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At IQ, we source alternative property investments that are SIPP compliant. This means, that you can invest in these opportunities by unlocking your pension to create potentially higher returns and tax efficiency. Here's some really useful information that will help you decide what's best for you.
What is a SIPP?
A Self Invested Personal Pension (SIPP) is a type of personal pension plan. It works in the same way for contributions, tax relief and eligibility. However the main difference is that the SIPP has a more flexible approach to investments. It is effectively a 'DIY' pension.
A conventional personal pension generally involves the plan holder paying money to an insurance company for investment in an insurance policy. This means the money is invested with relatively little choice or freedom from the plan holder.
A SIPP allows the plan holder much greater freedom in what to invest in and for the plan to hold these investments directly. The plan holder can have control over the investment strategy or can appoint a fund manager or stockbroker to manage the investments.
The types of investments that are typically used for SIPPs are - Commercial Property, Alternative Property such as Hotels and Care Homes, Shares, Bonds, Derivatives, Investment Trusts, Unit Trusts, REITS, Futures & Options, Hedge funds, Traded Endowment and Bank Deposit Accounts. Please be aware that all SIPPs are different. If you are looking to invest in property with a SIPP - make sure that the SIPP provider has the flexibility to do this for you.
Are you eligible for a SIPP?
If you have UK earnings, then you can contribute your entire income into a SIPP (subject to a 2012/2013 cap of £50,000). You will qualify for basic-rate tax relief automatically and for higher-rate tax relief on that portion of your income that attracts a higher rate tax.
If you do not have any UK tax earnings you can still pay a new contribution of £2,880 a year into your SIPP and receive basic-tax relief of £720, which will bring your overall investment up to £3,600. You can also set up a SIPP for a child or spouse and pay the contributions on their behalf up to these limits.
You can also move existing Personal Pension Plans into your SIPP, but we would recommend that you take advice from an IFA before doing this. At IQ, we can refer you to a panel of trusted IFA's who specialise in this area.
What are the advantages of a SIPP?
As well as receiving up to 50% income tax relief on contributions, individuals are also entitles to take a tax free lump sum of up to 25% of their accumulated fund at their chosen retirement age. This can be from age 55 and upwards. All of the time money is invested within the fund, it remains tax free subject to neither income tax, capital gains tax nor Inheritance Tax. You also, don't have to now take an annuity, but can draw from the fund whilst still invested (subject to certain limits).
What happens upon death?
As long as you haven't used your SIPP to buy an annuity and you die before the age of 75, the amount can pass to your beneficiaries. And you can leave it to anyone, not just a spouse or family members. They inherit the remaining amount as a lump sum, although they'll have to pay tax of 55 per cent on it.
The (not so) small print:
The information relating to financial products and services provided by this Website does not constitute individual financial, investment or tax advice. This Website is intended to provide general information only and does not attempt to give you advice that relates to your specific financial circumstances. We recommend that you discuss your specific requirements with an independent financial adviser.
For more information on SIPPs - call us free on 0330 100 2505 or e-mail email@example.com.
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Invest from just £17,000
10% fixed contractual return for years 1-10
12.5% fixed contractual return for years 11-15
150% assured buyback in year 15
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