PENSIONS – Self Invested Personal Pension (SIPP)

A SIPP is a Self Invested Personal Pension. Unlike managed funds, it lets you choose where your pension funds are invested.

A SIPP is a personal pension that offers you the widest range of investments to choose from. It gives you the opportunity to choose from the best funds, the best service providers and to get the best value for your money. It offers you even more flexibility when it comes to taking your benefits at retirement, with more choice and flexibility than a personal pension.

Why choose a Self Invested Personal Pension?

A Self Invested Personal Pension (SIPP) is a personal pension where you have greater choice in:

• The range of investments to pick from
• How those investments are managed
• Who does the administration
• How you wish to take your benefits at retirement.

It allows you to choose:

• a provider offering an award-winning service
• how and when your money is invested
• when to take your benefits
• what income options you would like to be able to consider

It's more flexible in that:

• you can make single, regular, transfer or third-party payments at any time
• you can change your investment decisions at any time
• you can choose how your dependants will benefit, if you were to die
• when taking your benefits, you can vary the amount and frequency.

A SIPP is a lifestyle retirement choice that puts you in control.

What can I use my SIPP for?

The plan can be used to:

• save for retirement
• take an income, tax-free lump sum, an annuity, or any combination of these options during retirement.

Am I eligible to join?

You are if you are resident in the UK for tax purposes or you are a crown servant working abroad (or the husband, wife or civil partner of the crown servant).

How much must I invest?

• The minimum regular payment is £100 a month.
• The minimum single or transfer payment is £1,000.

What can I invest in?

You have access to the following investment options:

• A wide range of pension funds and funds from other respected fund managers,
• Commercial property.
• Stocks and shares on the UK Stock Exchange, including securities on the Alternative Investment Market.
• Stocks and shares traded on a recognised overseas stock exchange.
• Unit trusts and investment trusts.
• Insurance company managed funds and unit-linked funds.
• Deposit accounts.

Investments such as commercial property may take longer to sell than others, and its value is generally a matter or a valuer's opinion.

If you would like more information on the investment options available, please speak to your financial adviser.

Can I transfer in other plans?

If you are considering transferring in other plans, we accept transfers from:

• personal pension schemes
• occupational pension schemes
• Section 32 buy-out policies
• free-standing additional voluntary contributions schemes
• retirement annuity contracts
• stakeholder pension schemes

If you have been contracted-out of the State Second Pension, any part of your transfer value that relates to Protected Rights, Guaranteed Minimum Pension or Section 9(2B) Rights can also be paid into the SIPP.

Transferring from another plan does not mean that your retirement fund value will be higher than it could ohterwise have been.

You should always seek financial advice before considering transferring.

When can I take the proceeds?

You can start to take the proceeds of your SIPP from age 50( 55 from 2010) whether or not you have actually retired. HM Revenue & Customs allows people in certain occupations to take benefits at an earlier age.

New pensions legislation will come into force on 6 April 2010. This means that from that date:

• you won't be able to start 'income drawdown' or start new phase of drawdown, unless you're aged 55 or older.
• you won't be able to start Dripfeed Drawdown unless you're aged 55 or older.

Taking your tax-free lump sum

You can take a tax-free lump sum from an arrangement at its pension date. This is the date from which a pension is first payable from that arrangement, either in the form of income or an annuity. It is not possible to take only a tax-free lump sum from an arrangement. Once a pension date has been set, the remaining funds in the arrangement must be used to provide a regular income or to buy an annuity.

Please note, you must take this lump sum before your 75th birthday.

Withdrawing income

Any withdrawals you make must be within the limits laid down by the Government Actuary's Department (GAD) and are subject to your normal rate of income tax. Within these limits, you can choose the level of income you require.

Please note:

• Over time, income withdrawals can erode capital.
• If your SIPP's investment performance is poor, this may reduce the amount of income available to withdraw, or the amount available to buy an annuity.

What happens on death?

On death your benefits will be paid out in the form of a lump sum, an income, a pension or a combination of these. The death benefts payable depend on the stage that any of your arrangements have reached when you die.

Buying an annuity

You can buy an annuity from any authorised pension provider. You will have a number of choices relating to your annuity, for example:

• An annuity for one or more dependants.
• Your annuity can stay the same each year or increase at a fixed rate each year of up to 8.5%, or in line with inflation.
• You can guarantee your annuity payments for between 1 and 10 years. This means your annuity will not stop if you die during this period, but will continue to be paid for the rest of the guaranteed period.
• You can choose how often you want your annuity to be paid, for example, monthly, three-monthly, four-monthly, six-monthly or yearly.

If you don't buy an annuity immediately on retirement, this could mean the rates are lower in the future when you do come to buy one, which could result in a lower annuity income for you.

What about fees and charges?

The fees and charges for investing in the SIPP are shown in the Key Features Document, which will be provided.

How do you decide if a SIPP is right for you?
Like most financial planning, SIPPs are best discussed with an expert independent financial adviser. So the next step is to meet or talk with us and we will answer your detailed questions. The more information you give us, the easier it will be to advise you. Then you can make an informed decision as to whether a SIPP is right for you.

What should you do now:

› Start paying into your SIPP.

› Transfer existing pension funds into your City Financial SIPP.
› Ask your Employer to talk to us about setting up a Group SIPP.
› Buy equities and commercial properties now, if applicable.
› If you have an old style SIPP, convert it into a new, flexible SIPP.

To talk to one of our advisors, call 0800 3893345 or email info@city-financial.co.uk