SIPP could mean Save-it, Invest-it, Plan-it, Personalise-it (Self Invested Personal Pensions (SIPPS))

Member Name: upton66

Product:	Self Invested Personal Pensions (SIPPS)
Date:	31/01/07 (1303 review reads)
Rating:

Advantages: Take Control, Tax Breaks

Disadvantages: Cannot access funds till 50 or 55 years old

With the easing up of the Pension regulations in April 2006 I opened a SIPP account at the earliest opportunity.

Basically a SIPP (Self Invested Personal Pension) is an opportunity for every man, woman and child to save money to draw as a pension.

Pensions really are not as complex as everyone makes out and a SIPP is highly recommended; I cannot now imagine not having one. It allows you take control and monitor your investments in one place, to reduce dealing costs, help you to plan savings and take advantage of the huge tax break that is available.

The only downside of contributing to a pension is that there is absolutely no way that you can access the investments before you retire, so money that goes in is only for your pension.

The upside is the great tax break. The Inland Revenue will top up every contribution to your pension by at least 22% (40% if you are a higher tax rate earner). So for a non-earner to invest their full £3,600 they only have to actually hand over £2,808

The new pension rules are surprisingly generous. If you are employed then you can invest up to 100% of your earnings (up to £215,000) into a personal pension. If you are a non-earner you can invest up to £3,600 – this can includes babies from day one!

You can have a SIPP as well as contribute to your Company pension fund

There is a limit before tax planning starts to get complicated but the fund value has to be around £1.5 million before you need to worry, should I be so lucky.

You can start to draw your pension when you reach age 55 (or at 50 if you are this age by 6th Apr 2010). At pension age the rules allow you to withdraw up to 25% of your invested pension as a lump sum.

You can continue to invest in a SIPP up to age 75. You can in fact continue to pay in and draw a pension at the same time. So-called immediate vesting is a clever party trick. You could invest £2,808, which will be made up to £3,600 by the kind taxman, and immediately withdraw 25% = £900 – and still leave £2,700 invested.

You can transfer existing Stakeholder Pensions and Personal Pensions built up through FSAVC’s (Free standing additional voluntary contributions alongside an Employer’s scheme) into a SIPP.

All capital growth within any pension fund, including a SIPP, is tax free, ie no capital gains tax, However they cannot reclaim the tax credits on share and fund dividends/distributions, and we all know who to blame for that. Interest on cash remains tax free.

You can basically choose to invest from almost the entire range of available investments funds, stocks, shares, bonds, warrants, gilts available on the markets.

Additionally you can buy and sell units as you wish within a SIPP and hold the balance as cash.

The SIPP provider group lists Inland Revenue approved providers, though a lot of the content seems to be out of date.

My SIPP provider is Hargreaves Lansdown and I manage everything on-line.

As everyone keeps telling you, set up a pension early in your life, even with a small regular sum, and in the long term it will build into something worthwhile. You can take one out for anyone eg children, grandchildren, spouse etc – they will certainly thank you.

I may make it sound simple here, but I stress I am not any kind of advisor, so don’t take anything here as a recommendation. If you have any doubts you must read up about pensions. The only authoritative source is the Inland Revenue website and these days it is surprisingly user friendly and easy to understand.

Summary: The Ultimate, only got yourself to blame, Pension Scheme