What is an SIPP?

A Self Invested Personal Pension, better known as an SIPP for short, is a type of retirement plan that was initially launched in 1989. The express purpose of an SIPP is to offer individuals, who are planning toward their eventual retirement, a better form of management over the investment of their pension fund’s resources. An SIPP can impart a fully adaptable personal pension arrangement that offers accountholders superior control over their chosen investments. An SIPP can deliver a broad choice of permitted personal pension investments in comparison to a variety of other types of pension plans.

Contribution Levels and Limits

How much can an individual invest in an SIPP each year?

  • Up to 100% of a UK resident’s annual earnings can be invested into an SIPP.
  • Individuals with no earnings are allowed to invest £3,600 annually.
  • The SIPP maximum annual contribution level is currently £50,000 for the years 2011 and 2012
  • Contributions above and beyond an annual amount of £50,000 will incur a forty percent tax rate
  • Any unused tax allowances from the three past tax years can be carried forward to alleviate the tax repercussions.

A SIPP can deliver the broadest scope of pension investments, which include:

  • Bonds
  • Funds
  • UK Equities
  • Foreign Equities
  • Gilts
  • Real Estate Investment Trusts
  • Unit Trusts
  • Other Investment Trusts
  • OEICS
  • Hedge Funds
  • Land
  • Commercial Property
  • Options
  • Traded Endowment Plans
  • Cash
  • SIPPs can also include many other UK and Foreign Equities that are traded worldwide.

How to Simplify Your Overall Investments With an SIPP

For anyone who holds various pensions with numerous providers, putting all or part of them into an SIPP could help investors to take charge of their own investments. In addition, having all of your funds in an SIPP can greatly make administration uncomplicated plus reducing the piles of monthly statements that you have to deal with..

How Popular are SIPPs and Why?

The very popular SIPPs have become progressively more widely held due to the fact that they are a tax efficient financial pension plan that is truly designed to facilitate full control over investment determinations.

What are the Specific Benefits of an SIPP?

A. A broad range of investment opportunities
B. Better control
C. Bringing numerous other pension funds together
D. Tax efficient
E. Protected Rights.
F. In the event of the untimely death of the SIPP accountholder, one hundred percent of the value of the SIPP could be paid without any inheritance tax to their chosen beneficiary.

Are There Any Risks With an SIPP?

Let’s face it; any investment plan carries inherent risks. The risks with an SIPP are:

A. Specific pension investments can fluctuate, causing the SIPP accountholder to realize a return that is less than what was initially invested in the SIPP
B. Type of investments held can create a risk to actual capital
C. It is a distinct possibility that future legislation by the government could actually alter the tax treatment of pension fund investments, including SIPPs.

Tax Relief

It is a common occurrence for tax relief to be realized on all contributions to an SIPP. Taxpayers who pay a basic rate or taxpayers, who pay none at all, will be receiving up to twenty percent from HMRC for an amount of as much as one hundred percent of their annual income. For taxpayers who earn in excess of £150,000, their additional tax relief would be thirty percent.