A Self Invested Personal Pension (“SIPP”) is one of the most tax-efficient ways to save for retirement and generate an income in later life. As with all pensions, a SIPP offers tax relief of up to 45% on contributions, coupled with no capital gains tax or income tax payable. There are a wide range of asset classes that can be invested in through a SIPP, offering a high degree of flexibility over asset allocation and risk.
What Are The Tax Benefits Of A SIPP?
The tax relief available to you depends on your individual circumstances, as follows:
Basic-Rate Taxpayers At 20% - If £8,000 (net) is invested in a SIPP, the government will automatically add £2,000 (20%) basic-rate tax relief, thereby increasing your total contribution to £10,000 (gross).
Higher-Rate Taxpayers At 40% - If £8,000 (net) is invested in a SIPP, the government will automatically add £2,000 (20%) basic-rate tax relief, whilst a further £2,000 (20%) can be claimed back through higher-rate tax relief with your tax return.
Additional-Rate Taxpayers At 45% - If £8,000 (net) is invested in a SIPP, the government will automatically add £2,000 (20%) basic-rate tax relief, whilst a further £2,500 (25%) can be claimed back through higher-rate and additional-rate tax relief.
Non-Tax Payer At 0% - Non-tax payers are eligible for 20% tax relief, contributing £2,880 (net), whilst the government will automatically add £720, taking the total annual contribution to £3,600.
No Capital Gains Tax or Income Tax – SIPPs are exempt from both capital gains tax and income tax.
Withdrawals From Age 55, At Up To 25% Tax-Free – You can start to withdraw a pension from your SIPP when you reach 55 years of age, when a tax-free Pension Commencement lump sum of up to 25% of the SIPP’s fund can be taken.
Favourable Tax Treatment For Your Heirs – If you pass away before your 75th birthday any money left in your pension can normally be passed to your heirs free from inheritance tax, with withdrawals made by such heirs then being tax-free. If you pass away after your 75th birthday then your heirs will be subject to income tax on withdrawals, or potentially charged at 45% if taken as a single lump sum.
How Much Can I Contribute Each Year To My SIPP?
Currently UK residents aged under 75 can contribute as much as they earn each year to their pensions up to a limit of £40,000 in the 2017/2018 tax year.
If you have not invested the full annual allowance in any of the past three tax years then, provided you had a pension in place for these years, it is possibly to carry forward the unused allowances to enable you to make additional contributions to your pensions within the current tax year.
What Asset Classes Can I Hold In My SIPP?
You can hold a wide variety of different assets in your SIPP including:
As with all investments, SIPPs are not suitable for everyone. If you are unfamiliar with managing your investment affairs, or do not feel comfortable or confident with the investment choices that SIPPs offer, then a SIPP may not be right for you. We recommend that investors regularly review their SIPP portfolio, or seek professional advice, to ensure that their investments continue to be in line with their objectives.
We believe that planning for your retirement is one of the most important matters in life that you can see to, which is why we believe that the personal bespoke service offered by DMT is superior to other more generic SIPPs in helping you achieve your retirement and investment objectives.
At the forefront of our service is to understand your appetite for risk, as SIPPs present the opportunity for investing in a wide range of asset classes with varying degrees of risk. Once this has been established we can then discuss appropriate asset classes and investments that offer the opportunity to meet your objectives.
At DMT we are not affiliated with any other financial firm or fund, which means we are entirely impartial when making investment decisions.
With close to 100 years of experience, our team has built up connections that span the global market place, which ensures we are fully abreast of the global geopolitical and economic landscape, understanding how such developments could impact on markets and investments.
You can choose to structure your SIPP in the manner you like, with as much or as little advice from your designated investment manager as you desire. You can monitor the value of your SIPP 24 hours a day, 7 days a week.
To discuss opening a SIPP with DMT, please complete the callback form to the right of this page, or contact us, and we will be pleased to help however we can.