UK based aggregator of alternative investments OFF3R announced on Tuesday the launch of its new Self Invested Personal Pensions (SIPPs) channel, which will feature pension products from some of the leading providers in the market. The company described A SIPP as a tax wrapper that holds your chosen investments until you retire and begin to draw a retirement income.
“A self-invested personal pension (SIPP) is a type of personal pension. It is sometimes referred to as a ‘do-it-yourself’ pension, due to the freedom of being able to choose and manage your own investments. Generally, this management will be done online, where you can see how much money is in your pension as well as where it is invested.”
OFF3R also published a guide about SIPPs:
“A SIPP holds investments within a wrapper for you until you retire or begin to draw your pension. It falls within the same bracket as a standard personal pension but you can have greater control over where you invest. It is often used by more experienced investors who feel comfortable managing the investments they would like to include in their personal pension.Whilst choosing to invest in a SIPP should give you more flexibility in terms of your investment choice, the accessibility to your funds remains the same as a normal pension. Under current regulations, you cannot access your pension until you are aged 55 or over, with this set to increase to 57 as of 2028. Once you are eligible to gain access to your pension you can withdraw up to 25% as a tax-free lump sum, with the remainder being taxed as earned income at your personal marginal rate, dependent upon your financial situation. However, if you are a non-earner, you will be restricted to investing up to £2,880 into a SIPP with a tax relief of 20%.”
OFF3R also revealed the types of SIPPs that are available:
- A Full SIPP: With this type of SIPP, investors can receive financial advice about what to include within the SIPP. and it tends to offer the widest choice of investment, but in turn generally has the highest charges. Therefore, a Full SIPP is generally more suitable to those with a larger pension fund.
- A Low-Cost SIPP: Unlike a Full SIPP, investors can be in control of the decision-making process, without any form of financial advice being taken. However, this can mean that the fees charged on the investments may be lower
With SIPPs, investors may do the following:
- Can invest up to £40,000 before tax into their SIPP in 2017/18 tax year.
- Can withdraw up to 25% of their SIPP as a tax-free lump sum on or after their 55th birthday.
- Can transfer existing pensions into your SIPP to collate them all in one place
Advantages include a high level of control, simple transfer of existing pensions to SIPPs, tax benefits, access to a wide range of different asset classes, and low monthly contributions. Disadvantages are different fees (management or administration, transfer, additional fund manager,) effective SIPP management takes time, and early withdrawals may incur high penalties.