SIPP Pension Advice

Is it Possible to transfer funds from other pensions over to my SIPP Pension?

This is certainly possible, and is another feature of the SIPP Pension’s flexibility. Your financial adviser will advise you of the best way to do this, and whether it is in the best interests to do so. Don’t forget, that by transferring out of some pension schemes, you may also be forgoing other entitlements, and there are also the cost considerations to bear in mind for carrying out a transfer.

One thing to consider, is that if you have contracted-out of the State Second Pension under other pension schemes, then you are not able to transfer those entitlements that relate to contracting-out into your SIPP Pension. That element of the transfer value is required to stay in the origiinal pension plan, or to be transferred into a plan which is permitte to accept such an entitlement.

What is the maximum amount if money that I can keep in my SIPP Pension?

This amount depends, and varies over time, and is called the Lifetime Allowance. This is an absolute maximum that can benefit from tax deductions. Again, as with the annual allwance, this is a cumulative figure which applies to all of the pension schemes that you have in place at any one time. The Lifetime Allowance for 2009/2010 is £1.75 million, and for 2010/2011 is £1.8 million.

If the pension funds within your SIPP Pension exceed the Lifetime Allowance then any sum in excess of the LA will be subject to the Lifetime Allowance Charge. This is, in effect, a tax on the excess amount over the LA. If the excess is taken as a lump sum, then this amount is charged at a tax rate of 55%. An alternative way of reducing the tax burden is to take the excess funds in your SIPP Pension as an annual income, in which case there will be an intia charge of 25%, and the remaining funds will be taxed at your marginal tax rate.

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UK SIPP Pensions - Are They Right For You?

Over the past 18 months or so, the financial services authority in the UK has conducted a thorough research exercise into UK SIPP Pensions, and taking a close look at cases where people have been advised to transfer from a cheap stakeholder pension or traditional pension plan to a more expensive UK SIPP Pension (which stands for ’self invested personal pension’).

The main reason to transfer to a SIPP is the investment choice is far broader - you may have access to literally thousnads of investment funds through this type of vehicle or more specialized areas for example gold, real estate, individual stocks and shares, and foreign currency instruments.

The key advantage of a UK SIPP Pension is its flexibility. Unlike other tax-efficient saving schemes, a SIPP gives you the ability to invest in a wide variety of stock market investments so you can potentially access higher rates of return even if interest rates are low. This will not be perfect for everyone, as a UK SIPP Pension can be exposed to more risk, but for those who are not attracted to the rates offered by savings accounts and ISAs, SIPPs are a great alternative.

However, many people are now questioning whether pension investors actually require such access to specialized investments.  One of the downside of a UK SIPP Pension is that there are some set up charges which are payable to the SIPP trustee and administrator, which run into hundreds of pounds.  In addition, there are ongoing dealing fees for each tttransaction carried out under the SIPP.

If you have  arelatively small pension pot, you need to carefully consider whether a UK SIPP Pension is really cost effective for your retirement requirements. One alternative for you may be to invest in one or two pension funds in a cheaper stakeholder or traditional pension and save money on administrative and management fees.

The best thing to do if you are unsure as to the best way forward is to contact an independent fiinancial advisor, and ask him to do a review and look at the costs you are paying on your current arrangements, and how these may differ with a UK SIPP Pension. The average UK SIPP Pension may charge you around 2% per annum, whereas a typical stakeholder pension would cost only 1% - potentially saving you approx £2,000 per annum based on a pension fund worth £200,000.

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Self Invested Pensions are becoming increasingly popular. To start up a SIPP an individual or their employer needs to approach an approved provider. These are normally insurance companies or fund managers but a comprehensive list is publicly available. You must use one of these providers to take full advantage of the tax benefits. Once a provider has been chosen, the plan holder can then manage the portfolio themselves, or they can appoint a manager to act on their behalf.

One of the key benefits of a Self-Invested Personal Pension is the tax advantages. Like all other personal pension plans, contributions to SIPPs are automatically exempt from basic rate tax. If you are a higher rate payer, you can claim additional relief in your tax returns. Similarly, if you have used your SIPP to invest in assets such as property, the income you receive is tax-free and is not subject to capital gains tax.

As with all pension plans, after retirement, the income that you draw-down will be subject to the usual income tax rates. The money you earn from your investments is also allowed to be reinvested tax-free, up to a threshold £235,000. Reinvesting your income is a great way of growing your pension pot without any upfront costs.

Another key advantage of a SIPP is its flexibility. Unlike other tax-efficient saving schemes, a SIPP gives you the ability to invest in a wide variety of stock market properties so you can potentially access higher rates of return even if rates are low. This will not be perfect for everyone, as SIPPs can be exposed to more risk, but for those who are not attracted to the rates offered by savings accounts and ISAs, SIPPs are a great alternative.

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