SIPP Pensions
A Self-Invested Personal Pension (SIPP) may suit your needs if you would like to have more control over your own pension fund and be able to make investment decisions yourself, taking professional advice where necessary.
SIPP: Pension Lump Sum Transfers
Many SIPP providers will now permit you to set up a lump sum transfer contribution from another pension for as little as £5,000. While most traditional pensions limit investment choice to a short list of funds, a SIPP enables you to follow a more diverse investment approach.
A SIPP will typically accept most types of pension, including:
- Stakeholder Pension Plans
- Personal Pension Plans
- Retirement Annuity Contracts
- Other SIPPs
- Executive Pension Plans (EPPs)
- Free-Standing Additional Voluntary Contribution Plans (FSAVCs)
- Most Paid-Up Occupational Money Purchase Plans
SIPP: Pension Investments and Funds
You can typically choose from thousands of funds run by top managers as well as pick from individual shares, bonds, gilts, unit trusts, investment trusts, exchange traded funds, cash and commercial property (but not private property). A SIPP could give you more control over moving your money to another investment institution, rather than being tied if a fund under-performs.
Investing in commercial property could be a particularly useful for owners of small businesses, who can buy premises through their pension funds. There are tax advantages in using the fund to buy commercial property, such as having no capital gains tax to pay. The rental income is received tax-free by the fund and when the property is sold, which must be before the pension is drawn.
If you own a business and decide to use the property assets as part of your retirement planning, you would pay rent directly into your own pension fund rather than to a third party.
Assuming that its value increases, a business property will generate a tax liability for the shareholders or partners, unless you sell the property to your SIPP. Then the business can pay tax free rent to your pension fund and any future gain on the property will also be tax-free when it is sold.
Before transferring to a SIPP it is important to check whether the benefits are comparable with those offered by your existing pension. Make sure that you are aware of any penalties you could be charged or any bonuses or guarantees you may lose (more information on SIPP investments).
SIPP: Pension Limits
If you have had an annual income of £130,000 or more since April 2007 and make regular contributions to a pension, changes announced in the 2009 Budget could affect you. Switching regular contributions to a new pension may mean future regular contributions are subject to a £20,000 limit.
You cannot draw a pension from a SIPP before age 55, and you'll need to spend time managing your investments. Where investment is made in commercial property, you may also have periods without rental income and occasionally property may ned to be sold when the market is not at its strongest. Because there may be many transactions moving investments around, the administrative costs are higher than those of a normal pension fund (see SIPP contribution limits).
Speak to the independent pension advice team from one our partner firms for impartial advice on SIPP investments. Use the free call back service for a no obligation consultation.
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