A Self-invested Personal Pension (SIPP) is a UK-registered personal pension arrangement that is available to both UK residents and expatriates. A SIPP gives a member more flexibility and control over their retirement savings and is typically favoured by savers seeking additional investment options or increased flexibility at retirement.
Advantages of a SIPP?
A SIPP can be funded by new contributions or the transfer of existing pension plans. If a member has worked for several employers, they are likely to have multiple pensions. Consolidating these in a SIPP may reduce fees and give better investment performance. Investments in SIPPs are tax-free and allow a wide range of investment choices, including commercial property.
If the member is UK resident, they will be able to receive tax relief on gross contributions of up to 100% of their net relevant earnings each year up to the Annual Allowance. If there are no earnings, up to £3,600 gross can be contributed each year and this will benefit from tax relief at the basic rate of tax.
When taking benefits, the rules for a SIPP are the same as for a standard personal pension; there is the option to access the entire pension pot in a lump sum at any time after age 55 and anything above the tax-free element will be taxed as earned income at the pensioner’s marginal rate.
Another SIPP benefit is the ability of the member’s funds to be passed on to nominated beneficiaries upon their death. If a member dies before the age of 75, the funds can be passed on free of tax. If a member dies after the age of 75, funds will be taxed at the recipient’s marginal rate of tax.
All UK SIPP providers are regulated by the UK’s Financial Conduct Authority.