Dip into a SIPP
As health and longevity continue to improve and there is a need
to fund a longer life in retirement, it is inevitable that people
will look for alternatives to the traditional personal pensions as
the mainstay of their retirement savings plans. In some cases,
compromises are being made, as recent research has revealed that
almost two million people in the UK are to postpone retirement over
the course of the next decade, in a bid to build their pension pot
further.
As traditional pension funds continue to underperform, more
savers are choosing to take control of their retirement money and
modern pension legislation allows greater flexibility in how they
plan for their retirement. A direct consequence of this is the
growing demand for self invested personal pensions (SIPPs), which
is expected to increase further as more people begin to appreciate
the flexibility and financial benefits of these vehicles.
A SIPP is a specific
type of personal pension, suitable for employed or self-employed UK
residents under 75 years of age, which offers a wide choice of
assets in which to invest, including stocks and shares, commercial
property and cash, amongst others. SIPPs typically allow you to
take full, active control of the underlying assets or, if
preferred, to appoint a discretionary investment manager to do this
on your behalf. The added advantage of appointing a discretionary
investment manager is that they should have the experience and
expertise to generate the returns to fund your retirement needs. To
self-manage a SIPP, as with any important longer term investment,
requires skill, experience and financial sophistication, given the
scope of assets in which you can invest. But the sophistication of
SIPPs has done much to increase their popularity, as they offer
unrivalled flexibility and freedom in planning for your retirement.
Unlike traditional pensions, there is no compulsory requirement to
purchase an annuity when you retire.
SIPPs also have compelling potential from a tax planning
perspective, and these continue to develop. There are a number of
special features associated with SIPPs, such as: availability of
full tax relief on contributions, subject to the UK annual
allowance; contributions paid net of basic tax relief at 20%; from
the age of 55, a regular income can be taken from the fund while
still being invested; growth is free from capital gains tax (CGT);
and a tax-free lump sum of up to 25% of the SIPP's value.
As with all investments, it is important to bear in mind there
are restrictions and risks involved in investing in SIPPs; the key
restrictions to consider are: the maximum annual contribution,
which is subject to HMRC rules (the current annual allowance is
£255,000, but this will be reduced to £50,000 with effect from
April 2011); residency and age restrictions; scheme rules may
prevent or restrict withdrawal of capital; and higher rate tax
relief must be claimed by self assessment. Any decisions made
concerning payments to, investments within and withdrawals from the
SIPP will affect the benefits.
We, in conjunction with specialist pension providers in the UK,
can arrange a SIPP structure for you through our Focus platform,
giving you access to a range of banking and investment services all
within one account and under one roof. The main advantage of
including your SIPP within our Focus platform is that you can save
time and simplify your administration. Additionally, through our
online banking system you can view your SIPP online, to allow you
to monitor the progress of your SIPP investment on a real-time
basis. By investing with Fairbairn Private Bank you have the option
of self-managing your SIPP or employing our discretionary
investment management service to manage it for you.
Our discretionary investment management service combines our
experience and understanding of clients' needs to construct
innovative services which are highly adaptable and uniquely
positioned. Your SIPP would be managed by us to target a return
within an agreed level of risk which you are comfortable with. We
understand that your overriding expectation is the delivery of
investment performance.
The types of investment that can be held within a SIPP carry
different forms of risk. As with any investments, the value and the
income from them can fall as well as rise and you may not get back
the original amount invested. Past performance is not necessarily a
guide to future performance and exchange rate changes may affect
the value of your investments.
Please note that all figures quoted are correct at the time of
writing.
To find out more about this service and explore other options
available, please contact us on +44 (0) 1624 645000.