi, I'm 25 years old. I currently have £18,500 in my retirement account. I currently contribute 15% with a 11% employer contribution to make 26% total. Roughly £850 is being put in a month into my SIPP. I have a lot of spare cash currently, my plan is to get a head to make use of that 25% tax free lump sum in the future, and to avoid any hefty monthly pension savings when I'm older. I also like the fact you save Tax + NI. Is this over kill?

[@asharyal8605]

No you have a sound strategy. Keep going

[@itsmesaltax]

@@asharyal8605 wow what a throw back. 3 years ago I posted thatZ . My SIPP is now at 78K and I have 102K in a Stocks and Shares ISA. I’m 28, I was 25 when I posted

[@battj1]

I'm interested in opening a SIPP with Vanguard. I would like to invest it into the Vanguard FTSE Global All-Cap Index fund. Will this fund be available for me to choose? Thanks.

[@Pensioncraft]

Hi @Jack Batty that fund (and all the others that Vanguard UK lists on its website) are available in a SIPP. I don't know of any exceptions. Thanks, Ramin.

[@battj1]

@@Pensioncraft amazing, thank you, so helpful! Been watching and saving loads of your videos - brilliant!

[@tomstopper5281]

Why did you choose not to pay via your company?

[@jamessampson8662]

I wonder if anyone can help me with this question I can't seem to find an answer to. A relative, aged 60, does not have her own pension but has a large amount of savings and is in receipt of her deceased husband's DB pension (£17,000 a year). Is there any reason why she cannot set up a SIPP and pay in c. £2880 a year, basically treating the SIPP as a tax efficient way of saving and also reducing IHT? Thank-you

[@jennyli365]

Can you have 2 SIPP with two different investment platform?

[@adiljavat1889]

Yes you can. Only 1 ISA though per year

[@barnstar2077]

What about flexible draw down though? Do Vanguard charge for that?

[@barnstar2077]

Having googled it, it would seem they do not offer flexible drawdown, you have to buy an annuity or transfer to another provider.

[@Pensioncraft]

Hi Barn Star they say "Our drawdown options for investors aged 55 and over who wish to take payments from their pension, such as flexible-access drawdown, will follow in the 2020-21 tax year." So you will be able to use their drawdown product or transfer to another provider if you prefer, and that transfer will incur no cost from Vanguard. "The Vanguard Personal Pension will also be competitive for investors who want to enter drawdown over the age of 55, once this option is available in the 2020-21 tax year. Simply put, there will be no additional charges for going into drawdown in the Vanguard Personal Pension. Drawdown is where you can take a tax-free lump sum (usually up to 25%) from your pension, with the balance going into funds that allow you to draw an income." And "From early 2020, we will also be able to support annuity purchases elsewhere and the repayment of tax-free cash when a client purchases an annuity. We will also support transfers for clients looking to take drawdown options elsewhere." The information is available here www.vanguardinvestor.co.uk/articles/latest-thoughts/retirement/get-ready-for-the-vanguard-personal-pension Thanks, Ramin.

[@barnstar2077]

@@Pensioncraft - Oh okay, thanks Ramin. Seems like they are a viable option after all. I may switch from HL soon.

[@petearmstrong2778]

I spoke to them about this (a number of us had same query!) they said no extra charges for drawdown although hasn't been formally announced as focus is on SIPPs in accumulation phase. Was told UFPLS and Flexi-drawdown should be available. Timeline hopefully 2020/Q4 (Sep/Oct?)

[@iandavies9154]

Vanguard is good on costs but extremely limited in the investment choices compared with other platforms. It is even possible to invest in other vanguard funds on other platforms not available direct from Vanguard!

[@Pensioncraft]

Hi Ian I agree, I'm annoyed they've got no REITS or high yield credit funds, but I don't invest in anything very esoteric and haven't found their menu of funds to be much of a limitation so far. Thanks, Ramin.

[@iandavies9154]

@@Pensioncraft As a homeowner I think I've got enough exposure to the housing market so Reits are not for me.

[@rf9562]

Hi, What if I leave the Uk and lets say I have couple thousand in SIPP? I am from Hungary, I might plan to go home in couple years. I also have an ISA. Thanks,

[@Pensioncraft]

Hi Róbert this may help www.expertsforexpats.com/expat-pensions/sipp-for-british-expats/ Thanks, Ramin.

[@rf9562]

@@Pensioncraft Thanks a lot

[@NuK3ClanTV]

They should be giving you a referral code to give out..!

[@Pensioncraft]

That would be marvellous, but I doubt they need my help! Thanks, Ramin

[@pw3591]

My big issue at the moment is that Vanguard cannot transfer in even their own Vanguard funds from other platforms. They currently only accept cash transfers. So I will have to sell my Vanguard funds on the HL platform, transfer the cash to Vanguard, then re-buy the same funds. In other words you are "out of the market" for as long as this process takes (upto 8 weeks) This could cost me thousands on a rising market, and is not a risk i'm willing to take. I had the exact same issue with Fundsmith a while back, fortunately and purely by luck it worked in my favour on that occasion, but it was a lesson learned.

[@iandavies9154]

Dependent On what Vanguard funds/etfs you have HL could be cheaper than Vanguard on annual management fees.

[@pw3591]

@@iandavies9154 I already have an ISA and General account with Vg, so with my SIPP combined I would hit the £375 cap. Which is much less than HL are currently nicking out of my account each year.

[@iandavies9154]

PHIL WELCH If you have ETFs, HL charge max £200 for the SIPP, £45 for the ISA and nothing for their Fund account.

[@pw3591]

@@iandavies9154 I'll look into that thanks, I don't currently hold any ETF's

[@Pensioncraft]

Hargreaves Lansdown does the same annoying thing as AJ Bell. The £200 cap only applies to shares (and investment trusts, exchange-traded funds, VCTs, gilts and bonds) not to funds which are charged at 0.45% up to the first £250k, 0.25% between £250k and £1 million, 0.1% between £1 million and £2 million and no extra charge above £2 million. They also charge for share dealing at £11.95 per trade for shares (if you trade 0-9 times the previous month). Each one of those trades would increase the breakeven by just under £8,000 (£11.95/0.0015=£7,966.67) www.hl.co.uk/pensions/sipp/charges-and-interest-rates Thanks, Ramin.

[@iandavies9154]

Is there the option to sit in cash if you think the proverbial is going to hit the fan?

[@Pensioncraft]

Hi Ian, you could do that but there's a money market fund that will probably give a small return while taking a very small risk. I discuss money market funds here kzbin.info/www/bejne/nIHCg514a7V3o5o Thanks, Ramin.

[@tomstopper5281]

Wouldn’t pay via your ltd company save you from paying taxes on the dividends?

[@Tredegarfilm]

Would you be able to get tax relief if you are below the level where you pay tax, £12,500?

[@Pensioncraft]

Hi Tredegar Wales see the section "Tax relief if you’re a non-taxpayer" in this document www.moneyadviceservice.org.uk/en/articles/tax-relief-on-pension-contributions and Father Jerry's question and Steven Clark's reply. Thanks, Ramin.

[@Tredegarfilm]

@@Pensioncraft thank you, a great help and great videos :)

[@zzhughesd]

VGOV Gilt advise anyone Vanguard. Thanks

[@pauldeal68]

I wish

[@coolmonkey619]

Are you going to invest the majority into your SIPP account now rather than the ISA.

[@iandavies9154]

The difference between a SIPP and an ISA is that you get tax relief on a SIPP but when you take the benefits of the SIPP they are taxable. An ISA you get no tax relief but the benefits are tax free.

[@JivanPal]

In line with what Ian said, a SIPP is almost functionally equivalent to a workplace pension for a self-employed person, except of course there's no employer contribution/match, since there's no employer!

[@iandavies9154]

Jivan Pal anyone can have a SIPP, you don’t have to be self employed. You can have both if you want as long as you don’t exceed the maximum annual contribution limit.

[@JivanPal]

@@iandavies9154, indeed, I just thought the analogy was worth giving.

[@hachimaru295]

pity the replies stopped ........

[@DandyCam47]

How can you calculate sipp payments? Assuming a average growth of 5%, retirement at age 55, kick the bucket age 80 (drawdown for 25 years) just based on a sipp/isa, what's the best strategy? Even though you get the initial tax releif, how much of a return would you see in the long run? Regards

[@Pensioncraft]

Hi Daniel, that was the previous video kzbin.info/www/bejne/onTdp4p9pM6igac Thanks, Ramin.

[@CaseyBurnsInvesting]

Didn’t realize that “Pension“ is used in the UK like “IRA” is used in the US

[@barnstar2077]

Yeah, IRA means something very, very different over here!

[@JulesOfIslington]

Pension is used in the UK to refer to both defined benefit and defined contribution retirement plans, whereas the US uses the term pension almost exclusively to refer to defined benefit retirement plans.

[@JivanPal]

@Casey Burns Investing, a pension is just a lump of money saved for use during/after retirement, and so the term is used in the UK when referring to any financial product that is designed for or has become associated with the purpose of being used for one's pension. For example, workplace pensions ( www.gov.uk/workplace-pensions ) and SIPPs can be seen as pension products, in much the same as the 401(k) and IRAs, respectively, are used in the US.

[@tomstopper5281]

Why such a low equity?

[@JulesOfIslington]

Annoyingly, and somewhat ironically for the subsidiary of a major player in the US market, Vanguard UK does not allow anyone with US citizenship resident in the UK (even if, like me, they also hold British citizenship) to open a SIPP account with them.

[@battj1]

Quick question, with a Vanguard SIPP, can you mix fund options, e.g. 50% in one fund and 50% in another fund? I can do this with Scottish Life and Royal London, just wondered if it was possible with Vanguard.

[@Pensioncraft]

Hi @Jack Batty yes you can. You can have any of their funds in any combination you like, although I personally choose to not have too many to keep things simple 8-) Thanks, Ramin.

[@battj1]

@@Pensioncraft thanks Ramin! Very helpful! Really loving your videos, so, so, helpful! Have saved a lot of them and am spreading the word to friends and family about them :-). Cheers, Jack