SIPPs Guide - SIPPs Pensions Explained
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This document serves as a comprehensive guide to Self-Invested Personal Pensions (SIPPs), explaining their benefits, contribution rules, and investment options. It highlights that SIPPs offer greater investment freedom compared to traditional pensions and provides details about associated costs and fees. Additionally, it emphasizes the importance of choosing the right SIPP provider based on individual investment strategies and seeking financial advice.
SIPPs Guide - SIPPs Pensions Explained
- 1. Unite Limited - Registered in Gibraltar No. 105368 – Top Floor Heritage House, 235 Main Street, Gibraltar. Tel +44 (0) 203 137 4400 – www.unite.gi SIPPs Guide: SIPPs Pensions Explained. If you’re lookingfora SIPP(a self-investedpersonal pension) thenyoushouldfirstensure thatyouthoroughly understandwhatSIPPsare and howtheywork.Here we take a lookat SIPPspensionswithour SIPPsguide:tohelp youmake an informedchoice alongwithyourqualifiedfinancial advisorbefore youchoose the rightproviderfor you. SIPPsExplained:Whatisa SIPP? A self-investedpersonal pensionisdesignedtobe an efficientwayof savingfor retirement. As withall formsof pensions,aSIPPoffersasmuchas 45 percentin tax relief onyourcontributionswithoutasking youto pay any furtherincome tax or capital gainstax.Of course,tax benefitsare dependentonyourindividual circumstances:while tax the government,asalways,canchange rules. Usually,withatraditional pension,yourinvestmentchoicesare limitedtoarelativelyshortlistof funds,typically those fromthe pensionprovider’sindividual fundmanagers.Bycontrast,witha SIPPyoucan investalmost anywhere andselectyourowninvestments. SIPPsExplained:Howmuchcan be contributedtoa SIPP? If you’re a UK residentunderthe age of 75, the general rule isyoucan contribute asmuch to your pensionsasyou earn:while receivingtax relief duringeachtax year.Thismeansthatif you earned£35,000 a year youcould contribute agross £35,000 towardsa pension.The paymentyouwouldmake isjust£28,000: with20 percent (at the basictax rate) beingaddedcourtesyof the taxman. Of course the more youearn, the more youcan claimback witha tax return offeringanaddedincentive tohighand top-rate tax payers. Witha SIPPpensionthere isnominimuminvestmentlevel:however,mostproviderssuggestaminimuminvestment of £50,000 or that you are transferringseveral thousandeveryyear.Inmostcases,people transfertheirpension policiesintoaSIPPforsimplicitytoconsolidate theirsavingsinone place. SIPPsExplained:Whoare SIPPsavailable to? SIPPsare opento everyone –eventhose alreadycontributingtoanexistingpensionscheme.However,manySIPPs are more expensive thanotherpensionssoit’simportanttoensure youwill capitalise onall of the investment freedomstheyoffer. SIPPsExplained:Whatinvestmentscanyouinclude inaSIPP?
- 2. Unite Limited - Registered in Gibraltar No. 105368 – Top Floor Heritage House, 235 Main Street, Gibraltar. Tel +44 (0) 203 137 4400 – www.unite.gi There are manyinvestmentsthatcan be includedinaSIPP – buthere isa listof the mainones: – Commercial property. – Depositaccounts. – Fixedintereststocks. – Governmentsecurities. – Groundrentsfor commercial property. – Insurance funds. – Investmenttrusts. – Openendedinvestmentcompanies. – Optionsandfutures. – Overseasstocksandshares. – PIBS:alsoknownas PermanentInterestBearingShares. – Tradedendowmentpolicies. – Unittrusts. – Unquoted shares. – Warrants. SIPPsExplained:Propertyinvestments Many people use SIPPstodevelopcommercial propertyincludingshops,industrialunitsandoffices.Theycanassist evenif youdon’thave the fundsto buythe propertyoutrightbecause itispossible toborrow around50 percent of the netvalue of the fund. So forexample,if the SIPPisworth£150,000 thenyou couldborrow £75,000 inorderto buy thatpropertygivingyou the opportunitytopurchase a propertyvaluedat£225,000. Rentforthe propertycouldthencovermortgage paymentsandif there isno mortgage the rentcan be placedintoa SIPPpensionandusedforlaterinvestments. SIPPsExplained:Whataboutthe charges? EventhoughSIPPinvestmentscanassistwithpropertypurchases,there are anumberof feestoconsiderwith providersoftenimposingfeesfrom£500-£750 forpurchases.Inaddition,there are valuationfeesandlegal feesto pay as well asannual managementcharges.Here isacloserlookat some of the feesthatSIPPsmaycharge: – Set-upfees:Usuallyrangingfrom£0-£750, the set-upfeeswithaSIPPusuallyrange from£200-£400. – Transferincharges:There can be chargesif you move yourfundsfromotherpensionsintoaSIPP. – Annual fees:Rangingfrom£0-£1,000 theyare meantto cover administrationcosts. – Dealingcharges:Buyingandsellinginvestments(exceptproperties) cancostup to £35 witha SIPP. – Propertypurchases:Typicallyyouwill be chargedfrom£450-£650 whenyouuse a SIPPto assistwiththe purchase of a commercial property. – Exitcharges:Shouldyoudecide tomove toa SIPPwitha differentprovider,youmightbe chargedanexitfee. – Additionalcosts:If youchoose an investmentadvisertohelpyouwiththe managementof aSIPP,theywill typicallycharge youfrom0.5 percent of the value of your pensionfundeachyear. SIPPsExplained:Howtochoose the right SIPPforyou
- 3. Unite Limited - Registered in Gibraltar No. 105368 – Top Floor Heritage House, 235 Main Street, Gibraltar. Tel +44 (0) 203 137 4400 – www.unite.gi Whenchoosingthe rightSIPPproviderforyou,firstlythinkaboutthe type of investmentsthatyouwantto make withyourpension. Generally,if youwanttoinvestinstocksand sharesandinvestmentfunds,thenlow costSIPPswill usuallymatch your needs.However,there are muchmore extensiveofferingstochoose fromtoo:withinsurance companies typicallyofferingcomprehensive SIPPsalthoughyouwilloftenhave toplace aportionof your SIPPintothe insurance fundbefore youcan make the investment. Meanwhile,SIPPspecialiststraditionallyofferthe widestrange of investments. SIPPsexplained:Howtofind outmore Hopefullythisinformationhasprovidedyouwithsome guidance aboutwhattoexpectshouldyoudecidethataSIPP isright foryou. Shouldyouwishtofindoutmore basedon yourindividual investmentstrategythenyoucancontact Unite nowto who can introduce youtoa professional financial adviser.