SIPP’s and SSAS’s

SIPP’s

From April 2006 SIPPs can be owned by anyone. The investor can put in a maximum of their annual salary or up to 225k if that is the lesser. The is a lifetime limit of £1.6m.

What is a SIPP?

The Financial Act of 1989 first introduced Self Invested Pension Plans (SIPP’s) in a similar way to members of Small Self Administered Schemes (SSAS’s). The number of SIPP plans is expected to rise considerably to over 500,000 following the introduction of SIPP 2006 rules. SIPP’s are governed by the personal pension regime but they have access to a larger range of investment options than do insured plans. SIPP’s have the same tax benefits and regulations as conventional personal pension plans but it is you, the client, and your advisers who have control over the investment choice making the SIPP individual to you.

So, in essence, a SIPP is an Inland Revenue approved “wrapper” that enables an individual to invest their contributions into many different types of investment and offers far greater control over the way funds are invested. This means that the clients can actually self-select shares in companies of their own choice. SIPP’s can also accept transfers in from other pension schemes that may be underperforming or a deferred pension from an ex-employer.

Advantages:

SIPP’s can offer you freedom and flexibility. They give you the freedom to choose where your funds are invested. They can also be very cost effective for individuals with large pension funds who wish to take a more active role in the way that their pension fund is invested.

People over the age of 50 but under 75, who are about to draw their pension but do not want to lock themselves into an annuity, can use a SIPP when moving into income drawdown, also known as unsecured income withdrawal, to provide more flexibility in drawing income.

Income Drawdowns are pension arrangements that are put together into one pot. When you retire you can take a tax-free cash lump sum up front and then draw an income from your remaining fund directly rather than buying an annuity. However, if you have not bought an annuity by the time you reach 75, you must do so then.

Who would invest?:

SIPP’s are particularly helpful to those who wish to:

a) Invest significant single or regular contributions
b) Transfer funds from previous under performing pension arrangements
c) Acquire business premises
d) Personally control the investment of their own funds
e) Find an alternative to the restrictive pension products generally on offer from the life assurance industry

What can you invest in?:

• Unit Trusts
• Investment Trusts
• OEIC’s – Open-ended Investment Companies
• Company Managed and Unit-Linked Funds
• Deposit accounts
• Individual Pension Accounts
• Traded Endowment Policies
• Equities and investments quoted on the major stockmarkets
• Commercial property

When can you start drawing?:

You can start drawing benefits from the SIPP at anytime between the ages of 50 and 75 under current legislation, unless you are in a job where you retire early and have an agreement with the Inland Revenue. However, at retirement, not all benefits have to be taken at once. Up to 25% of the fund can be taken as a tax-free lump sum with the remainder being used as your retirement income.

SSAS

Following the advent of pension simplification in April 2006 all new pension schemes fall under the same rules. However, existing schemes such as the SSAS can benefit from the old or new rules dependant on which benefits the customer.

A Small Self Administered Scheme is a special type of pension scheme that is usually restricted to the share holding Directors of Limited Companies. One of the attractions of a SSAS is the ability of members to make their own investment decisions and can be a route to a huge tax saving.

A SSAS is run by an individual or company with pensions experience appointed on accordance with the requirements relating to a SSAS, also known as the Pensioneer Trustee, together with members of the SSAS appointed by the company under certain rules and regulations. These members are principally responsible for taking the investment decisions and are also known as the Managing Trustee. This is all in accordance with legislation and the Trust Bond and Rules.

SASS Trustees are usually not only members of the SSAS but also Directors of the sponsoring company. SSAS enables company directors to provide for retirement in a highly tax and cost effective manner. It provides advantages for businesses in the form of flexible use of capital and reductions in taxation. Investments such as gilts, bank deposits, unit trusts and managed pension funds are generally acceptable and do not normally create problems. A member may retire at 60, draw a pension from the fund then convert their fund into an annuity at anytime up to reaching their 75th birthday. This, in effect, means that the pension can be secured when annuity rates are favourable. Also if the member dies before an annuity has been purchased, the capital remaining can be used to provide dependants or other benefits.

As a member, you can take a more active role in the management of the assets in a SSAS than would be possible via an insured arrangement. Also, the levels of contribution that are permitted to a new SSAS are often higher than would be permitted to a personal pension scheme. The company should make regular contributions in any company financial year, although it is permitted to contribute any amount not exceeding the inland revenue maximum, including paying nothing at all.

We offer an extremely competitive service, so for more information regarding SSAS or SIPPS contact us on:
Telephone: 0115 945 5199   Fax: 0115 982 6250
Between 8.30am and 5.30pm Monday to Friday to discuss your requirements.

E.mail: info@davidburnell.co.uk
and we will find a cost effective solution for you.

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David Burnell Financial Services Ltd
1 Albert Road, West Bridgford, Nottingham, NG2 5GS

Tel: 0115 945 5199   Fax: 0115 982 6250
Email: info@davidburnell.co.uk

David Burnell Financial Services Limited is an appointed representative of IN Partnership the trading name of the On-Line Partnership Limited which is authorised and regulated by the Financial Services Authority.

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