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Whether you wish to enjoy your hard-earned "leisure years" at home in the UK, or abroad in a more temperate climate, self-invested personal pensions (SIPPs) are a tax-efficient way to save for retirement.

Unlike traditional pensions, which tend to be quite restrictive regarding investment and fund types, SIPPs give investors the power to choose how and where they invest their money. For example, SIPPs can be invested in any of the following:

  • Stock exchange listed investment trusts
  • Commercial property
  • Gilts and bonds
  • Stocks and shares
  • UK government bonds
  • Foreign government bonds
  • Financial Conduct Authority-recognised open ended investment companies
  • Bank deposit accounts
  • Exchange traded funds
  • Real estate investment trusts

Who is a SIPP for?

SIPPs can be a great option for retirement savers both at home in the UK and for those who are living as expatriates abroad – for example, in the European Union, Australia or the United States.

SIPPs effectively allow a saver to pool pensions into a single pot, either before or after retirement, so they can later draw income from it.

The superior levels of freedom and flexibility presented by SIPPs make them an ideal retirement saving vehicle for people who like the idea of an actively managed fund which can be utilised to work effectively for them. And, just as with any other pension, SIPPs pensions holders are able to access their money from the age of 55, while up to 25% of the fund can be withdrawn as a cash lump sum which would be tax-free to a UK resident.

Furthermore, a SIPP may be ideal for those who match any of the following criteria:

  • People with a trusted financial adviser or wealth manager whom they wish to make decisions on their behalf
  • Those with a desire to make a broader range of investments
  • Those who wish to consolidate multiple pensions
  • Those with a valuable pension pot
  • Those with the ability to make sizeable pension contributions
  • People with a desire to keep money invested and to draw an income

SIPPs are sometimes referred to as "do-it-yourself" pensions but it is important to remember that investors don't have to make their investment decisions alone. In fact, unless a person is an experienced and proven investor, it's essential to seek advice from a professional and trusted adviser regarding the available options.

Tax advantages

SIPPs are not subject to capital gains tax or income tax in the UK. Additionally, as with all other pensions, they provide up to 45% tax relief on contributions.

There may also be particular SIPPs tax benefits if you own a commercial property. This is because it is possible to effectively sell premises to the SIPP, thereby releasing funds which you can then reinvest.

Lastly, there are several inheritance tax benefits of SIPPs. For example, it is possible to pass on your SIPP fund on death. Beneficiaries can then choose to accept the pension fund as a lump sum, a continuing income, purchase an annuity or simply leave it invested.

A SIPP can be left to any beneficiary you choose, including a charity, and can even be divided between multiple beneficiaries.

Types of SIPP

There is more than one type of SIPP and what will work for the individual investor will depend entirely on his or her requirements.

  • A full SIPP provides the greatest freedom and flexibility in relation to the variety of possible investment types and is particularly appealing to retirement savers with the largest pension funds (in excess of £150,000). Full SIPPs incur a creation fee, an annual management charge and may sometimes require a minimum monthly contribution.
  • A low-cost SIPP also offers a broad degree of investment options, but doesn't allow offshore funds, investment in unquoted shares or property ownership. Lower cost SIPPs are ideal for people with more modest pension pots. Charges are usually reduced and there are no annual management charges.
  • A so-called hybrid SIPP is an offering provided by insurance companies. However, unless you have already paid a significant amount of money into the insurer's own funds, there is only very limited control of investment types.

SIPPs advice from Blacktower

The Blacktower Group was formed in 1986 and since then has been providing its clients, both in the UK and abroad, with a bespoke service to help them achieve their investment and retirement investing objectives backed by experienced, independent wealth management.

We want to help you realise your goals. So, whether you are home or abroad, we can help you make a SIPP transfer and more. We are based in many locations across Europe and have advisors who speak Spanish, Swedish, Danish, Norwegian, French and Italian, English and more.

Get in touch with us today.

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