Self Invested Personal Pension Plan (SIPP)

A SIPP gives you freedom to choose and change the investments within it.  SIPP's have been around since 1990, but have risen rapidly in popularity since 'A' day on the 6th April 2006.The main reason to choose a SIPP rather than a conventional personal pension is to exercise power over the type and range of investments bought;  especially having the power to purchase commercial property either directly or with a mortgage, or to buy and hold individual shares. Some SIPP's are set up by providers of fund wraps, fund supermarkets, fund platforms discounted if all monies are held on the wrap, platform or supermarket. Elsewhere, conventional personal pensions are available with circa 1,000 fund options - in practice; the line between SIPP's and conventional personal pensions has become blurred. Rules for contributions benefit withdrawal etc... are the same as for other personal pension schemes. There are also packaged plans available to streamline the set up and running of procedures.

Investment Options

The range of assets permitted by HMRC includes:

• Stocks and shares listed on a recognised exchange
• Futures and options traded on recognised futures exchanges
• Authorised UK unit trusts and OEIC's and other UCITS funds
• Unauthorised unit trusts that don’t invest in residential property
• Investment trusts subject to FSA regulation
• Unitised insurance funds from EU insurers and IPA's
• Deposits and deposit interests
• Commercial property (including borrowing to fund the purchase)
• Ground rents
• Traded endowments policies

Tax Treatment

Contributions to SIPP's are treated identically to contributions to personal pensions.  Individual contributions will receive automatic basic-rate tax-relief; higher rate taxpayers can claim additional relief through their tax returns. Employer contributions are allowable against corporation or income tax. Income from assets in the scheme will remain untaxed, although in common with other pensions the tax credit for UK income is no longer reclaimable.  Growth is free from capital gains tax. Pension income provided either from an Annuity or via income withdrawal is taxed as earned income at the members highest marginal rate. 

Important changes to the whole UK pension regime are proposed in 2006. These will radically alter the way people can save for retirement, but offer great opportunities to save in SIPP's for your retirement. Some of the most important changes are:

• Limits to contributions will be raised to the lower of £225,000 or £100% of earnings in the 2007/2008 tax year.
• The limit to tax relieved savings are set the size of all your personal funds added together.  This is called the 'lifetime limit'. It is set at £1.6m for 2007, rising to £1.8m in 2010.
• There will no longer be a probation on setting up a personal pension using earnings to contribute if you are a member of an occupational scheme at the same time.
• You will not be allowed to draw your pension until you are 50 rising to 55 in 2010.
• Protected rights funds may be used and tax free cash often is available.

Lost touch with an old pension?

If you have a pension that you have lost touch with or are unsure of its value we able able to assist with this, alternatively, please follow the link below for The Pension Tracing Service. This will enable you to ask for a pension trace for yourself or someone you know.  You can even track down someone elses old pension if you think you may be a beneficiary.  All you need is the name of the pension scheme, or the employer the scheme is with.

www.thepensionservice.gov.uk/tracing  or ring 0845 6002537 for The Pension Service.

or You may apply for a State Pension forecast from the Department of Work and Pensions online here

If you would like to talk to us more about this or would like us to assist you with tracing your pension, or any other matter regarding any aspect of planning for your retirement, please contact our pensions team here.