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Miscellaneous
Self Invested Personal Pension Plan (SIPP)
From April 6, 2006, investors will be able to acquire buy-to-lets with their pension funds. After that date property bought via a Self Invested Personal Pension Plan (SIPP) will not attract capital gains tax when it is sold, and income from rent will be tax-free.
A Self Invested Personal Pension allows you to make your own investment decisions about your pension fund. You can pay regular contributions to a SIPP or you can pay single contributions.
Self Invested Pension Plan's (SIPP's) is an Inland Revenue approved 'wrapper' that enables an individual to invest their contributions into many different types of investments and funds and offers far greater control over the way the funds are invested. SIPP's can offer you freedom and flexibility. They offer you the freedom to choose where your funds are invested. They can also be very cost effective for individuals with large pension funds who wish to take a more active role in the way that their pension fund is invested.
People over the age of 50 but under 75, who are about to draw their pension but do not want to lock themselves into an annuity, can use a SIPP when moving into income drawdown, also known as a pension withdrawal, to provide more flexibility in drawing income.
Advantages of a Self Invested Personal Pension Plan (SIPP)
- A tax efficient way to save for your retirement
- Flexibility to take into account changes in your individual circumstances, working pattern and lifestyle
- Control over the investment of your pension fund by allowing you to choose from a wide range of investments
- SIPP's can also be a very cost effective option for individuals with large pension funds who wish to take a more active role in the way that their pension is invested.
- There are generally no hidden charges or penalties as SIPP's will often have a very transparent charging structure that will include a known fee structure that is irrelevant to the size of the fund.
- Tax Incentives - Contributions receive tax relief at your highest rate(s). This means that if you are a higher rate taxpayer, you need contribute only £60 of your own money to get £100 invested, thanks to the £40 you will get back from the taxman. Basic rate relief is credited to the fund, while the higher rate relief has to be claimed back from the Inland Revenue.
Who Might Benefit From A Self Invested Personal Pension Plan (SIPP)?
Individuals with larger pension funds, let us say in excess of £100,000, with a need for wider investment choice will benefit from a SIPP situation. Individuals with smaller funds or who are happy with the options provided by a standard personal pension will not need the extra advantage of a SIPP and therefore could save money by using a stakeholder pension type arrangement, for instance.
