SIPP - self invested personal pension
Even before you reach retirement age, it’s important to start thinking about what to do with your pension fund – and how best to manage your savings ahead of spending them.
If you have retirement savings that have accumulated across a number of different personal pension pots, a Self-Invested Personal Pension (SIPP) – is a good way to combine them.
Many people may choose to do this, as consolidating pension funds simplifies the administrative process and irons out any potential complications in the future.
Although SIPPS can be used within a wide range of countries, including the UK, they offer valuable benefits to expats or those planning to enjoy their retirement overseas – making them a popular solution for those looking for more control over their pension pot.
In this guide, we’ll give you a simple overview of SIPP administration, what to expect if you choose to use a SIPP scheme in your pension plan, and how to transfer your funds efficiently and safely.
We know that planning this stage of your life is a big step. That’s why we are here to give you a cohesive pension administration service and asset management options to help you with your investment decisions – growing your cash lump to meet those retirement goals.
All of our insights and professional advice come from decades of individual planning experience, in line with UK best practices.
For quality guidance with no hidden fees and no middlemen, get in touch with the Brite team today.
What is a self-invested personal pension (SIPP)?
A SIPP is a self-invested personal pension that is offered to holders of UK pensions. If you live outside of the UK, you may also be eligible for a SIPP.
SIPP plans became prevalent in the UK in the 1980s. As a low-cost savings method, they give UK pension holders a larger choice of investments and control of where their funds are allocated.
A SIPP can be sometimes used to facilitate an overseas pension transfer where a QROPS (Qualifying Recognised Overseas Pension Scheme) doesn’t meet individual circumstances.
As such, many pension funds use this to access a variety of different currencies – often making them a great fit for those whose retirement journey is taking them abroad.
What is the difference between a personal pension and a SIPP?
A SIPP works in a similar way as the standard personal pension and is classed under the general umbrella term of ‘personal pension scheme’.
It’s important to note that SIPPs are still considered UK pension plans and regulated under HMRC rules – even those held abroad.
SIPPs held by non-UK residents are still deemed UK self-invested pensions. However, they can give customers more control over where their funds are invested.
What are the rules for SIPPs?
If you live abroad or are planning on taking your retirement in a foreign country, the same tax relief rules will apply to your pension pot as they would in the UK. This means that any taxable pension income still has to be declared to HMRC, alongside the member payments of any trustees.
A number of personal pension schemes and occupational plans can be transferred into a SIPP – alongside cash pension contributions if you choose to top your fund up in this way.
As they are classified in a similar way to personal pensions, you can also flexibly draw income from your SIPP from the age of 55, with full access to the total value.
However, it is important to note that there are limits on tax relief for the first five years of non-UK residence if you are an expat, so make sure to factor this into your financial planning ahead of a move abroad. A lifetime allowance (LTA) limit also applies to most pension solutions which can result in tax charge of up to 55% on pension funds in excess of £1,073,100.
Your pension pot may also be liable for additional tax charges, especially if you choose to reside in a country that does not have a double taxation agreement with the UK. This could mean that your pension income is still subject to UK tax.
In some cases, you may be able to reclaim a portion of these payments – but you could also be taxed in your country of residence too.
To discuss whether switching your existing pension assets to a SIPP is a smart move for your individual retirement journey, get in touch with our friendly financial advisors today.
Is a SIPP good for my pension plan?
With SIPP administration, you can choose and manage your own investment accounts or have an experienced financial advisor help you make informed choices as to how your pension is handled.
SIPPs offer flexibility when it comes to making additions or changes to your current pension plans, which includes investment management and a wider range of assets that can be funded.
This may include:
- Collective investment funds – for example, within unit trusts or open-ended investment companies (OEICs)
- Company shares, both in the UK and abroad
- Investment trusts
- Some property and land – most residential properties are excluded
These assets may change depending on the type of SIPP your pension provider offers, and restrictions do apply for personal use.
If you are looking to put funds into residential property, SIPPs do not allow this kind of direct investment.
However, you may be able to invest in offices or other kinds of commercial property. You might also opt to indirectly invest through collective investment funds such as real estate investment trusts.
Before transferring your pension, make sure your plans align with any tax rules or check the limitations of your particular SIPP.
You can also ask one of our dedicated Brite for straightforward, no-obligation guidance at any point – whether you’ve already transferred your pension with us or are simply thinking about your options.
What are the benefits of a SIPP, and what should I expect?
For those looking for a flexible option when it comes to consolidating several personal pensions into one easy-to-access solution, a SIPP may be ideal.
Officially recognised as a registered pension scheme since 2006, SIPPs qualify for tax relief – which means that payments can receive a boost from government contributions.
Higher and additional rate taxpayers can claim back more, but it is important to remember that these tax benefits are limited by annual earnings and the pension annual allowance.
As with most aspects of financial planning, it is important to consider what will happen to your pension should you pass away and what restrictions might be in place.
Notably, SIPP funds can often be passed to beneficiaries free from inheritance tax – that’s if death occurs before 75 and the amount accrued is under the lifetime allowance (LTA) limit.
In addition, set-up costs and overall fees for this type of pension transfer are usually found to be lower than overseas pension schemes.
However, a SIPP tax-free lump sum payment is limited to 25% per annum.
If you have used several personal pensions over the course of your working life, SIPPs are an ideal way to consolidate them in one overall product.
This simplifies the process and helps reduce administrative issues further down the line – whether you continue to live in the UK or choose to take your retirement abroad. However, this aspect is likely to be more important to expats.
At Brite, we know how important it is for you to stay informed when it comes to your money.
That’s why you can use our handy onsite calculator to create and compare the fees you can expect from the wider pension industry and with us.
Find out how our team of dedicated financial advisors can reduce the impact of high fees ahead of transferring your pension – with just a few simple clicks.
What do I have to be aware of with a SIPP?
Although self-invested personal pensions can be a tax-efficient and flexible solution when it comes to controlling and consolidating your money ahead of retirement age, as with any financial product, there are potential risks when it comes to any type of investment. As such, it’s best to seek qualified help and guidance to ensure that you are making the best choice for your money.
How do I know which pension choices are best for me?
Everyone’s financial and personal circumstances are different – which is why the best way to fully understand which pension would work best for you is to get a full review and a new valuation.
At Brite, we believe that we can grow your wealth so you can truly get the most out of your retirement years.
This is why we also consider what your pension could potentially be worth in the future, not only what it is valued at when you first come to us.
When it comes to creating a SIPP, we create a cohesive pension solution that takes your goals into account – whether it’s a long-held retirement dream or a monetary aim.
We do this by helping you take control of your funds, led by a team with years of dedicated industry experience and financial knowledge as part of a no-obligation review.
First, we’ll collect all the important information needed on yourself and your pension, before having a chat about the full scope of your retirement plans.
Once we’ve made this assessment, we’ll discuss whether your pension would be best left in the UK or if an overseas pension transfer is recommended in helping you achieve your goals. You will not be charged anything for this pension review service by Brite.
If you decide to go ahead with switching your pension fund with us, we’ll quickly get to work on making all the necessary arrangements to facilitate this. To smooth out the process, our fees are paid within the transfer arrangement – so you don’t have to send us any payment once this has been processed.
To discover how we can help you achieve your dream retirement, get in touch with us by using our simple contact form.
Why choose Brite for your pension solutions?
First started in 2016, Brite offer an unparalleled all-in-one pension service. This allows us to give you a cohesive service, from advisory to pension administration, seamless transfers to secure asset management.
With a wealth of expertise within our team to facilitate this, we are able to bypass the need for third-party intervention or middlemen – so we can keep our costs and fees down. This allows you to keep more of your retirement money to enjoy, wherever you choose to spend those exciting years.
Even if you have previously transferred your pension to an existing scheme, but have been disappointed by the overall service or progress of your investment, Brite can help you make the next step.
We make a point to tell our clients that their existing pensions and their funds have plenty of potential for growth.
However, high charges throughout the industry can cause issues with performance. That’s why we give you the best of both worlds: melding top-level advice and guidance with unbeatably low fees.
To start your journey, why not book in a friendly, no-obligation chat with us to discuss your goals. Get in touch using our contact form or easily book in a call-back.
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