Guide to SIPPs
SIPP Guide...Information & Advice
What are they?
SIPP stands for Self Invested Personal Pension. It is a personal pension plan in every sense of the word but has the added advantage that you, as the investor, have complete control over the investment strategy and investments contained in the pension plan.
How do they work?
Personal pensions are usually provided by insurance companies and they often limit your choice of investment to a number of investment funds normally managed by the insurance company. A SIPP should be viewed as a tax efficient wrapper into which you can invest almost any type of financial asset. Although a SIPP may be provided by an insurance company, it can also be provided by specialist SIPP administrators.
The insurance company or administrator will establish the SIPP wrapper which will receive all the tax advantages that are enjoyed by a standard personal pension. Once the SIPP has been set up, you invest your lump sum (or in some cases regular contributions) which initially will be placed in a cash account. In conjunction with an investment adviser, a balanced spread of investments will be purchased, using the capital in the cash account. The list of permitted investments is very wide but includes:-
- UK and international company shares
- UK and international government and company debt (gilts and corporate bonds)
- Collective investment schemes such as unit trusts, pension funds, investment trusts
- Commercial property
- Deposit funds and currency
- Commodities
- Futures and options
- Warrants
- Derivatives
There are some types of assets which, although not strictly banned, are highly tax inefficient for all pensions but which otherwise could be of interest to SIPP investors, such as residential property, works of art and antiques.
How much can I invest?
You will receive tax relief at your highest rate on any contributions that you make and since pension rules were simplified in April 2006, you can contribute up to 100% of your salary up to £235,000 (in the 2008/2009 tax year). Even if you are a non-taxpayer, you will still receive basic rate tax relief on any contributions made up to £3,600 in each tax year.
Is a SIPP suitable for me?
This question can only be answered after consultation with a suitably qualified pensions adviser who will analyse your circumstances taking into account your investment risk profile. In general, however, SIPPs are more suitable for investors who:-
- Require significant flexibility in their pension planning
- Like to be in control
- Want to take a hands on approach to planning their retirement
- Have a specific investment adviser that they would like to manage their portfolio
- Have specific ideas with regard to investment that cannot be met through investing in an insurance company fund
Most SIPP contracts have relatively high minimum contribution levels which means they will appeal more to higher earners and those with significant capital built up in other existing pensions that can be transferred.
There are certain fees involved in establishing and running a SIPP and these are normally explicit. You can expect to pay an initial set-up charge, annual plan fee, initial charge on the investments that you purchase and annual management charge on those investments. In addition to this, you should expect to factor in a charge for any advice that you receive in conjunction with setting up the SIPP and the associated investments.
Anything else that I need to know?
Although initially aimed at higher earners and professional partnerships, there are a number of low cost SIPPs, mainly on the internet, aimed at investors with more modest sums to invest who wish to invest in collective investments and listed shares and who will be unlikely to invest in commercial property. These services are unlikely to provide any advice with regard to the types of investment available and their suitability, including the asset allocation most likely to achieve your personal objectives. In addition, certain types of investment may not be available, for example, commercial property. However, fees are normally lower than those provided by a "full" SIPP.
Our SIPP Pension Service provides:-
- Impartial Quotes & Advice on your SIPP options.
- Advice on transferring pensions and transfer analysis comparing existing scheme benefits with the new scheme.
- Assessment of your circumstances to find the most suitable type of SIPP pension for you.
- Helping you with the relevant paperwork to ensure that your SIPP is processed smoothly.
| Barclays Defined Returns Plan |  | Minimum Pension Investment £3,600 | |
| This capital protected plan has a choice of investment terms of 6 years offering a maximum return of 44%. Can be used for SIPP and SSAS pension investment. |
**Guaranteed gross income.
Disclaimer
Please bear in mind that:
- The above investment plans are designed as medium to long term investments.
- Past performance of the FTSE 100 should not be seen as an indication of future performance.
- The FTSE 100 Index measures only the capital value of the shares in the Index and no allowance is made for dividends paid by the companies in the Index.
- If you redeem a structured investment plan before the end of the term, you may get back less than the amount you originally invested. The value of the plan will be determined by the price at which the Investments can actually be sold on the relevant dealing date.
- The list of investment plans provided above should not be seen in any way as being a recommendation. No advice has been given and you should be aware that any investment which takes place will be transacted on an “execution only” basis.
- Full details of the funds, including investment performance statistics and risk profile will be provided in the documentation/brochure sent to you and it is up to you to ensure that you fully understand the nature of investment before proceeding. If you are at all unsure of the suitability of the type of investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.
- The levels and bases of taxation and reliefs from taxation can change at any time and the value and availability of any tax reliefs depends on your individual circumstances. Any favourable tax treatment of SIPPs and SSASs may not be maintained in the future and is subject to changes in legislation.
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