Sipps Pensions Explained

An Explanation of Sipps Pensions

Sipps Pension funds are going to cause confusion for many people when they come out in April 2006 but this well written article on the BBC website by Claire Court helps explain the changes rather well.

Below is a brief overview of the article:

Although they have been around since 1991 not many people have Sipps but what they offer is more control over the running and investments of your pension funds.

What is a SIPP?

It's a personal pension contract that is held in your own name. You decide when and where to invest the funds even if you are in full time employment. You also have more say about what happens to the assets of the fund after you pass away.

Contributions to a Sipp Pension

From next April you will be able to contribute up to 100% of your earnings with a maximum contribution of £215,000 allowed in each tax year.

Investment Choice

This is where the real changes are happening, from next April, 2006, you are allowed to invest your pension money in a much broader arrange of assets. Even things like wine, antiques and the big one, residential property.

Not irreversible

Unlike current pension schemes you are free to sell the assets in your Sipps fund at anytime and transfer them back into another pension scheme such an employers scheme etc.

Residential Property

For the first time you will be able to directly invest in residential property both at home and abroad. Property in Spain, especially popular areas like the Costa del Sol look set to reap the benefits of these changes. France could be another hotspot with property in Montpellier and the surrounding areas of the Languedoc featuring highly on a lot of peoples wish lists. Many UK Residents have always dreamed of buying an off plan property abroad and places like Spain and France provide an excellent choice within just a couple of hours of the UK.

Having said that overseas property looks like a hot prospect there could be problems with various rules and regulations and further information is eagerly awaited.

Sipps Retirement & Death Benefits

Unlike Employer schemes the new pension regs give a lot more flexibility about how and when you choose to draw your pension benefits.

Some restrictions still apply and the earliest age that you can start to take funds out of your scheme is 50 but this age will rise to 55 from 2010.

The earliest age you can draw benefits will increase to 55 from 2010, although it will remain at 50 until then.

Retirement & Death Benefits