| Please note that
these are general guidelines only. Please contact us
before taking any action.
What is a Self-Invested Personal Pension (SIPP)?
It is a Registered Personal Pension Scheme, where the
member decides where the assets are to be invested.
In other words, it does what it says on the tin –
it is a personal pension and the member directs where
the monies are to be invested.
Who are the trustees?
• In some SIPPs the member and the SIPP provider's
trustee company are joint trustees
• In other SIPPs, the SIPP provider's trustee company
is the sole trustee.
• For the MW SIPP 2 it is the latter – MW
SIPP Trustees Limited is the sole trustee.
• But they have an overriding duty of care to protect
the investments for the member
Who can have a SIPP?
• Basically anyone in the UK up to age 75
• There is no lower age limit – they can
be set up at birth.
Investments (other than property)
• Can invest in anything, but some (most) investments
are wholly tax free on both income and capital gains
(other than ACT payable on UK dividends) whilst other
investments are penally taxed
• Penal tax of 40%, 55% or even 70% applies on
such investments as art, antiques, personal chattels
such as yachts, racehorses etc
Property investment
• UK commercial property fully tax free
• Overseas commercial property may be subject to
local taxes
Contributions
• Up to a total of £50,000 in tax year 2011/12
by company and/or member, with full personal or corporation
tax relief on such contributions, provided: a) member's
contributions do not exceed 100% of salary. b) company
contributions can be justified to Inspector of Taxes
as being relevant to member's involvement with the business
• The limit of £50,000 covers all pensions
for a member – so if the member has an insurance
pension policy with an annual premium of £15,000,
a maximum of £35,000 can be paid for him into
the SIPP.
Maximum benefits
• Up to £1.8M fund but reducing to £1.5M
on 6.4.2012
Benefits payable
• Can be taken at any time after age 55
• 25% of fund can be taken as tax free cash sum
• Can take tax free cash sum and defer taking annual
income
• Annual pension depends on fund size but is between
zero and 100% of basic drawdown pension: 100% of basic
drawdown pension is roughly equivalent to what member
would get if an annuity were bought (but no need to
buy an annuity).
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• UK residential property
allowed as a wholly tax free investment provided it
is via a "suitably diverse commercial vehicle".
This means either via a unit or investment trust, or
REIT or OEIC or directly - but if direct, it must be
a portfolio of at least 3 properties (or £1M),
with no one property being more than 40% of portfolio,
and the SIPP member (together with any connected party)
cannot own more than 10% of the portfolio
• Overseas residential is same as for UK residential,
but there may be local taxes and local legal issues
re ownership etc.
Borrowings
• A SIPP can borrow up to 50% of the net assets
of the SIPP for any purpose
• Must be on commercial terms
Loan Backs
• No limit but must be prudent, secure and commercial.
• Cannot loan to member or a connected party.
Unquoted Shares
• No limits
• But HMRC might impose penal taxes on shares in
connected companies that have "taxable property"
– we advise caution.
• We do not permit investment in shares in unquoted
trading companies
Investment transactions with Connected Parties
• Permitted
• Must be on commercial basis
• Must be independently valued
• Can be both ways i.e. SIPP can buy from or sell
to the member.
• If member has guaranteed pension income (essentially
state pension plus annuity income from an insurance
policy) of at least £20,000pa, can take as much
drawdown as they choose in any year, but will pay marginal
income tax rate on their drawdown payment
• No need ever to buy an annuity
Death
• On death before drawing benefits, whole of member's
fund can be paid out as lump sum free of IHT
• On death after starting to draw benefits (includes
just taking the tax free cash sum) if no annuity has
been bought fund is used to provide income each year
to spouse/dependants. Alternatively, can pay out whole
of fund but tax of 55% is paid. Residual 45% fund exempt
from IHT.
• If lump sum is paid out to a pre-nominated charity,
zero tax is payable.
.
Protected Rights
• MW SIPP2 accepts protected rights pension funds
• No investment restrictions
• Must be used on death to provide income at specified
minimum level to surviving legal spouse or civil partner
Future changes
• Lifetime Allowance will reduce to £1.5M
from 6.4.12
• Restrictions on Protected Rights cease from 6.4.12 |
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