SELF INVESTED PERSONAL PENSIONS (SIPPs)

SIPPs have been around for some time now but have become more popular as flexibility and choice are seen to be more important.

A SIPP is effectively a pension plan where you can:-

• choose when and where to invest your money within wide boundaries
• decide when and how you would like to take your benefits
• make changes to your investments as your circumstances change

WHO IS A SIPP FOR?

Anyone who wishes to:-

• enjoy a wider spread of investments than that afforded by a standard personal pension plan.
• have flexibility in the way benefits are taken during retirement
• purchase commercial property as an investment within the pension fund

A SIPP will not be for everyone. For many, especially those with funds below £75,000 say, a Stakeholder Pension may be the right choice with lower charges albeit with reduced flexibility.

WHAT CAN I INVEST IN?

• There are a wide range of investment options, including:-
• stocks & shares traded on a recognised exchange.
• shares in unquoted companies
• OEICs, unit trusts, investment trusts
• exchange traded funds, hedge funds
• deosit accounts
• gilts
• overseas securities
• commercial property
• a SIPP can also have borrowing facilities to assist in investment.

TAX BENEFITS

Contributions to a SIPP enjoy the usual tax benefits associated with pension schemes:-

• Full tax relief at highest marginal rate on personal contributions up to 100% of earnings
• Company contributions allowable against corporation tax
• Tax efficient build up of funds

The above contributions are subject to an annual limit of £40,000 (there may be restrictions for higher earners and in other circumstances) and a lifetime fund limit of £1,000,000.

TAKING BENEFITS

SIPPs provide increased flexibility in the way benefits can be taken. Gone are the days when you have to use your fund to buy a fixed annuity.

The tax free cash sum option remains (up to 25% of the fund value) but with the balance fund you can enter into drawdown (see section under pensions), enjoy phased retirement or buy an annuity at any time.

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