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.