Registered Offices - 21 Castle Street, Carlisle, Cumbria CA3 8SY
Telephone: 01228 538988 Fax: 01228 538988 Email: info@investacc.co.uk
Company No. 2719226
The Investment And Retiring Planning Specialists
What is a SIPP
Self Invested Personal Pensions (SIPPs) were first introduced in 1989 and have evolved into the favoured investment vehicle for individuals seeking more control and flexibility in their retirement planning. Unlike traditional insurance company pension schemes, members are not restricted to the narrow investment funds of any one company and may invest in a wide range of permissible investments within a tax efficient wrapper. Income tax relief is allowed on personal contributions and corporation tax relief on company contributions. The fund is exempt from most forms of taxation, allowing tax efficient growth.
Who can have a SIPP
Any individual who is resident in the UK under the age of 75 may invest in a SIPP and in certain circumstances non-UK residents who have had UK earnings in the previous five years may also be eligible. An individual may be a member of as many pension plans as they wish, contributions may be paid direct by the member, their employer and by transfer of previous pension plans.
How much may be contributed?
Contributions to a SIPP are unlimited, the only limits applicable being limits for tax relief purposes. To obtain tax relief on individual contributions, the maximum that may be paid is the greater of: -
- £3,600 regardless of earnings and
- 100% of relevant UK earnings.
HMRC set an annual limit for tax relief purposes, these limits have been confirmed up to the year 2010 as follows: -
- 2007/08 £225,000
- 2008/09 £235,000
- 2009/10 £245,000
- 2010/11 £255,000
What investments are permissible?
HMRC allow SIPPs to invest in a wide range of investments, permitting virtually any form of asset to be held, although a list of prohibited assets has been published by HMRC which includes residential property and other esoteric investments, although not specifically prohibited, should any scheme arrange any such investments, penal tax charges will be applied.
SIPPs may borrow to acquire investments, although borrowing is limited to a maximum of 50% of the fund value. Transactions with scheme members are permissible, although any such transactions must be arranged at an arms length valuation.
Minerva SIPP will not allow the following forms of investment: -
- Direct Residential Property
- Wasting Assets
- Direct or indirect investment in sporting animals
- Tangible, movable assets (art, antiques and fine wines)
- Certain unquoted shares which own other prohibited assets.
How benefits may be paid
Upon drawing benefits the fund value is tested against the Standard Lifetime Allowance, (SLA) if the fund exceeds the SLA a tax charge will arise unless transitional protection applies. The SLA has been confirmed to 2010 as follows: -
- 2007/08 £1.60m
- 2008/09 £1.65m
- 2009/10 £1.75m
- 2010/11 £1.80m
At retirement, a number of options exist for the payment of pension benefits, including: -
- Pension Commencement Lump Sum - A tax free lump sum equivalent to 25% of the fund value may be paid.
- Secured Income - A Lifetime Annuity may be purchased, providing pension income for the member, this may include a spouse's benefit, allowing continuation of pension income after the member's death.
- Unsecured Income - Income may be drawn directly from the fund, allowing investments to remain, the level of income available is determined by reference to the fund value and Government Actuary Department (GAD) published rates at the time. This allows a flexible level of income as the member may vary their income from nil up to the maximum permissible in any one year. Benefit limits are assessed every five years.
- Alternative Secured Pension - Alternative Secured Pension only available after age 75, is similar to Unsecured Pension but with lower levels of income.
What happens in the event of death?
- Before Retirement - On death prior to retirement, the full fund value may be paid to a nominated beneficiary.
- After Retirement - The death benefits available will depend upon the form of pension benefits payable, if a Lifetime Annuity has been secured, benefits may continue to be paid to a spouse or, if a guarantee period has been selected, the balance of the guarantee period may be paid. For members who have elected unsecured pension, the fund value has remained invested and will be available to provide a spouse/dependent's pension or, alternatively, the fund value may be paid to a nominated beneficiary, less 35% tax charge. For members in Alternative Secured Pension the only benefits available upon death are a spouse/dependent's pension, if there are no dependents the fund may be transferred to another scheme member or paid to a nominated charity.
What charges are applicable?
Please refer to the current charging schedule: -