Tax Advantages of SIPPs
Like a Personal Pension, SIPPs benefit from 20% tax relief uplift from the government on your contributions (up to your annual allowance) and you can enjoy your investments growing free from UK capital gains and income tax. People earning more than the basic rate threshold for income tax can also claim further income tax relief from the government. Speak to one of our advisers about this if it relates to you.
SIPPs are also outside of your estate for Inheritance Tax purposes, therefore they act as a tax efficient method of passing wealth on to the next generation.
Companies receive corporation tax relief on the contributions into a SIPP. This therefore provides you with tax efficient savings for retirement and the company benefits from a smaller tax charge at the end of their financial year.
If the employer contribution is through sacrificing remuneration that you would have been paid, then you and the employer also benefit from National Insurance tax relief.
Transfer Pension to SIPP
At Simpson Wood, we specialise in guiding you through the process of transferring
your pension to a SIPP. A SIPP offers a dynamic approach to retirement planning, granting you greater autonomy and a wider array of investment choices, including stocks, bonds, mutual funds, and commercial property. This flexibility, integral to the best SIPP pension plans, is accompanied by both opportunities and responsibilities.
Eligible Pensions for SIPP Transfer
- Defined Contribution Schemes: Common in the UK, where both you and your employer contribute, with the value influenced by market conditions.
- Defined Benefit Schemes: These provide a guaranteed income upon retirement, based on the scheme’s rules. Transferring from such schemes to a SIPP carries a higher level of risk due to the potential loss of guaranteed income.
Special Considerations for Non-Residents
- International Investments: SIPPs offer opportunities for global investment.
- Tax Implications: These might differ for non-residents.
- Returning Residents: SIPPs are an ideal choice for those planning to return to the UK.
Why Choose a SIPP with Simpson Wood
A SIPP is a great way to consolidate pension pots for your retirement, or provide tax efficient savings towards your retirement. They offer a blend of control, flexibility, and opportunity. However, with great power comes greater responsibility; it is crucial to understand the risks and charges involved.
With Simpson Wood’s expertise in SIPPs, you’re not just planning for retirement, you’re strategically positioning yourself for a comfortable, secure, and enjoyable later life. Our team is committed to guiding you through these options, ensuring your retirement strategy is as effective and rewarding as possible.
If you would like to discuss planning for your retirement, please contact us.
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FAQs
Can I purchase a property within a SIPP?
You can purchase a Commercial Property within a SIPP. The rental income received is tax free as it is invested into the pension, and there is no capital gains tax to pay on the sale of the property in the future.
You must remember that the pension scheme owns the property, not you individually. Therefore costs relating to the property must be paid from the pension scheme and not by you individually. Rent must also be paid at market rate for the property, therefore if you are purchasing your own commercial premises for your business through the use of a SIPP, you must still pay rent for the property.
Can I purchase a holiday home or buy-to-let through the SIPP?
No you cannot. Anything that is deemed as a property suitable to live in is not permitted within a SIPP.
Can I purchase a building with commercial and residential use within the SIPP?
Rather than purchasing the entire building, the property must be split between the commercial element and the residential. This allows the SIPP to purchase a long-term lease interest in the commercial element while a third party (usually the individual) purchases the freehold of the building including the residential element.
Also there is a clause that if the residential element is used by somebody who is always needed to be on site, then it could be included within the SIPP. A usual example of this is a caretaker.
Can I borrow money within the SIPP?
You can borrow up to 50% of the net SIPP value within the pension. As an example, if you had a SIPP value of £400,000 then you could borrow £200,000.
However, if you had a SIPP with assets of £400,000 with existing borrowings of £100,000 then you could only borrow a further £50,000. This is because the net value is £300,000 and so the maximum that can be borrowed is £150,000 altogether.
If you would like to discuss planning for your retirement, please contact us.
