What is a SIPP?

What is a SIPP?

A SIPP is a Self-Invested Personal Pension which offers a tax-efficient way to save for retirement.

Who is a SIPP for?

SIPPs are designed for people who want to take control of their retirement savings and are happy making their own investment decisions.

You can open more than one SIPP and you can have one alongside other types of pensions, like a workplace pension.

What are the benefits?

A SIPP gives you more freedom than many other types of pensions.

You can choose how much money to pay in and when. With a wider range of investments to choose from, you have the flexibility to invest where you want to, this could give your money more chance to grow. You can choose to invest in funds, shares and bonds for example. But wherever you decide to invest you should keep in mind that all investments can fall and rise in value. It is possible to get back less than you invest.

SIPPs have the same tax benefits of traditional pensions. When you pay money in the government will automatically add 20% in tax relief as an incentive to save more.

Here's an example:

This means, for every £800 you add to your SIPP the government will add an extra £200. And if you pay tax at a higher rate, you can claim back even more tax relief through your yearly tax return.

Pension and tax rules can change, and benefits depend on your circumstances.

When you buy investments within a SIPP, you shelter them from UK tax. This means if your investments grow you won’t have to pay capital gains tax on future profits. And if your investments produce an income, you won’t pay UK income tax on that either.

These aren’t the only benefits. Any money in a SIPP can be passed on tax-efficiently to your loved ones when you die. It’s usually free from inheritance tax and in some cases the money can be passed on completely tax free.

But remember pension and tax rules can change and benefits depend on your circumstances.

What are the pension rules?

If you’re considering a SIPP, it’s important to understand any pension rules and limits. Just remember that these pension limits apply across all of your pension schemes.

You can pay in as much as you earn and receive tax relief, up to the annual pension allowance.

If you’ve taken an income from your pension, or you’re a high earner, your allowance could be less.

If you’re a low or non-earner, then you can usually pay in up to the lower annual limit and still get tax relief on top.

With the HL SIPP, you have access to all the main retirement options, and can make withdrawals from age 55 (rising to 57 from 2028).

The options include drawdown, lump sums and annuities. You can choose to take a flexible income as and when you need it. Or you can opt for a secure income for the rest of your life if, for example, you don’t want to keep your pension invested in retirement.

If you’re looking to take control of your retirement savings, a SIPP is an excellent option.

With the HL SIPP you can start investing with a lump sum of £100 or from £25 a month.

You can also open an HL SIPP by transferring.

For example, you might want to bring your pensions together under one roof for easier management, or to access all the available retirement options.

Just check for charges first, and that you won't lose any valuable benefits.

SIPPs are for people who are happy to make their own investment decisions. All investments can rise and fall in value so it’s possible to get back less than you pay in.

You’ll usually need to be at least 55 (rising to 57 from 2028) before you can access the money in your pension. Pension and tax rules can change and any benefits will depend on your circumstances. Before transferring a pension, you should always check the costs involved and whether you’d lose and valuable benefits.

What you do with your pension in an important decision. You should check you’re making the right decision for your circumstances and that you understand all your options and their risks. The government’s free and impartial Pension Wise service can offer guidance on your retirement options.

This video isn’t personal advice. If you’re unsure what to do please contact us for advice. Correct as at March 2024.