Good news on SIPPs

Planning to take charge of your retirement?

If you like the idea of flexibility and freedom, a self-directed pension scheme - like SIPPs - could be right for you.

SIPPs (it stands for a Self-Invested Personal Pension) have become increasingly popular in recent years, with over £30 billion currently invested. Every UK resident under 75 can contribute to a SIPP. You can even open one for a child without affecting your personal tax status.

They offer:

a wide, innovative choice of investments
high performance potential
big tax benefits (an investment of £10,000 could cost you as little as £6,000)

Yet market research indicates many UK customers are still unaware of this savings opportunity, despite the fact that it generally allows a much faster accumulation of pension funds than through traditional channels.

Perhaps it's time you took a look.

A bit of history

SIPPs, or Self Invested Personal Pensions, have been around for a while. In fact, they were first introduced by the UK government in 1989, essentially to encourage people to save more for retirement.

Initially, the high-income end of the market was most interested - mainly for tax reasons - but that has now changed. Today, SIPPs appeal to all income levels and have definitely gone mainstream. Why? Because SIPPs offer you the opportunity to invest in a very broad range of assets and some 1,000 funds (compared to 40 or so for other pension plans). These include:

Unit trusts and Open-Ended Investment Companies (OEICs)
Tax-exempt unauthorized Unit Trusts
Exchange Traded Funds (iShares)
Commercial Property
Gilts
Local Authority Bonds and Fixed interest securities
UK and international equities, including AIM shares
Corporate bonds
Cash
Deposit accounts with Banks or Building Societies
Foreign securities
Futures and Options, including CFDs (Contracts for Difference)
Hedge Funds (provided they are listed on a Recognised Securities Exchange)

This is definitely NOT your grandfather's traditional pension portfolio. And meanwhile, SIPPS enable you to sit in the driver's seat to a large degree (that's the "do-it-yourself" part), although you can also use a broker or manager.

The Allenbridge Advantage

Running your own investment portfolio can be exciting, daunting - and risky. And like any investment, SIPPs offer no guarantees.

That's why professional advice is always a good idea.

We can help you open and manage a SIPP. And if you simply want to open a SIPP account with Allenbridge and then personally manage it, you can do that too.

We are here to work with you and meet your specific requirements.

Just call our freephone number 0800 33 99 99 for help

Now - The Small Print !

Eligibility

You can join any type and number of pension schemes at any time. Even if you are in your company's pension scheme you should still be able to set up and contribute to a SIPP

Contributions

There is no limit on the amount you can contribute to a pension scheme, only on the amount that is 'tax privileged'
If you are a UK resident you can have tax relief on the higher of 100% of your annual earnings or, if you are retired or not earning, £3,600
Residency and age are no longer a factor when determining the amount you can contribute
Each year you will normally have an 'annual contribution allowance' of £215,000 (This amount will rise annually to £255,000 in 2010/11). This is the annual amount of your contributions that are 'tax privileged'
Each year you can contribute in excess of the annual allowance if you have earnings to support the contribution (but if you exceed the allowance, a tax charge of 40% will be levied on the excess)
The 'annual contribution allowance' will not apply in the year your pension benefits are taken in full, or the year of your death

Transfers

You may choose to transfer your existing pension schemes to the SIPP
Any benefits you have in an existing pension scheme will not need to be tested against Revenue limits prior to transfer
No tax free cash certificates will be required on any transfer
If you are under 75 and taking income withdrawals in the form of unsecured pension from another pension scheme, you can choose to transfer this pension scheme to the SIPP
If you are 75 or over and taking income withdrawals in the form of alternatively secured pension from another pension scheme, you can choose to transfer this pension scheme to the SIPP

Investments

Scheme borrowing will be limited 50% of the scheme assets at the date the loan is taken out.

Benefits

The minimum pension age is rising to age 55 from April 2010
When you take your benefits from the SIPP the value of your SIPP fund will be tested against your 'lifetime allowance'
Your 'lifetime allowance' may be the 'standard lifetime allowance' or an allowance in excess of this. The 'standard lifetime allowance' is £1.5 million in 2006/07 and will rise annually to £1.8 million in 2010/11
In certain circumstances you may be able to enhance the 'standard lifetime allowance'. For example, you may be able to obtain protection on your existing pre A-day pension rights.
If your pension fund exceeds your lifetime allowance, the excess will be subject to a tax charge and the amount of charge depends on whether you take this excess as a pension or a lump sum
Up to 25% of the value of the pension below the 'lifetime allowance' can usually be taken as a tax free lump sum
There will be a 'lifetime allowance' charge of 25% on funds in excess of your 'lifetime allowance' if they are taken as a pension in addition to any income tax payable on your subsequent pension payments
There will be a 'lifetime allowance' charge of 55% on funds in excess of your 'lifetime allowance' if they are taken as a lump sum
If you have a pre A-day pension fund with 'enhanced' protection they will not be subject to a tax charge
Income withdrawals taken from you SIPP from minimum pension age up to age 75 will be known as unsecured pension
Income withdrawals can continue to be taken from the SIPP once you reach age 75 - this is known as alternatively secured pension
By age 75 you must be taking income withdrawals in the form of alternatively secured pension, or must have purchased an annuity on the open market

Death Benefits

The type of death benefits available depends on if you are taking benefits at the date of your death, and if so, whether you were taking unsecured pension or alternatively secured pension
Pension benefits can only be paid to your dependants
The definition of dependant is expanded to allow any person who in the opinion of the scheme administrator was financially dependant on the member at the date of the member's death to be a dependant.

This is based on our interpretation of current legislation and Revenue practice as at December 2005 and should not be relied upon for detailed advice or as a statement of law. Whilst every effort has been made to ensure that the information is correct, we cannot accept any responsibility or liability for any omission or inaccuracy in the material provided in this document. Please remember that current tax benefits may change in the future.