SIPP

WHAT IS A SIPP?

A Self-Invested Personal Pension (SIPP) is the name given to the type of UK government approved personal pension scheme, which allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and Customs (HMRC).

SIPPs are a type of Personal Pension Plan that allows via the HMRC rules for a greater range of investments to be held than Personal Pension Plans, notably equities and property. Rules for contributions, benefit withdrawal etc. are the same as for other personal pension schemes.

A SIPP provides you with the option of choosing when, where and how you invest the assets of your pension fund. Contributions that you make to a SIPP will receive tax relief, most will be via relief at source whereby the pension provider claims 20% tax relief on that contribution. If you are a higher or additional rate tax payer, then the additional claim can be done via your self-assessment. Or alternatively an employer could take the pension contribution from your salary before any tax is deducted.

A SIPP will also allow you to Combine all frozen pensions from previous employer’s schemes and personal schemes into a single scheme.

A SIPP is a flexible type of pension that gives you and your adviser the freedom to choose where to invest your pension savings, subject of approval. While traditional personal pensions would normally be invested in certain asset classes, a SIPP allows you to take control and give your savings the best chance of investment growth to provide for your ideal retirement.

BENEFITS OF A SIPP?

Investment flexibility

With a SIPP you can invest in all kinds of assets, even commercial property. Our Individual SIPP and Family Trust offer full flexibility to invest in any HMRC allowable investments, and we offer a more limited range through a cost-effective SIPP and Single Investment SIPP if you don’t want to take advantage of the more complex investment options.

Pension consolidation

A SIPP is an ideal way to manage all of your pensions in one place. By consolidating your frozen pensions you can easily monitor the value of your retirement savings and maximise your investment capacity.

Flexible retirement options

At any time after age 55, you can normally take up to 25% of the value of your pension pot as a tax-free cash lump sum. Then you can choose to draw the rest of your pension direct from your SIPP whenever it suits.

Contribute when it suits you

You can choose how much and how often you pay into your SIPP (subject to certain rules), and you may also take a break from payments if you need too.

WHAT CAN A SIPP INVEST IN?

Cash and Deposit accounts (in any currency providing they are with a UK deposit taker)
Insurances company funds
UK Gilts
UK Shares (including shares listed on the Alternative Investment Market)
US and European Shares (stocks and shares quoted on a Recognised Stock Exchange)
Unquoted shares
Bonds
Permanent Interest Bearing Shares
Commercial property
Ground rents in respect of commercial property
Unit trusts
Open ended investment companies (OEIC)
Investment trusts
Traded endowment policies
Offshore Investment funds
Offshore Futures and Options

Once invested in your pension the funds will grow free of UK Capital Gains Tax and Income Tax (tax deducted from dividends cannot be reclaimed).

The most important thing to remember is that the range of available investments depends largely on the choice of SIPP provider, which means obtaining professional financial advice is important before taking any action. Ultimately it is down to the trustees of your pension plan to agree whether they are happy to accept your investment choices into the SIPP. The trustees are responsible and liable for ensuring that the investment choices fall within their remit.

When you wish to withdraw the funds from your SIPP, not before the ages of 55, you can normally take up to 25 per cent of your fund as a tax-free lump sum. The remainder is then used to provide you with a taxable income.

If you die before you begin taking the benefits from your pension the funds will normally be passed to your spouse or other elected beneficiary free of Inheritance Tax. Other tax charges may apply depending on the circumstances.

A SIPP can also be used to invest and develop commercial property, such as offices, industrial units or shops. Your pension fund does not even have to be large enough to buy a property outright as you may be able to borrow up to 50 per cent of the fund’s net value.

There are also tax advantages of buying your own business premises within a SIPP. The rent paid into your SIPP is free of tax because it is a tax deductible expense. There will be no Capital Gains Tax to pay on the property when it is sold within the pension fund and if you die before age 75 and before you start drawing your pension, your beneficiaries can receive the proceeds of the sale of the property free of Inheritance Tax.