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SIPP Pension

SIPP Pension is an abbreviation for Self Investment Personal Pension.

What is important to remember is that Self Invested Personal Pension Plans (SIPPS) are in essence, just Personal Pension Plans (PPP). They just have more investment opportunities which in turn, appeal to the more adventurous investor.

The fundamental difference is that through a SIPP, individuals can literally become their own fund managers and have the facility to invest outside the normal insured contracts within a pension wrapper which includes shares and property

Please see our SIPP Advice Guidance at a glance below:-

SIPP Rules
MAXIMUM ANNUAL CONTRIBUTIONS No limit to employer’s and employee’s contributions.Tax relief for employees’ contributions is limited to the higher of £3,600 per annum or 100% of relevant UK earnings.

Annual Allowance for 2014/2015 is £40,000 per annum.

Potential ability of carrying forward up to 3 years worth of unused Annual Allowance (based on an annual amount of £50,000 for each of those earlier years).

Contributions made in excess of the Annual Allowance will trigger a tailored tax charge of up to 40-45%.

CONTINUING CONTRIBUTIONS AFTER EARNINGS CEASE Before age 75, tax relief will be restricted to maximum of £3,600 pa. Can still contribute up to the Annual Allowance but tax relief is not available on any contributions over £3,600 pa.After age 75, no tax relief is available.
RETIREMENT AGES From age 55.Exceptions for those with SIPPs effected prior to 6 April 2006 in special occupations (e.g. sports people, provided that the member is tested against a reduced lifetime allowance (2.5% per annum from age 55) and that the full pension must be vested.
TAX-FREE LUMP SUM 25% of fund subject to Lifetime Allowance (LA) of £1.25 million (2014/2015) subject to any transitional protection.
PENSION Benefits tested against Lifetime Allowance with any excess having Lifetime Allowance Charge applied.This excess could be taken as a lump sum, income or combination of both.
PROPERTY PURCHASE AND BORROWING RULES Can invest in commercial property and borrow up to 50% of net scheme assets. Connected party transactions permitted.
INVESTMENTS Investments unrestricted (although this will be trustees discretion)
LOANS TO MEMBERS Not permitted, any loan to a member will always be treated as an unauthorised payment.

N/B Loans to unconnected parties are allowed.

DEATH BENEFITS Return of fund on death before 75 to the nominated beneficiary.On death after age 75, a lump sum death benefit will be payable net of a 55% tax charge.

Quite simply, a SIPP works in much the same manner as a personal pension plan. Contributions are paid in the form of regular contributions and single contributions (subject to HMRC limits) and other pension benefits can be transferred in.

Transfer payments and income from investments do not count as contributions, nor does any rental payments where property may be being used. The SIPP will enjoy the same tax reliefs and tax advantages as any other registered personal pension plan.

The key difference is that contributions are invested in accordance with your individual specific instructions. Prior to the investment instruction being received and executed, contributions are held in a trustee bank account where they will usually earn a competitive rate of daily interest.

A number of providers stipulate that a minimum amount must be retained in their insured pension funds which cannot be used for self-investment purposes.
Any individual can invest in a SIPP. Even if you are a member of an occupational pension scheme you will be able to simultaneously contribute to a SIPP subject to certain limits. It’s just a matter of whether contributions will be tax relievable.

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