What is a SIPP?

Take care of your retirement savings

SIPP - Self Invested Personal Pension

A pension is one of the most tax-efficient ways of saving for your retirement. In my opinion a SIPP offers you the most exciting opportunities.

Like all pensions, a SIPP offers up to 45% tax relief on contributions and there is no capital gains tax or further income tax to pay. The tax benefits will depend on your circumstances and tax rules are subject to change by the government.

Traditional pensions typically limit investment choice to a shorter list of funds, normally run by the pension company's own fund managers, a SIPP lets you invest almost anywhere you like and choose your own investments.

You can manage your SIPP online, enabling you to buy and sell investments from home on your computer.

Government boost to your pension

 When you make a pension contribution, 20% basic rate tax relief is automatically added by the government. If you pay tax at 40% or 45%, you can claim back even more through your tax return. Basically I can claim back up to a further 25% higher and additional rate tax relief via my tax return.

You must pay sufficient tax at the higher/additional rate to claim the full tax relief via your tax return. Remember, tax rules can change over time and the relief you receive will depend upon your circumstances.

Additional tax benefits

No capital gains tax or further income tax 
Investments in a pension can grow free of UK capital gains tax and further income tax. 
Up to 25% tax-free lump sum when you retire 
From age 55, you can usually take up to 25% tax-free cash from your SIPP and a taxable income from the rest. The government has proposed from April 2015 you should be able to take as much of your pension as you wish as income or even as a lump sum, from age 55. This is subject to consultation and the first 25% would be tax free with the remainder subject to income tax. 
No inheritance tax if you die before retiring 
If you die before taking benefits from your pension, and before reaching age 75, the fund will normally be passed to your spouse or other elected beneficiary free of inheritance tax.