Tuesday, July 2, 2019

Is An SIPP Right For You In Retirement?

You may have heard of the term ‘SIPP’ several times before but are confused regarding what it is and whether it is the right move for you or not. This article is here to put all of those answers to bed. So, let’s jump right in…

SIPP stands for Self Invested Personal Pension. This is a popular pension plan because it allows the holder to choose and manage their investments effectively. Most traditional pension plans don’t offer this, they actually tend to limit investment choice and that’s why an SIPP presents such an attractive alternative for many.

Nonetheless, like any other type of pension plan or UK pension transfer this is something you need to think about extensively to determine whether it is right for you or not. No matter whether you’re moving to America and want to see your retirement out via luxury retirement community or you’re thinking of exploring somewhere new like Asia, your pension is going to need to be considered. So, let’s look at the benefits of an SIPP and why you should consider this option… 

First and foremost, one of the reasons why SIPPs are recommended is because of the substantial tax benefits you will gain. Of course it is important to bear in mind the fact that tax is always variable. It is based on the account holder i.e. your circumstances and there is always the possibility that it could alter as time passes. Nevertheless, let’s take a look at some of the tax benefits you could possibly reap…
  • You don’t actually have to pay tax in order to benefit from a full basic rate tax relief on your personal contributions. This is capped at up to £3,600 per tax year. 
  • You will automatically receive a basic rate tax relief on all of your contributions to your SIPP. 
  • When you reach retirement you will benefit from tax breaks. If you are over the age of 55 you will have the possibility of taking up to a quarter of your pension pot and the good news is; this will be a tax free lump sum.
  • This is not the only retirement tax break. You also have the security of knowing that your dependants will receive your entire pension account if you die before taking any benefits from it. They will get this as a lump sum which is free of tax. 
  • There is no income tax or capital gain tax on your investment returns. 
  • Higher-rate or additional rate tax payers can also claim back more tax relief. 
Aside from this, another key benefit associated with a SIPP was touched upon earlier in the introduction and this is the fact that you will gain from a huge selection of investment options. This encompasses all of the following; unlisted shares, commercial property, individual company shares, corporate and government bonds, investment trusts and investment funds. This really gives you the opportunity to make the most of your pension plan and use it to your benefit. 

It is quite clear to see why SIPPs are recommended. If this is something that sounds appealing to you, you should make sure you hunt down a quality financial advisor who can help you to assess your options and find the right SIPP scheme for your needs specifically. 

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