Online SIPP (Self Invested Personal Pension)
What is a SIPP?
A SIPP, or self invested personal pension, is a type of personal pension plan that is designed to give you more flexibility and choice when saving for retirement.
You can choose to invest a lump sum or regular payments into your SIPP. Each year the amount you can put in to your SIPP is equivalent to your gross UK earnings, so normally your salary for most people. This is subject to an overall maximum contribution of £245,000 (2009/10).
At Investor Profile we try to cater for your every need, which is why we offer access to both an online Personal Pension and an online SIPP through our Free Range Portfolio Service.
Online SIPP
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More about Online SIPPs
Regardless of which plan suits your own needs the benefits of investing in our Free Range Portfolio are second to none:
- Online access to your account for dealing and valuations
- 100% rebate on initial and annual commission paid back to your account
- Online management of lump sum or monthly contribution options
- Invest in any Unit Trust, any ETF, any Investment Trust, any listed shares, any Gilts
- Full transaction listing for greater control
- Transfer and consolidate your existing pensions in to one, simple plan
- Transfer your existing protected rights assets
- Your new plan WILL accept new National Insurance rebates if you are contracted out of S2P*
- Transfer other investments for a ‘one-stop-shop’ view of your portfolio
- Clean charging structure with no set-up charge
*This is important because many online SIPP providers do not accept future contributions.
More about SIPPs
The self invested personal pension plan was introduced in 1989 by the conservative government and was aimed at wealthier individuals as a way for them to gain wider access to investment choices within their personal pension plan.
20 years on and the SIPP is still the pension plan of choice for those looking to invest larger amounts towards their retirment and take advantage of the greater investment choice.
The universe of investment choices within SIPPs can include unit trusts, OEICs, investment trusts, listed shares and gilts, overseas shares, insurance funds and commercial property.
Among the investments that cannot be included within a SIPP are residential property, holiday accomodation, timeshare homes, machinery, wines, vintage cars, yachts, jewellery, gold and coins.
Protected rights assets can now also be held within a SIPP. As of October 2008 the National Insurance rebates built up within your pension plan, as a result of contracting out of the State Second Pension (S2P) or before that the State Earnings Related Pension Scheme (SERPS), are now free to be transferred to any pension scheme that accepts the transfer.
This is an important rule change as it now means millions of pounds worth of pension savings can be invested in to a choice of any of the investments highlighted above. In the past most of these assets were held by insurance companies that offered a small range of relatively poorly performing funds.
SIPPs have all the same tax advantages as other personal pension plans.
You receive a tax rebate every time you invest in a pension. So if you invest £800 into a SIPP, the government will deposit £200 as well. If you are a higher rate taxpayer you can claim a further £200 rebate via your tax return. So a £1,000 contribution would only cost you £600.
This higher rate relief will not last for long though. After April 2011 the government will withdraw this higher rate relief for those earning over £150,000 per annum.
Those that have no income at all can still contribute £3,600 to a pension, so you invest £2,880 yourself and a tax rebate of £720 will be paid into your pension to make it up to the full amount.
There is a limit to the overall size of pension fund that is allowed for any one individual. This is known as the lifetime allowance and is currently £1.75 million (2009/10).
Please click here for more information about Personal Pension Plans or for your guide to Pension Facts 2009/10.
Important Considerations
Will my pension provider charge an exit penalty for me transferring my pension to an online SIPP?
They shouldn't do but always check for a difference in the current value and the transfer value of your pension.
How do the plan charges of my current plan provider compare with those of the online SIPP?
SIPPs are designed to be very simple in their cost structure. With normal pensions it may not be so simple to determine the costs involved. It can take a good deal of investigative work to understand the extent of the charges on your current plan. That's really why an online SIPP or personal pension is easier to follow and understand.
If your employer is paying in to your current plan will they be happy to contribute to the SIPP instead?
This is easily done from an administration point of view but of course the final decision will be made by your employer.
Help! I don't know anything about pensions.
Pension transfers can be a complex area so if you are unsure about transferring your pension it is worth getting expert independent advice from a Certified or Chartered Financial Planner. Once you have this advice there’s no reason why you can’t come back to invest with us.
I might have had a pension years ago but don't have any paperwork.
If you think you might have taken out a pension plan in the past but have lost the paperwork there is a government service that can help you locate this. For more details check out The Pension Tracing Service, or telephone 0845 6002 537.
Insurance companies seem to change names or merge all the time.
If you know you have a pension plan but cannot find the right contact details for the pension provider it may be that they have changed name or were taken over by another organisation. The Association of British Insurers can help you get in touch with the relevant company. Please call 020 7216 7455 or visit www.abi.org.uk
