A SIPP is a Self-Invested Personal Pension (SIPP) is a UK-registered pension scheme established as a personal arrangement. Compared to standard UK pension schemes, a SIPP offers greater choice of investments, and additional flexibility at retirement.
Who can benefit?
Anyone can set up a SIPP. Individuals residing in the UK can make new tax-relieved pension contributions to the scheme or transfer in an existing pension arrangement. UK non-residents would establish a SIPP to transfer an existing pension arrangement held in the UK or elsewhere. SIPPs provide a convenient and flexible way to save for retirement. While most UK non-residents say they will not return, in reality many do for career or personal reasons. SIPPs are fully interchangeable with its award winning range of Qualifying Recognised Overseas Pension Schemes (QROPS).
Specifically designed for internationally mobile individuals, QROPS accommodate multi-currency investments and payments, flexi-access or phased drawdown and segmentation, and the ability to pay full pension income to a partner and leave residual funds to nominated beneficiaries.
Which pensions can be transferred to a SIPP?
Any UK registered pension scheme(s) can be transferred to a SIPP with restrictions on transferring a defined benefit scheme or pension annuity once payments have commenced. It is not possible to transfer a state pension entitlement.
A SIPP can also accept transfer payments from overseas pension arrangements, including QROPS, provided that the overseas pension provider is willing. Financial advice should always be taken prior to any pension transfer.
The Lifetime Allowance
Total UK pension funding is capped by the Lifetime Allowance (LTA). This is currently set at £1 million (2016/17). Pension benefits are tested against the LTA when a benefit crystallisation event (BCE) occurs. BCEs include: the commencement of retirement benefits; death before drawing benefits; reaching the age of 75; or a transfer to an overseas pension arrangement.
If the value of UK registered pension savings exceeds the LTA, then a tax charge will apply. Members who have previously saved into a UK pension scheme and have applied for transitional protection, may be permitted a higher LTA.
Access to retirement benefits
Pension benefits may be accessed from the age of 55 or earlier in the case of ill health.
Flexibility of Drawdown
A SIPP allows the member to draw retirement benefits when they choose, as a lump sum or an income stream, commencing after the age of 55. The rules allow 25% of the fund (capped at 25% of the LTA) to be paid free of UK income tax. The balance will be subject to UK income tax at the member’s marginal rate. The International SIPP offers both Flexi-Access Drawdown (FAD) and Uncrystallised Funds Pension Lump Sum (UFPLS) payments.