SIPPs (Self Invested Personal Pensions)

For pension investors who have built up substantial funds there can be advantages in converting a personal pension fund into a SIPP.

What is a SIPP?
With a conventional Personal Pension the pension company does everything, that is to say they will set it up, administer and run it, invest your premiums and eventually pay out your pension.

A SIPP “unbundles” the pension plan, so that the administration is dealt with separately from the investment of the funds. This means that you set it up with a SIPP provider, who administers it. That leaves you free to control the investments yourself, or together with an investment adviser or manager.

What are the benefits?
Simply, greater investment choice:

It allows you to choose from a wider range of investment funds not just those of the one company. This means that you can cherry pick from the whole market of pension and collective investment funds.

It also extends the choice to other investments, such as shares, Gilts, property and even such things as gold bullion.

In times when markets are volatile you can spread the funds, for example, between different bank accounts to get the best return on your cash.

Property investment has become very popular in recent years. This is because a SIPP can purchase property directly to hold as an asset of the fund. Residential property is not permitted but most kinds of commercial property are. It is also possible for a SIPP to purchase property from the member.

An example will best illustrate how this can work.

Mr Smith’s company owns the premises it is trading from. It has been valued at £150,000. Mr Smith has a SIPP worth £200,000.

Mr Smith’s SIPP buys the property from Mr Smith’s company at market value, paying £150,000 to the company.

A rental agreement is made between the company and the pension fund.

Advantages:

The company gets an injection of cash.
Any increase in value of the property in the pension fund is free of Capital Gains Tax.
The pension fund receives rent from the company, also tax free.
Mr Smith’s pension fund acquires a good income generating asset.

How can we help?
We have many years expertise in SIPP investments. For more information or to discuss your own circumstances, contact Colin.

Alexander Sloan Financial Planning Ltd   
Email Colin Rodger: colin.rodger@alexandersloan.co.uk

Authorised and Regulated in the UK by the Financial Services Authority

A Company Registered in Scotland No. 197380