Self-Invested Personal Pensions

If appropriate to your particular situation, a Self-Invested Personal Pension (SIPP) could be another option to consider if you require the flexibility to choose where your pension money is invested. SIPPs are now also open to people of lower incomes – not just those with commercial property.

More accessibility
A SIPP is a personal pension wrapper that offers individuals greater freedom of choice than conventional personal pensions. However, they are more complex than conventional products and it is essential you seek expert professional financial advice.

SIPPs allow investors to choose their own investments or appoint an investment manager to look after the portfolio on their behalf. Individuals have to appoint a trustee to oversee the operation of the SIPP but, having done that, the individual can effectively run the pension fund on his or her own.

Thousands of funds
You can typically choose from thousands of funds as well as pick individual shares, bonds, gilts, unit trusts, investment trusts, exchange traded funds, cash and commercial property (but not private property). Also, you have more control over moving your money to another investment institution, rather than being tied if a fund under-performs.

Once invested in your pension, the funds grow free of UK capital gains tax and income tax (tax deducted from dividends cannot be reclaimed).

Unrivalled tax benefits
SIPPs, like all pensions, have unrivalled tax benefits. If you aren’t using a pension to save for retirement you could be missing out on valuable tax relief. In the current 2013/14 tax year you could receive up to 45% tax relief on any contributions you make and pay no income or capital gains tax on any investments returns inside your SIPP.

Other considerations
You cannot draw on a SIPP pension before age 55 and you should be mindful of the fact that you’ll need to spend time managing your investments. Where investment is made in commercial property, you may also have periods without rental income and, in some cases, the pension fund may need to sell on the property when the market is not at its strongest. Because there may be many transactions moving investments around, the administrative costs are higher than those of a normal pension fund.

The tax benefits and governing rules of SIPPs may change in the future. The level of pension benefits payable cannot be guaranteed as they will depend on interest rates when you start taking your benefits. The value of your SIPP may be less than you expected if you stop or reduce contributions, or if you take your pension earlier than you had planned.

A SIPP could be a suitable option if you:

– would like to have more control over your retirement fund and the freedom to make your own investment decisions, or prefer to appoint investment managers to do this for you and are prepared to pay a higher cost for this facility would like a wide range of investments to choose from

– want to consolidate your existing pension(s) into a more flexible plan

– need a tax-efficient way to purchase
commercial property

Dividends received within a SIPP do not come with a 10% tax credit, so basic-rate taxpayers are no better off receiving dividends within a SIPP than receiving the dividends directly. Investors in a SIPP need to be comfortable making their own investment decisions about their retirement. Investments go down in value as well as up so you could get back less than you invest. The rules referred to are those that currently apply; they could change in the future. You cannot normally access your money until at least age 55. Tax reliefs depend on your circumstances. If you are unsure of an investment’s suitability you should seek professional financial advice.


One of the most effective ways you can manage your estate planning is through setting up a trust. The structures into which you can transfer your assets can have lasting consequences for you and your family, so it is important that you obtain professional advice
as the right structures can protect assets and give your family lasting benefits.

A trust is a legal arrangement where one or more trustees are made legally responsible for assets. The assets – such as land, money, buildings, shares or even antiques – are placed in trust for the benefit of one or more beneficiaries.

They are not the sole domain of the super-rich. Trusts are incredibly useful and flexible devices that people employ for all sorts of different purposes, including Inheritance Tax planning.

In its simplest form, a trust is just a legal mechanism for separating the ownership of an asset into two parts: the ‘legal’ ownership, or title to the asset, on the one hand, and the ‘beneficial’ ownership on the other hand.

It is in the course of Inheritance Tax planning, though, that people are most likely to come face to face with trusts, and seek to get an understanding of what they are and how they work. Their use is widespread and, despite some recent adverse changes in tax law, they remain an important tool in estate planning.

The trust is created when the settlor transfers assets to the trustees, who hold the assets in trust for the beneficiaries. The main reason a person would put assets into a trust rather than make an outright gift is that trusts offer far more flexibility than outright gifts.

The trustees are responsible for managing the trust and carrying out the wishes of the person who has put the assets into trust (the settlor). The settlor’s wishes for the trust are usually written in their Will or given in a legal document called the trust deed.

The purpose of a trust

Trusts may be set up for a number of reasons, for example:

– to control and protect family assets

– when someone is too young to handle their affairs

– when someone can’t handle their affairs because they are incapacitated

– to pass on money or property while you are still alive

– to pass on money or assets when you die under the terms of your Will – known as a Will trust

– under the rules of inheritance that apply when someone dies without leaving a valid Will (England and Wales only)

There are several types of UK family trusts, and each type of trust may be taxed differently. There are other types of non-family trusts. These are set up for many reasons, for example, to operate as a charity, or to provide a means for employers to create a pension scheme for their staff.

When you might have to pay Inheritance Tax on your trust

There are four main situations when Inheritance Tax may be due on trusts:

– when assets are transferred—or settled—into a trust

– when a trust reaches a ten-year anniversary of when it was set up

– when assets are transferred out of a trust or the trust comes to an end

– when someone dies and a trust is involved when sorting out their estate

The treatment of trusts for tax purposes is the same throughout the United Kingdom. However, Scottish law on trusts and the terms used in relation to trusts in Scotland are different from the laws of England and Wales and Northern Ireland.

Saving for a rainy day

T he gap between the fortunes of savers and non-savers continues to widen, and research supports these findings[1]. ‘Habitual savers’ continue to put away more for a rainy day, but the total number of people saving has fallen, and, despite improvements to the economy, one in five people in the UK have no savings at all.

Saving facts
1 The number of people in the UK with no savings at all has risen year-on-year from eight million to over nine million, or one in five of the UK adult population.

2 For those who are managing to save, the average amount that people have in savings was boosted by £175 in 2013 in comparison to the previous year, from £10,033 to £10,208.

3 The total number of people who are managing to save something has dropped from 14.8 million to 14.4 million (31% and 30% of the adult population respectively), and more than half (54%) of those surveyed said they were saving less than they did two years ago.

4 Many people are still only thinking in the short term – almost half (48%) said they prefer to spend their money rather than save and invest, and 64% said they know they are not saving sufficiently for their long-term needs.