SIPP | FAQ’s

What is a SIPP?
SIPP stands for Self Invested Personal Pension Plan. These are a type of pension that offers the holder greater levels of flexibility and greater investment choice compared to conventional pensions. SIPPS may also be referred to as ‘wrappers’ due to the fact that any investments that you have placed within this ‘wrapper’ are dealt with in a certain manner.

Do I need a SIPP?
Although SIPPS are favourable to conventional pensions for most expatriates, they are not a blanket solution and may not be the best option for all. Generally SIPPS are for those who like to handle their own investments, willing to accept an element of risk, want greater tax benefits or preferential death benefits.

What does it cost?
The charging structure depends entirely on the type of SIPP that you use. The annual charges applied to SIPPS usually start from around GBP250 exclusive of VAT. Also, there may be an additional one off payment which starts from around GBP250 to set up the policy. You should note that the above figures are the minimum charges only, however any extra or further charges should be fully explained to you before the commencement of your plan.

How do I draw from it?
Generally speaking there are three main ways for you to withdraw income from your SIPP. You can either draw directly from your investment fund, purchase an annuity from an insurance company or a combination of the two.

What are the fees?
Every policy that is handled by an external advisor will more than likely impose a fee for their time spent managing your investment. There are two general types of fees; the advisor will either impose a flat management fee or will request a % of your fund.

What happens to my SIPP if I die?
Should you pass on before the end of your policy the remaining funds can be paid to your beneficiary as a tax free lump sum.

Can I transfer property into my SIPP?
You are not able to transfer existing property into your SIPP but you can use it for purchasing property. A SIPP is allowed to borrow up to half the value of the fund it holds to purchase a commercial property.

Am I required to purchase an annuity?
No, although the option is still available to you when you reach retirement age. If you decide to take a 25% tax free lump sum you can use the rest to purchase an annuity if you wish to do so. Alternatively you can just withdraw the remaining sum as intervals that suit you.

Is there a difference between SIPPS and stakeholder pensions?
Both are classed as Personal Pension Plans and have the same rules and regulations when it comes to contributions and tax relief. Stakeholder pensions however are more basic and can be funded from as little as GBP20 per month. They also have a maximum annual charge of around 1.5%, however fund choices are severely limited compared to SIPPS and generally offer a range of about 20 funds.
SIPPS have a much wider array of investment options and give the policy holder more direction and flexibility. Investments can be made up of gilts, trusts, cash, bonds and commercial property amongst others, whereas a stakeholder pension does not.

Can I invest in residential as well as commercial property?
No. Currently SIPPS only offer the option to invest in commercial property and this is only available with certain SIPP funds.

Can I purchase private equity?
Current legislation does allow you the purchase of private equity into your SIPP as long as they comply with HMRC regulations.

Is there a lifetime allowance?
There is a maximum amount of payments made that can benefit from tax reliefs. It applies to all pension schemes and currently is around GBP1.8M.

If you have any questions regarding your UK pension situation then please email us at info@expatsipp.com.

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