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.

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.

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

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.

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.

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.

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