1. What is a SIPP?
  2. Do I need a SIPP?
  3. What does it cost?
  4. How do I draw from it?
  5. What are the fees?
  6. What happens to my SIPP if I die?
  7. Can I transfer property into my SIPP?
  8. Am I required to purchase an annuity?
  9. Is there a difference between SIPPS and stakeholder pensions?
  10. Can I invest in residential as well as commercial property?
  11. Can I purchase private equity?
  12. Is there a lifetime allowance?

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    What is a SIPP?

    SIPP stands for Self Invested Personal Pension Plan. This is a type of pension that offers the holder greater levels of flexibility and greater investment choices compared to conventional pensions. SIPPS may also be referred to as ‘wrappers’ due to the fact that any investments you have placed within this ‘wrapper’ are dealt with in a certain manner.
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    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 flexibility with respect to investments and income, and could take advantage of the different death benefits or preferential death benefits.
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    What does it cost?

    The charging structure depends entirely on the SIPP that you use and the chosen investment options. The annual charges applied to SIPPS usually start from around £300 p/year , making it even more cost-effective. Also, there may be an additional one-off payment which starts from around £300 p/year  to set up the policy. You should note that the above figures are the approximate minimum charges only. However, any extra or further charges should be fully explained to you before the commencement of your plan.
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    How do I draw from it?

    Generally speaking, there are a range of ways you can take income from your SIPP. You will usually be entitled to up to 25% of the pension fund as a lump sum at age 55, which can currently be taken tax free and with the remaining fund you can choose to draw a regular income, purchase an annuity, use a combination of the two, or defer the withdrawal of income until later. There is no obligation to take the lump sum or the income, and equally no obligation to use the whole pension to provide the lump sum and income in one go (in other words you can phase your drawdown). 
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    What are the fees?

    Every policy that is handled by an external advisor will more than likely mean a fee will be imposed for the adviser’s time spent managing your investment. There are two general types of fees: the adviser will either impose a flat management fee or will request a percentage of your fund.
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    What happens to my SIPP if I die?

    If you die before taking any benefits (and for any portion of the fund which hasn’t been ‘crystallised’ to provide you with benefits), conditional on you being under the age of 75, your nominated beneficiary (or beneficiaries) can elect to have the pension fund either paid as a tax free lump sum (which is handled outside of your estate and therefore is not usually liable to inheritance tax either) or, where they are dependents (a spouse, civil partner or child under the age of 23) can have the pension transferred to them.

    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. Over the age of 75, or for any part of the pension which has been used to provide you with benefits, lump sum payments of death benefits are levied with a Special Death Lump Sum tax charge of 55%, though a dependent beneficiary is still entitled to transfer the benefits to their own pension without any deduction of tax.
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    Can I transfer property into my SIPP?

    A SIPP is able to purchase and hold commercial property and can therefore purchase commercial property and land from individuals, however, it is not possible for a SIPP to hold residential property, or land which is used, or suitable for use as a dwelling. You cannot, therefore, purchase either your own or any other residential property directly using a SIPP. A SIPP enables you to borrow up to half the value of the net value of the pension to purchase commercial property.
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    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 draw an income directly from the pension as long as it is paid according to the current limits. Alternatively you can just withdraw the remaining sum at intervals that suit you.

    It is very important that you are aware that SIPPs and Annuities have very different features in respect of income and death benefits, which our wealth managers will be able to explain in more detail during the consideration process. You are also able to purchase an annuity at any point during the life of the pension (though the annuity you may be able to purchase may change relative to the currently prevailing annuity rates, meaning there is no guarantee in future of the annuity you will be able to get).
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    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 much more basic and can be funded from as little as GBP20 per month and were designed to enable greater access to pensions. They also have a maximum annual charge of around 1.5%. However, fund choices are severely limited compared to SIPPS and generally offer a very small range of funds.

    SIPPS have a much wider array of investment options and give the pension holder more flexibility. Investments can be made up of gilts, trusts, cash, bonds and commercial property, among others, whereas a stakeholder pension may not, traditionally investing predominantly in mutual funds.
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    Can I invest in residential as well as commercial property?

    No. Currently investment regulated pensions cannot invest directly into residential property or land which is used, or is suitable for use as a dwelling. Such investments are called taxable property and can come with severe tax penalties.
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    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 and the requirements of the pension scheme Trustees.
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    Is there a lifetime allowance?

    Currently, there is a lifetime allowance on the total value an individual can hold across all UK pension holdings without getting a tax charge. This limit is currently GBP1 million (for tax year 2017-18), and for an individual who has benefits in excess of this amount and has not applied for ‘protection’ from HMRC, there may be tax charges on the excess. Our wealth managers will be able to discuss you options with you if this is, or potentially will be the circumstance