SIPPS Review -  Definition of a SIPP

So having decided that you must plan early for your retirement, it is important that you fully understand exactly what a Self Invested Personal Pension scheme is. A SIPP works in the same way as a personal pension plan in as far as the amount of contributions you are able to make and the taxation benefits you receive on those contributions. However where the SIPP comes into its’ own is in the flexibility of investment areas you are able to take advantage of compared with the traditional limited range of funds offered by Insurance Companies. These areas are not restricted to U.K. investments and can take advantage of worldwide opportunities giving them much greater scope. When performing a SIPPS Review you will also discover the benefits at retirement age allow you to take a lump sum cash advance with the rest of your fund providing an annual income.

SIPPS Review – The Tax Benefits

With a traditional pension scheme arrangement you are allowed tax relief on the contributions you make towards your plan, at the highest rate of tax that you pay, and all the investment growth that your fund makes is tax free At the end of your plan you are allowed to take 25% of the accumulated fund as a tax free lump sum. Because your investment fund is free from Capital Gains and Income Tax it grows at a much higher rate than a normal investment. You can start your SIPPS at any age but there is a ceiling at age 75. The maximum you are allowed to invest into this arrangement upon which tax relief can be claimed is £3600 per annum, even if you do not have any income, which is a fabulous opportunity given that with tax relief this will only cost you £2880. You need to be a resident of the U.K. to take advantage of a SIPPS.

Start Your Plan With A SIPPS Review

As we mentioned before you can utilise all your old occupational pension plans by transferring them into your SIPPS arrangement if this is beneficial to you. You can also make regular payments personally or you can make lump sum payments from other investments. Before transferring any benefits from other investments whether they be savings plans or your old company pension schemes make sure you are aware of any losses you may suffer from penalties imposed by the other Companies for early cancellation etc. You then need to weigh up the tax advantages and possible faster rates of growth in a SIPPS as opposed to leaving your current savings where they are. Always consider taking professional advice before making your final decision.

When you do eventually decide to retire you have the following options. Everyone is allowed to take a tax free lump sum of 25% of the accumulated fund from age 55. The remaining 75% of your fund is used to pay you an income each year for the rest of your life. Various other options come into play here such as guaranteed income payments or investment related income which is based on future investment performance of the fund. A SIPPS Review each year will determine the best option for you.

Where Should I Invest?

SIPPS are not restricted as we previously mentioned to the traditional funds that insurance companies use, so you have a much grater choice as to where your money is invested for you. Perhaps you even have an area of expertise or a hobby or pastime that you can relate you investment to. Some examples of areas in which you can invest are equities, futures/options, real estate or commercial property so your portfolio can certainly be spread across different investment sectors. So, in conclusion, by taking a SIPPS Review you will discover that they give you so much more control and freedom than a traditional pension.

SIPPS REVIEW – Getting The Most Out Of Your SIPP

It all starts when you are in your teens and you get your first job. You are told about the Company Pension Scheme and you think ‘there’s plenty of time for that’. You cannot even imagine the time that is left for you to invest in your pension. During the first maybe 10 years of your working lives you change your job a few times and start to accumulate different pension plans with different employers. These, of course, are all forgotten about and accumulate dust until you eventually retire. As a result of moving around jobs, your part paid pension plans are very rarely worth anything when they come to maturity. That is why it is so important to get a SIPPS Review at an early age.

Choose The Ideal Pension With A SIPPS Review

Some years later when you are married and have a family you begin to become more responsible and realise that one day you will no longer be able to work and need to have some form of pension scheme to provide an income in retirement. A Self Invested Pension Plan is possibly the best route to take as it gives you control over ownership of your pension benefits. In order to ensure that this income is going to be sufficient you constantly need to assess the percentage of your pension premiums to the income you are earning by performing an annual SIPPS Review so you are aware of what level of income you will receive when you retire.

SIPPS Review Recommendations

Pension planning can be fairly complex and needs to be reviewed every year. If you do this you can take away the strain of wondering whether you will be able to afford retirement and realise that this form of investment can actually be a very straightforward method of saving for your retirement. All retirement planning carries extremely tax efficient strategies for achieving your goals, but of course there are a multitude of different plans and schemes in the marketplace. We aim to guide you to your preferred choice, but stress that this is a review of some of the best schemes we have discovered. If you wish to get a general SIPPS Review please go to SIPPS article.