Pensions Advice, Retirement Planning - Investment Financial Adviser Dunfermline, Fife, Scotland UK

Posted by William on September 21st, 2007 in Pension Advice

“John” is a 41 year old self-employed joiner who came to me last week asking about personal pensions. Like a lot of people he is getting concerned that his pension is not on target and he wants to increase his contributions.

As is often the case he was advised by an “expert” friend who suggested that he should take out a SIPP (Self-Invested Personal Pension). Like all aspects of financial advice it very much depends on the clients personal situation as to which vehicle is most suitable in fulfilling their retirement needs.

Lets take a look at the case for and against SIPPs :-

WHAT IS A SIPP?

A SIPP is a Self Invested Personal Pension which will be registered by HM Revenue & Customs to receive contributions and transfers in order to build up a retirement fund.

Compared to a traditional personal pension a SIPP can be a lot more flexible. Through it an investor can have access to wide range of assets and investment opportunities which include land, overseas property funds, quoted and unquoted shares, unit trusts or OEICs, commercial property etc

A SIPP offers significant tax advantages with full relief on contributions and growth free from income and capital gains taxes.

Transfers can be made from a previous UK registered schemes and you can add to o it with further transfers or contributions at any time.

SIPP v PP

The main advantages of a SIPP are the investment flexibility and control you have over managing and accessing your pension. It also comes into it’s own for business owners who can shelter their business premises within their SIPP. The property falls into the ownership of the pension and therefore is allowed to grow in value without paying income tax. In addition, any rent paid by the company/partnership is paid to the pension and is offset against profits.

Whilst SIPPs used to be the domain of the more discerning investor they are now more accessible to the ordinary person who simply wants to put some money away for retirement. However a lot of SIPPs are not used to their full potential and the client would be better investing in a PP because the charges would probably be lower. I tend to suggest that if your fund is lower than £100,000 then it is unlikely that the fees would be competitive in comparison with your existing arrangements. That said there are cases with people who have less than that where a SIPP has been the right advice.

As ever it is necessary to seek professional advice from a qualified pensions expert before deciding which vehicle is the right one for you.