The Self-Invested Personal Pension (SIPP) is essentially a pension wrapper that is capable of holding investments and providing you with tax efficient savings for when you retire. As a form of personal pension scheme they offer an individual complete control of their assets and the option to choose and manage their own investments.

Quite often many individuals have more than one pension scheme, with this is mind one of the major advantages of a sipp is that you can transfer in pre-existing pensions; this allows you to consolidate and bring together your plans for retirement. Additionally this will allow easier management of your investment portfolio and also lend it’s self to regular investment reviews.

Recent changes in traditional pension schemes

When you apply to an experienced case manager is appointed from one of our trusted FSA regulated partners, an expert, no obligation review service is offered to make an assessment on what is the best option for you.

If your current pension scheme is invested in any of the following scheme or schemes or you have had a change in circumstances then this review service may be of particular benefit:

  • A personal pension, frozen or with benefits
  • A personal pension scheme with a company that no longer sells pensions
  • A company pension where your employer has ceased trading
  • A company pension scheme where the company is closing down
  • If you have been or are getting divorced

In recent years pension charging structures have changed dramatically, now, due to the introduction of stakeholder pensions the charges applied to these new pension plans are considerably lower than in the past. This means that many individuals find themselves with over priced and outdated pension contracts. Additionally investment returns on many older pension plans have performed poorly with little or no bonuses being added to “with profit” pension plans.

With this in mind a sipp has many attractive qualities, the fore runner being increased control and flexibility of your investment options.

Tax benefits

When you contribute to any pension, basic rate tax relief of 20% is automatically added by the government, for example if you contribute £8,000 the government automatically adds £2,000, to make a total of £10,000. However if you are a higher rate tax payer then you are eligible to claim back up to a further 20%. These means an investment of £10,000 into your sipp could cost as little as £6,000. However additional rules do apply to those on an income higher than £150,000 but these rules will be discussed by your case manager or if you have a questions don’t hesitate to contact us.

Higher rate tax charged at 40% is currently applicable to incomes of £37,400 and over for 2009/10, for 2010/11 this is set to increase to include salaries between £37,401 and £150,000.Additionally in 2010/11 those with incomes over £150,000 will be charged at an additional rate of 50%.

In the 2009 pre budget Alistair Darling announced new restrictions on higher rate tax relief. Employer contribution will now be included and effectively those with incomes over £130,000 will no longer be entitled to higher rate tax relief.

With regards to sipps higher rate tax relief can still be claimed at 40% for the tax year of 2009/10. The government will then contribute the basic rate tax relief of 20% to all pension contributions to encourage individuals to save for the future. For further information on the changes in higher rate tax relief contact us today for a free 5 minute review with a partnered case manager.

What’s more once your contribution has been made any funds are able to grow free of Income tax and UK capital gains tax.

Additionally if you die before you start drawing benefits from your pension then the funds ill automatically be transferred to your spouse or any other pre-elected beneficiary. However other tax charges may apply and this should be discussed with your independent advisor.

Any pension and tax benefits are liable to change alongside any changes in legislation.