Self-invested pension plans
Introduced in 1989, self-invested pension plans (SIPPs) aim to provide greater flexibility for pension holders in terms of what investments they can hold in their pension plans.
What are SIPPs?
SIPPs “unbundled” pensions administration from investment management. For the first time pension holders were able to select a pension administrator, known as a SIPP provider, and separately appoint either a discretionary manager to run their investments or take responsibility for selecting their own investments.
There have been many changes since then, the most recent of which was “Pensions Freedom” in April 2015, explained below.
Firstly, no withdrawal limits will apply, provided investors are aged 55+ and have freedom over how they draw money from their private pensions, such as a SIPP. Secondly, the 55% pension ‘death tax’ has been abolished. From April 2015, funds left in private pensions can be passed to beneficiaries free of tax, if the pension holder dies before age 75. If death occurs age 75 or over, the beneficiaries are taxed as income on the pension funds they receive.
This is a Financial Promotion
Investment flexibility
Having established your SIPP, you can appoint an external discretionary manager, such as Credit Suisse, to look after the investments for you via a discretionary managed account. We can then take a holistic view of your overall investment strategy and make sure that your SIPP is managed in line with an asset allocation strategy covering all your assets.
Alternatively, you can take responsibility for managing the investments in your SIPP via an advisory arrangement. Credit Suisse can also help you with this approach.
Pension consolidation
You may have collected a number of different pension plans during your career and may find it administratively tiresome to keep track of what they are worth, how they are invested and how they are performing. For these reasons SIPPs are very popular as a pension consolidation vehicle: you simply transfer all of your pension plans into one place. This means one pension administrator for all of your pensions and one valuation – not several valuations arriving at different times.
In addition, if you appoint Credit Suisse to manage the investments in your SIPP on a discretionary basis, you will have one investment manager looking after all of your pension assets.
Lifetime allowance
The Lifetime Allowance governs the maximum amount that an individual can accumulate in UK pensions during their lifetime. Any amounts in excess of the Lifetime Allowance are taxed on retirement.
The Lifetime Allowance increased to GBP 1.055 million from 6 April, 2019 and increased further to GBP 1.073 million from 6 April, 2020.
Additional considerations/risks
- Your invested capital is at risk, the value of which can go down as well as up.
- There are restrictions on what you can hold within a SIPP that may not apply to investments that you can buy in your own name.
- You cannot take any benefits from your SIPP until you are aged 55 and then any withdrawals in excess of 25% of the fund will be taxed as income.
- Tax legislation may change in the future, so that some or all of the tax advantages currently enjoyed in your investment may disappear.