Who Are Sipps For - Sipps Pension Guide

Who are Sipps Pensions for

Traditionally Sipps Pensions have been the domain of the wealthy and as a general rule of thumb you had to have a pension fund with a value greater than £200,000 in order to make it worth your while.

The 6th April 2006 is an important date for Sipps Pensions as it heralds the beginning of sweeping changes in the Personal Pension market that allows traditional investments such as buy to let properties to be brought within your Sipps Pension Scheme. You can also include luxury investment items such as vintage cars and fine wines.

The benefits of Sipps Pensions are obvious. You can now receive tax breaks on any property you purchase and in pure terms it means that a higher rate tax payer will only be paying £60,000 for a £100,000 property. (After the Inland Revenue have given them their 40% tax relief)

Unlike "normal" Personal Pension Schemes you will all be able to borrow against the assets of your Sipps Pension Fund in order to invest more aggressively or simply to leverage your buying power and returns on investment.

There are some fairly strict rules concerning borrowing money against your SIPP Pension, for example you can only finance 50% of the value of any residential property that you purchase. Some of the disadvantages are less obvious but should still be considered and discussed with a Qualified Advisor before committing yourselves to a Sipp.

The main disadvantage is that the Sipps Pension needs to be set up as Trusts with trustees administering the fund and making sure that everything that you do falls within the law regarding Sipps Pensions. This could end up being restrictive but it could also end up being expensive.

 The other disadvantage that we can foresee is time. In the past people paid contributions into a Pension Fund that was managed by professional Pensions Companies. With a Sipp pension however you will need to monitor the various investments that you make and make decisions about the future of those investments.