Self-Invested Personal Pensions
A Self-Invested Personal Pension (SIPP) is a government-approved personal pension scheme that gives you a much greater degree of control over how your retirement pot is invested. This is essentially a UK-based pension wrapper that can accommodate a wide range of investment and saving strategies. And as we’re about to explain, SIPPs can be beneficial to a wide range of people living in the UK and abroad. If you transfer your pension to a SIPP with us, you can let our expert advisors manage all your investments, make your own decisions with support from our advisors or go it alone: the choice is yours. Whichever approach you choose, you will receive regular investment news, views and research from our team of experts, and our telephone support team will always be there to answer any questions you may have. we will also pay up to £500 towards any exit fees you may incur when consolidating existing pensions into one of our SIPPs.
Understanding the Growing Popularity of the SIPP
The UK government has undergone numerous changes in recent history, and many citizens are unsure of how to best manage and protect their wealth. For example, the so-called pension death tax (which once claimed 55 per cent of the pension’s value when the member passed away) has been abolished. Additionally, pension holders are no longer required to purchase an annuity. Relief measures like this have decreased demand for Qualifying Recognised Overseas Pension Schemes (QROPS), making SIPPs more attractive in some circumstances.
Any of the following investments might be found in a pension wrapper of this type:
- Commercial property holdings
- Mutual funds
Explaining Self-Invested Personal Pensions (SIPPs)
Holding different types of assets in a SIPP is an excellent way to diversify risk whilst you save for retirement. The broad base of investment options makes this type of pension particularly attractive to most individuals.
However, a SIPP is not for everyone. Some people are comfortable working with a less diverse array of investment options. Others receive all the pension provisions and requirements they need through their employer, and so moving to a SIPP would be unnecessary. Under most circumstances, a SIPP will be a recommended option if you are looking for a diverse range of investments, flexibility with regards to drawdown and lump sums, and you are looking for a very competitive alternative to your current pension arrangement.
SIPPs make the most sense for the average investor looking to spread their savings across a number of different asset classes allowing for diversification, and therefore lowering investment risk. They also allow the individual to group together several different pension pots and move them inside a common, tax-efficient wrapper makes them easier to manage and maintain.
After the recent legislation change on March 9th 2017, transfers to QROPS may attract a 25% overseas transfer tax, therefore a SIPP is quickly emerging as a suitable alternative to taking control of your pension – especially if you live or work overseas. However, we should note that transferring from a defined-benefits pension to a SIPP will require giving up some safeguarded rights. This makes it all the more important that you only move forward under the advisement of the financial experts at Knightsbridge.
If you would like to learn more about the possibility of moving your pension to a SIPP, please don’t hesitate to get in touch with us. We can perform a comprehensive review of your current pension and let you know whether a SIPP is a viable option
Who Benefits from a SIPP?
SIPPs make the most sense for investors with a desire to spread their savings across a wide array of assets, holdings and investment schemes, essentially diversifying their funds, lowering risk. Grouping the holdings inside a common, tax-efficient wrapper also makes them easier to manage.
Many Knightsbridge clients are eager to move their defined benefit pensions (i.e. final salary pensions) into a SIPP, as doing so allows them to exercise greater control over how it is invested. Doing so could even result in any of the following benefits:
• Allowing them to retire earlier
• Offering them greater flexibility over death benefits
• Permitting them to withdraw their full pension thanks to flexi access rules
Now transfers to QROPS may attract as much as a 25 per cent tax, a SIPP is quickly emerging as your next-best alternative – especially if you live or work overseas. However, we should note that transferring from a defined-benefits pension to a SIPP will require giving up some safeguarded rights. This makes it all the more important that you only move forward under the advisement of the financial experts at Knightsbridge.
If you would like to learn more about the possibility of moving your pension to a SIPP, please don’t hesitate to get in touch with us. We can perform a comprehensive review of your current pension and let you know whether a SIPP is in your best interest.
Advantages of a SIPP?
No hidden costs, i.e. bid/offer spreads, initial units or penalties for early retirement.
The full value of your fund is payable in the event of an early death (before the age of 75) as a tax-free lump sum.
You pay no income or capital gains tax, allowing your investments to grow faster
Up to 25% of your fund can be taken as a tax-free lump-sum payment when you retire. Additional lumps sums can be withdrawn but will be subject to tax.
There is no need to retire in order to receive your pension – it can be vested any time after your 55th birthday.
You can draw an income (income drawdown) from your SIPP fund while maintaining full control of your investments, subject to certain conditions and limits, and there is no need to buy an annuity from an insurance company in order to do this.
You can reduce your immediate pension income to zero using the tax-free income drawdown facility, thereby reducing your tax liability and helping with capital growth.
Your SIPP fund can be bequeathed in a will to anybody you wish. With careful planning, it may be possible to do this outside of your estate so that it does not attract inheritance tax.