A self-invested personal pension, or SIPP, allows you greater control over your retirement savings.
Here’s everything you need to know about how they work, your investment options, and all the ways you might benefit.
A tax-efficient personal pension that gives you more control over your retirement savings
A SIPP is a type of personal pension that provides more flexibility and control than a standard pension.
Unlike a traditional pension, which often involves a fund manager selecting and managing your investments, a SIPP allows you to choose how your pension savings are invested.
With greater control over your investment choices, you can tailor your investment strategy according to your risk tolerance, time horizon, and retirement goals.
Use your SIPP to invest in a wide range of assets, including commercial property
Investments you can hold in your SIPP include:
- Collective investments such as unit trusts, or OEICS
- UK and international shares
- Corporate bonds and gilts
- Commercial property
- Agricultural land
- Commercial land
- Investment trusts
- Commodities
- Cash.
This list is not exhaustive. Investment options can vary depending on the provider.
As such, you could benefit from speaking to an independent financial planner to ensure you find a SIPP provider that allows you to make the investments that are appropriate for you.
You can make regular and one-off payments into your SIPP
Once your SIPP is up and running, you can choose to make regular payments, pay a one-off lump sum, or a combination of the two.
Plus, your SIPP needn’t be your only pension. Depending on your circumstance, you may wish to pay into a SIPP and a workplace pension at the same time.
If you’re self-employed, as well as making personal SIPP contributions, if you run your own business, you can also make employer contributions. This may help to reduce the tax you pay – as a business and individual.
Who can open a SIPP account
You can open and pay into a SIPP if you’re under 75 and a UK resident, or if you’re working overseas with UK earnings.
Alternatively, if you’re a British expat, an International SIPP may be the solution you need.
International SIPPs are based in the UK and qualify for tax relief in the same way as UK SIPPs.
If you transfer into an international SIPP while you’re living abroad and then return to the UK for either a short time or permanently, normal pension contributions can be made by you and/or your new employer.
Using a SIPP could be particularly helpful if you want to consolidate multiple pensions into one easy-to-manage plan. If this is something you’re considering, it’s important to establish if your current pensions already have valuable benefits or guarantees that you would be giving up by moving them.
Many providers won’t allow you to transfer your pensions unless you have first taken expert advice.
So, before you plough ahead, get in touch. We’ll discuss your options and help you find a SIPP to suit your needs.
Top benefits of using a SIPP for your retirement savings
There are several compelling reasons why a SIPP could be a good choice for your retirement savings, including:
- Enjoy greater control of your investments. One of the biggest selling points of a SIPP is the level of control it offers. You can choose exactly where to invest your pension pot, tailoring your investments to match your appetite for risk, and financial goals.
- Choose from a wide range of investments. With access to a wide range of investment options, you have more options to diversify your retirement portfolio.
- Tax benefits. As with other pension schemes, SIPPs offer significant tax relief on contributions, which could boost the value of your pension pot over time. Plus, the option to take 25% of the pension fund as a tax-free lump sum at retirement is a major advantage.
- Flexibility in retirement. SIPPs offer greater flexibility when it comes to your retirement income. Whether you prefer a lump sum withdrawal, income drawdown, or purchasing an annuity, you can access your SIPP according to your specific needs.
In some circumstances, you may wish to borrow from your SIPP
While a SIPP is primarily a retirement savings vehicle, you can also use your SIPP to borrow money.
Typically, this is done to purchase commercial property – as an investment, or to buy a business premises that you can then lease back from the pension.
You can borrow up to 50% of the net fund value to purchase a commercial property. For example, if your SIPP was valued at £500,000, it could borrow up to £250,000.
As you might expect, there are strict rules around borrowing from your SIPP. It only applies to commercial property and you must be able to evidence how you’ll repay the loan.
Again, if you already have a SIPP or are interested in setting one up in order to purchase property, please get in touch.
Get in touch
If you think a SIPP might be a good option for you and your pension savings, get in touch.
Email enquiries@alexanderpeter.com or give us a call on +44 1689 493455.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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