SELF INVESTED PERSONAL PENSION
01 sipp a bespoke pension plan A Self Invested Personal Pension (SIPP) can deliver greater choice and flexibility than a traditional pension. It has all the tax benefits of a traditional personal pension, and could give you access to a wider choice of investments as you build up funds to provide for your retirement. This allows you to spread risk without having to set up a number of different pension plans. A SIPP allows your Investment Manager to make proactive investment decisions to take account of your personal situation. A SIPP lets you change how much and how often you pay in. It also gives you flexibility when deciding how much you draw from your fund when you retire. www.brewin.co.uk
02 The tax benefits of a SIPP As a registered pension scheme, a SIPP offers a number of tax advantages: Personal contributions attract tax relief up to your maximum rate, within the relevant contribution limits Contributions made by your employer are not treated as a benefit for tax purposes, providing they are within the relevant limits Your accumulated savings grow free from capital gains tax and income tax liability (although the notional tax on dividends cannot be reclaimed) In the event of death before retirement, the accumulated fund can normally be distributed to your spouse and/or dependents, free from capital gains tax, income tax or inheritance tax Up to 25% of the accumulated fund can be taken as a tax-free lump sum when you start to take the benefits Tax relief is generally available for contributions (detailed on page 3), but tax penalties apply where the total benefits at retirement exceed the lifetime allowance. With long-term pension saving, an important feature of the above tax reliefs is the ability of funds to grow gross. Our investment approach We believe that each client s financial needs are unique, and this is especially so when it comes to their SIPP strategies. The planning options available within a SIPP mean that the accompanying investment strategy has to be both flexible and tailored to suit the needs of the client. As every client will have a different investment objective and attitude towards risk, we spend time formulating and agreeing your specific investment strategy at the outset. The tax-efficient nature of investments within pension plans means that your Investment Manager will be able to make the most appropriate investment decisions without the need to consider taxation. This allows for much greater flexibility in investment strategies. The strategy is implemented and regularly reviewed by your Investment Manager. We believe that clients should know exactly who is responsible for their portfolio and as such the final say on asset allocation and stock selection rests with your dedicated Investment Manager. Our Investment Managers receive the support you would associate with one of the UK s largest independently-owned private client investment managers. They are supported by in-depth research from both our in-house team and external sources. Stock selection meetings occur daily and input is gathered from around our business and the wider financial industry, ensuring investment decision-making is based on the latest information. The overall aim is to provide clients and their advisers with access to the people who manage their money. At the same time, the presence of a rigorous investment process, combined with the resources of Brewin Dolphin, provides the reassurance that your SIPP funds will be managed effectively. A key advantage of SIPPs is that they can invest in almost any asset. There are tax penalties that place restrictions on particular asset types, but the options are still very wide. Brewin Dolphin will be able to provide assistance with investment into the majority of underlying asset types, however we would recommend that you consult your pensions adviser where you are considering investments into property or private company shares. Please note, too, that whilst Brewin Dolphin looks across a wide range of financial products and services in order to meet your needs and objectives, we will not review all Retail Investment Products in the market. As such we offer a Restricted Advice service. The risks associated with your SIPP may increase for certain categories of underlying assets chosen by you or your Investment Manager. It may take time to realise the value of certain underlying assets such as property. The value of your investments may fall and this may reduce the retirement benefits you receive. Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation which is subject to change.
03 Level of contributions Provided you are eligible to make contributions, you can pay into your SIPP as much or as little as you choose. This can be a combination of personal and/or employer contributions and can be made on a one-off or regular basis. Although there is no limit to the level of contribution, there is a limit on the level of tax relief available. The limit is known as the annual allowance, the amount of which is subject to update by HMRC usually on an annual basis Income tax relief is not available for personal contributions which exceed earned income, although regardless of earnings, most people can contribute a minimum amount into a SIPP or other pension arrangement and still receive basic rate tax relief at source. An employer can receive relief against corporation tax for contributions providing they can be justified as wholly and exclusively for the purpose of their trade. Incorporating your existing pension arrangements Most clients coming to us already hold a range of different pension benefits, either from previous jobs or their own personal pensions. A SIPP can be an excellent way to consolidate these (including, for the time being, any protected rights or other contracted-out elements) into one portfolio. Your pensions adviser should be able to recommend whether you should transfer your existing pension arrangements. Flexibility on retirement Most people can start taking income from age 55. When you start to take the benefits, up to 25% of the accumulated fund can usually be taken tax-free. At retirement from the plan, you can start taking benefits from your SIPP either by purchasing an annuity or drawing an income from your fund (known as income drawdown ). This is a flexible way of taking benefits from your SIPP without buying an annuity. Where an annuity is purchased, all of the funds are paid to an insurance company who will provide a guaranteed level of income throughout the remainder of your life. There are different types of income that may provide for continuation to a surviving spouse after death, or provide for increases in payment. With the exception of unit-linked or with-profits annuities, control of the assets of the SIPP is completely lost upon annuity purchase. Where benefits are taken in the form of income drawdown, the funds remain within the SIPP and investment control is retained by yourself. This offers flexibility because the level of income can be varied and the purchase of an annuity can be deferred to suit your circumstances. The Government Actuaries Department set maximum levels of income available for capped drawdown arrangements. However, for those who are already in receipt of a pension meeting the Minimum Income Requirement flexibility drawdown is available which allows an unlimited percentage of the fund to be drawn as taxed income. Although annuity rates generally increase with age, deferring your pension benefits may not be in your financial interests due to the way annuity rates are calculated by life offices. One feature of income drawdown is that, in the event of death, the full fund can be used to pay an income to a surviving spouse or dependent child, or can be paid as a lump sum (subject to tax at a penalty rate) to the spouse, other beneficiary, or estate. This is a feature that attracts many individuals to taking benefits using income drawdown, but you should consult an adviser in order to establish whether it is appropriate in your circumstances. If you draw a high income from the fund it may result in a substantial erosion of the amount of fund available to purchase a pension annuity.
The bespoke nature of a SIPP means that personalised advice is critical
07 Understanding the risks There are some risk factors that every investor should consider before deciding whether or not a SIPP is right for them The pension you receive when you take benefits from your SIPP depends on numerous factors including: The contributions you and your employer make to your SIPP The investment performance of the underlying assets The charges and fees payable from your SIPP The maximum levels of capped drawdown as laid down by the Government Actuaries Department Annuity rates when you take benefits You must note that: The value of your investment can go down as well as up and you may not get back what you put in The favourable tax treatment of SIPPs may change in the future The capital value of the fund may be eroded Annuity or scheme pension rates may be at a worse level in the future When maximum withdrawals are taken, high levels of income may not be sustainable Should you wish to cancel any of your SIPP investments within the cancellation period you may not receive the original amount invested.
08 About us Established in 1762, Brewin Dolphin is one of the UK s largest independently-owned private client wealth managers. Our success is founded on a firm belief that, because your financial needs are unique, the investment advice you receive should be too. We ve worked this way for generations, providing individually crafted solutions that help our clients to preserve and create wealth. Today, we are putting that accumulated experience to work for many thousands of people, including retail clients, charities and pension funds. Next steps If you would like to know more about SIPPs, or any of our other investment services, please talk to your Brewin Dolphin Investment Manager. Alternatively, please visit our website at www.brewin.co.uk for further details.
Design Deep Photography Noel Murphy With thanks to Dave King Acoustics
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