The popularity of the SIPP has demonstrated how alternatives to insurance companies’ arrangements are appealing to many individuals.
However, a SIPP isn’t appropriate for everyone’s requirements and needs, as greater flexibility usually results in additional maintenance costs.
There are a number of factors to bear in mind before considering a SIPP, however, a SIPP may be more appropriate if you:
- Have pension funds in excess of £75,000
- Wish to take a more entrepreneurial approach to managing your pension
- Want to consider the purchase of commercial property
- Are looking for bespoke advice
- Are willing to accept a higher level of charges (as a SIPP can be more expensive than a “standard” pension)
- Want greater flexibility and control over your pension investments
- Are keen to have flexibility in drawing benefits at retirement
- Have alternative income sources at retirement
Before making any decision about the suitability of a SIPP we recommend that you seek specialist advice. Boolers have provided support in this area for over 25 years contact us if you wish to discuss your own situation.
FAQ's
Please find below a list of Frequently Asked Questions to provide further initial guidance on SIPPs:
Q. Can I transfer an existing pension into a SIPP?
A. Yes, however careful consideration needs to be given to the existing pension, as valuable features such as guaranteed annuity rates or Terminal Bonuses may be lost on transfer into a new pension. Boolers are authorised to provide specialist advice on all types of pension transfers.
Q. I have a number of old pensions from past employment, is it good to consolidate them into one pension?
A. This can have several benefits, such as more efficient charges and opening up wider investment opportunities. However, as above, whether it is in your best interests to consolidate needs detailed investigation and we therefore suggest taking specialist advice on this matter.
Q. How do I contribute premiums into a SIPP?
A. This can be set up on a regular or ad-hoc lump sum basis, as a personal contribution or employer contribution.
Q. What can a SIPP invest in?
A. Numerous share based investments and commercial property (including Commercial / Agricultural Land), a full list can be found at Permitted Investments for SIPPs.
Q. Can a SIPP borrow to buy a Commercial Property?
A. Yes, up to 50% of the scheme's net assets may be borrowed.
Q. Can I use a SIPP to buy a proportion of a property?
A. Yes, the property ownership can be shared with other parties, including other SIPPs.
Q. Can a SIPP purchase residential property?
A. As a rule no, some exceptions include purpose built commercial properties, with a residential element e.g. Hotels and Student Halls of Residence. But if you’re thinking of a “normal” house or flat then it’s a definite no.
Q. Are my pension funds protected?
A. Yes, we are covered by the FSCS (Financial Services Compensation Scheme), this means that you may be entitled to compensation from the scheme if we cannot meet our obligations. For pension products, the cover level is 90% of the claim without any upper limit. Where cash deposits are held as an asset of the scheme, the cover is £50,000 per person, per authorised institution.
Q. Are the contribution limits of a SIPP different to a Personal Pension?
A. No, the rules regarding contribution levels are exactly the same as a Personal Pension.
Q. Can I transfer Protected Rights funds into my Boolers Focus SIPP?
A. Yes, this has been possible since 1 October 2008. More information on
protected rights is contained in the section ‘SIPPs
and Contracting out’
Q. Can I have more than one pension?
A. Yes, although every individual has a total annual pension contribution allowance. Having more than one pension does not increase the amount that can be contributed to your total pension provision in any one tax year.
Q. What are the options at retirement?
A. You can take your benefits from age 55 (increased from age 50 at 6th
April 2010). At this point you can take 25% of the fund as a tax free
lump sum, with the remaining 75% available to produce an income.
There are many retirement options available, for further research we suggest the Financial Services Authority’s “Money made clear” guide to your retirement options: http://www.moneymadeclear.fsa.gov.uk/pdfs/retirement_options.pdf
Further Information
If you wish to conduct further research, more external information can be found at our Useful Links for Pensions and Investments.
