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What are SIPPs?
Self-Invested Personal Pensions (SIPPs) were
launched by the Government in the 1989 Budget to allow independent investors
to choose and control their own investments in a form which is virtually
free of tax. There is no income tax on income arising on investments and
no capital gains tax.
What are the benefits of Pilling SIPPs?
There are many. Here are a few examples:
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There are no hidden bid/offer spreads,
initial units, transfer or early retirement penalties.
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The full fund value is available on death
before age 75 which can normally be paid as a lump sum free of
Inheritance Tax (subject to lifetime allowance).
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You receive tax relief at 20%, 40% or
50% on personal contributions (subject to HMRC limits and your tax
status).
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Your pension fund accumulates free of
income tax or capital gains tax for the chance of greater growth.
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Up to 25% of your pension fund (subject to
lifetime allowance) may be taken as a tax-free cash sum at retirement.
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You do not have to actually retire from work
to take your benefits (vesting) - a pension may normally be vested at
any time after your 55th birthday.
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You need not buy an annuity from an
insurance company but can draw an income from your fund while, within
certain limits, keeping full investment control. This is called Drawdown
Pension.
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Using Drawdown Pension, you can take the
maximum tax-free cash from the SIPP, while reducing the immediate
pension income (to zero if you wish) until a higher level is needed.
This can assist capital growth and reduce your personal tax bill.
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You can leave a pension fund after your
death for the benefit of your spouse.
Why a Self-Select Pension?
A SIPP is one of the most tax efficient
investments. The Pilling Self-Invested Personal Pension gives you an
economical way to control the investment risk, strategy and performance of
your own pension arrangement.
One problem with conventional pension
arrangements is that, once invested, your contributions are largely
beyond your control until you are ready to take retirement benefits. You
are locked into the investment performance of your chosen pension manager.
With-Profit contracts can be particularly difficult to reconcile.
You could transfer to another scheme, but why
suffer heavy cash penalties and further setting up charges on the new
arrangement just because you want to change your investments. With a SIPP
you have the freedom to change your investments as often as you want.
How does it work?
Pilling & Co employ a professional pension
management firm to carry out some of the administration. It is branded “Sippcentre”,
part of the A J Bell family of products.
Sippcentre is a division of A J Bell Management
Limited. A J Bell Management Limited is the Scheme Administrator responsible
for the day to day administration and management of the scheme.
A J Bell Management Limited is authorised and
regulated by the Financial Services Authority and is part of the A J Bell
Group, one of the UK’s leading SIPP administrators with assets under
administration exceeding £15 billion.
Who can invest?
Pilling SIPPs are open to you if you are under
75 years of age regardless of your income level. Without net relevant
earnings or with low earnings you can still contribute up to £3600 gross
(£2880 net) each year.
How much can I contribute?
This depends on your tax bracket and for 2012/13
rules it is explained below.
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Non-earners or persons earning less than
£3600 p.a.: Contributions of up to £3600 gross (£2880 net) will
receive tax relief at 20%.
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Basic Rate Taxpayers: All
contributions up to a level equivalent to net relevant earnings can
receive tax relief on contributions at source of 20%.
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Higher Rate (40%) Taxpayers: All
contributions up to a level equivalent to net relevant earnings or
£50,000 (gross), which ever is the lower, can receive tax relief on
contributions at source of 20%. The extra 20% of tax relief is credited
in the self-assessment tax return.
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Additional Rate (50%) Taxpayers: All
contributions up to a level equivalent to net relevant earnings or
£50,000 (gross), which ever is the lower, can receive tax relief on
contributions at source of 20%. The extra 30% of tax relief is credited
in the self-assessment tax return.
Contributions are relieved at the marginal tax
rate only to the extent that such tax has been paid in the tax year of
contribution. The annual earnings limit for the 2012/13 tax year is £50,000.
You can also carry-forward unused relief from the three previous tax years
prior to the current one by back-applying the new £50,000 limit. This means
that in the most extreme example a 50% taxpayer can get full relief at 50%
on up to £200,000 of gross contributions this year, if they have not
contributed anything in 2011/12, 2010/11 and 2009/10 and have sufficient
earnings taxed at 50% in 2012/13. The planned reduction in the additional
rate of tax from 50% to 45% in 2013/14 may make larger contributions in
2012/13 more desirable.
Who chooses the investments?
You do. We try to make sure the investments you
choose for your SIPPs are allowed. However, we do not accept any tax
consequences and/or liabilities of any kind should we later find that,
whatever the reason, you have chosen non-qualifying or unsuitable
investments.
Our dealers are pleased to provide free
investment assistance (always on a general "Execution Only” basis) to
enable you to make your final investment decisions. However, you are always
responsible for suitability and future investment performance. Our
Investment Managers will be happy to provide more detailed personal analysis
of your investment portfolio once you return our
Client Agreement.
I am a financial adviser. Can I introduce
pension business to Pilling & Co?
Yes. Financial advisers that are registered with
the FSA and who introduce pension clients to us can receive up to 3% initial
and up to 0.5% annual renewal commission on contributions and resulting fund
values respectively. This must be agreed by the client in the initial
application. In addition, financial advisors must complete our indirect
Client Supplementary Terms of Business (available separately) to register an
agency with us. With client approval, advisers can give instructions or
receive information from us on behalf of their client.
Where does Stakeholder fit in?
The Pilling SIPP does not qualify under
Stakeholder rules because it expresses its charges clearly as an annual fee,
plus commissions. That does not mean that a Pilling SIPP must be more
expensive than a Stakeholder plan.
With the introduction of Stakeholder Pensions,
rules were changed to allow any UK resident (including children) earning
less than £3,600 pa who is UK resident to contribute up to £3600 gross pa to
a personal pension. This is a great family tax break for Inheritance Tax
mitigation and setting up investments for the long-term future of minors. We
offer a “Kiddie” SIPP for children under 18 at half the annual and set-up
fees with a very large choice of funds. On reaching age 18 the plan becomes
a full SIPP with a full investment choice.
Can I buy and sell shares within my SIPP?
Yes. You can manage your SIPP investments
without restriction, and your fund may be held entirely in cash if you
choose.
What investments can I make in the SIPP?
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Most pension arrangements restrict you to
the internal funds of the chosen pension provider. However, our SIPP
gives you a very wide choice of direct investments such as:
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Stocks and Shares quoted on the UK Stock
Exchange and securities on the AIM but not PLUS Quoted markets.
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Similarly listed government or corporate
bonds and debt instruments.
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Stocks and Shares traded on a recognised
overseas stock exchange. Dealing terms may vary depending on which
market the stock trades.
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Unit Trusts, Investment Trusts and OEICS.
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Some hedge funds (subject to necessary
authorisation).
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Covered warrants (subject to completion of
an application form which allows us to assess the appropriateness of
complex products).
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ETFs as well as many ETCs and ETNs.
Do you deal "instantly"?
Yes. Unlike many schemes, our expert dealers
will deal for you as soon as possible. We do not deal only 'once a
day', or even just 'on certain days of the week'. If preferred,
you can often hold on the telephone while we do your deals.
How do you confirm my deals?
A contract note is sent to you for every deal
showing price, commission etc. If you do not have a contract note, or the
contract you have received is incorrect please tell us without delay and at
least within 2 business days. Regardless of cause, we can accept no
financial liability for missing or incorrect contract notes unless this is
brought to our attention within 10 business days of the original
deal(s).
Can I transfer from existing pension funds to
Pilling's SIPP?
Yes. But, under no circumstances is
Pilling & Co ever responsible for advising you on the suitability of
transferring existing schemes into our SIPP. This decision is your own and
transfers are, without exception, accepted on this basis.
Can I transfer protected rights in to a
Pilling's SIPP?
Yes. From 1st October 2008 it will be possible
to transfer funds held within a Protected Rights Pension scheme into a Self
Invested Personal Pension (SIPP). Protected Rights have also been referred
to as ‘Contracted Out Pensions’ or ‘SERPS Pensions’.
Pension provision is a complex area for most
clients, and we impose certain restrictions on the transfer of existing
pension arrangements to ensure the suitability of the scheme. We accept
instructions for pension transfers directly from clients who are
authorised under the Financial Services Act, such as solicitors,
accountants, actuaries etc., but, we strongly recommend that clients who are
not so authorised should first take independent financial advice.
Over a period of time, Pilling & Co has built up
a good working relationship with leading firms of independent financial
advisers and we can recommend them to you for specialist pension advice.
Further details are available from your usual
contact at Pilling & Co, or please speak to our Investment Department on
0161 832 6581.
May I leave the SIPP in cash?
Yes, but you should not regard this as a
permanent investment arrangement, more as a temporary home for funds during
periods of market uncertainty.
Do you pay interest on cash?
Yes. Quarterly, we pay gross interest on your
cash on a tiered system at rates fixed by Pilling & Co. Your cash is always
held in accounts segregated from our own, and only in banks which are
authorised and regulated by the FSA. We pay interest to your account after a
variable administrative deduction. An example of the rates are
here.
For tax reclaims and to process your
contributions, an account in your name will be held by Sippdeal with the
Bank of Scotland. This will also enable future income drawdown facilities. | |
How are dividends dealt with?
Dividends paid by the companies in which you
invest are credited to your accounts. Together with Sippdeal Trustees
Limited, we will claim any income tax deducted from interest, corporate
bonds, or other eligible stocks on an annual basis and credit this to your
account.
How do you deal with “Corporate Actions?”
We write to tell you of any action affecting
your investments including conversion and subscription rights, takeovers and
similar offers. We process any capital reorganisations, demergers etc. You
may only take up rights issues and open offers in a SIPP if you have cash in
the plan, or can add new cash to your SIPP. If you do not have enough cash,
then the funds must be raised inside the plan. Where investments are
pooled, entitlements are allocated on a “pro rata” basis and are rounded
down to the nearest whole unit. You must give your clear instructions
(preferably in writing) direct to the Pilling SIPP Dept. or by email to
CAISA@PILLING.CO.UK by the requested date, or we can accept no
responsibility whatsoever for any resulting losses or liabilities.
How are my SIPP investments registered?
Through CREST, where available, in our nominee
“St Ann’s Square Nominees Limited” (SASNL). You are always the beneficial
owner of the investments. They are never part of Pilling & Co’s assets
nor, indeed, the nominee company’s assets. There may be occasions when
identical stocks are pooled together within Crest, or at another custodian,
as one block under the title of SASNL. These cannot then be attributable to
any individual client and ownership will be evidenced by an electronic
bookkeeping entry at Pilling & Co instead of a physical certificate. In
these circumstances you are warned, that in the unlikely event of an
un-reconcilable shortfall after the failure of a custodian, clients may
share in that shortfall in proportion to their original share of the assets
in the pool.
Are my investments secure?
Yes. Pilling & Co accepts absolute
responsibility for St Ann’s Square Nominees Limited. Your investments
are not only protected under the Financial Services Compensation Scheme (FSCS),
but, with the security of Pilling clients in mind, we also maintain
additional professional financial risks insurance to cover the changing
level of turnover in our business. If your investments must be held by a
third party, we will use our best endeavours to make sure that only
recognised and well-respected financial institutions are used. There may be
further risk with non-UK based custodians because of different settlement,
legal and regulatory requirements. In some cases dividend payments may be
briefly held in a custodian’s overseas bank account before payment is made
to Pilling & Co. However, we do not accept responsibility for such third
party safe custody obligations.
Do I get valuations and statements?
We send you half yearly portfolio valuations and
accounting statements at no extra cost.
Do you produce newsletters?
Yes. We send you our ISA & PEPTalk every three
months. We also produce a monthly newsletter which we can send to you via
e-mail.
Can I receive Company Reports and Accounts?
To reduce administration costs, we suggest that
these are obtained from the respective Company Registrars direct.
Do I have the same rights as an ordinary
shareholder?
Yes. By negotiation, we can arrange for you to
attend company meetings, to vote and to receive any other relevant
information that is sent to share or unitholders direct.
Why is a Pilling SIPP "Low Cost"?
Pilling & Co is registered as an Investment
Partner, allowing you to take advantage of the tax benefits of SIPPs on a
cost-effective basis. Our competitive administration charges and dealing
commissions (see
Charges)
mean you take greater benefits from your pension fund.
What are the dealing charges?
With a minimum of only £10, our dealing
commission per bargain is 1.65% of the first £10,000 value, 0.5% on the next
£90,000 and 0.4% on any excess. We must charge you Government stamp duty at
0.5% of the value when buying UK shares, preference stocks, convertibles and
investment trusts and the standard industry levy of £1 applies to all
bargains over £10,000. These terms may vary for overseas and non-Crest
stocks.
Is there any commission on unit and
investment trust transactions?
Yes. Buying and selling investment trusts is on
our normal scale, as are unit trust/OEIC sales. No further commission
will be charged on buying a unit trust or OEIC when we are paid commission
from the managers direct.
Are there any charges for closing or
transferring a Pilling SIPP?
Cash can be transferred to another SIPP manager
at no cost. You may prefer to sell the investments at our normal
dealing rates to convert them into cash. Individual shareholdings can be
transferred out of the SIPP to another SIPP manager at a cost of £20 plus
VAT per holding. Please note there is also a fee of £75 plus VAT
payable to Sippdeal when you transfer out to another manager.
Although "Self-Invested" can Pilling manage
my SIPP?
Yes. Not every client has the confidence or
wishes to run pension investments without help and we offer Investment
Managed and Discretionary Managed facilities to both new and existing
Pilling SIPP investors.
We also offer a managed portfolio service for
smaller investors; the Pilling Ideal Portfolios. There are 5 models —
Income, Higher Income, Growth, Select Opportunities and Overseas Growth.
What is the Investment Management Service?
This is where your investment decisions are made
with the help of your own Investment Manager. We will discuss any ideas you
have or indeed create a portfolio structure for you. You will receive full
written reports on your portfolio with an economic review every six months.
Our fee for the management of your portfolio is 0.5% per annum of the value
on the first £250,000 and 0.25% on any balance. The fee will be charged
every six months in arrears at the time of your review.
What is the Discretionary Management Service?
This is where tactical decisions are made by us
and acted upon without the need to contact you. Some clients work abroad and
are happy that their interests are being looked after when they are away.
Others simply wish to rest easy in the knowledge that their assets are
receiving professional attention.
Our fee for this service is 1% per annum of the
portfolio value up to £250,000 and 0.5% on any excess. Again this is charged
every six months in arrears. We send you contract notes, confirming all
deals we have done for you. You can always see what is happening to your
account and you will be sent full investment valuations and personal
portfolio reviews each half year. You will have your own Investment Manager
who can discuss all aspects of the portfolio and the strategy behind it.
Is Income Withdrawal available?
Yes, by taking a Drawdown Pension and for an
additional annual fee of £150 plus VAT charged by SIPPCentre. We can arrange
for you to drawdown income from your plan. Once you complete a ‘Benefit
Form’ we request a calculation of what income you can take based on your
age, sex, prevailing Government Actuary Department (GAD) rates and the size
of your fund. You can also elect to take up to 25% tax-free lump sum
(subject to individual confirmation).
What about Phased Income Withdrawal?
It is the same basic procedure as income
withdrawal only it allows you to put part of the SIPP into drawdown and
leave part ‘fully invested’. Amongst the planning options, this allows
retirees to hedge their bets on obtaining better annuity rates in the
future. Normally your SIPP is split into 1000 segments allowing variation on
the above 50:50 scheme.
What changes when I reach age 75?
There are changes on three fronts:
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You can no longer pay in any contributions
and receive tax relief.
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Even if you have not drawn income from your
pension, in the event of your death and leaving the pension to someone
other than a spouse or eligible dependant, the fund will be subject to a
tax recovery charge of 55%. It is not normally part of your estate.
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If you are drawing income from the pension,
your annual income limits will be re-calculated every 12 months compared
to every 36 months prior to age 75.
What is Flexible Drawdown?
Flexible Drawdown is a new invention as of tax
year 2011/12. It allows anyone with £20,000 pa of proven retirement income
resources from state pensions, annuities, occupational pensions, etc to take
any amount they like from their Drawdown Pension. This is provided they pay
their marginal rate of income tax on it thus disregarding the restrictions
of the aforementioned GAD rates. The £20,000 minimum income guarantee cannot
be satisfied with earned, rental or property income.
How does death affect the Pilling SIPP?
You can nominate who the beneficiaries of your
pension should be in the event of your death. The application form has a
‘nomination of beneficiaries’ included and you can alter this later in
writing if needs be.
Our SIPPs are generally not part of the Estate
of a deceased person and therefore not subject to Inheritance Tax (IHT).
However, this is not something we are in a position to guarantee.
On the death of a pension investor who has not
taken income from the fund and is younger than 75, the fund may be
distributed to beneficiaries without tax recovery charges.
If the fund is a Drawdown Pension or the pension
investor is over 75, then there is a tax recovery charge of 55% unless the
pension is being left for the continued use of a spouse, eligible dependent
or charity.
How does the Lifetime Allowance affect SIPPs?
The Government set the standard Lifetime
Allowance, (LTA), at £1.5m for 2012/13. Each time new benefits commence via
a Drawdown Pension, Flexible Drawdown or Annuity Purchase a portion of your
lifetime allowance is used up. Once you have used up your lifetime
allowance, any benefits paid above the allowance will be subject to the
lifetime allowance charge. If excess funds are used to provide a taxable
pension, the lifetime allowance charge is 25% of those funds. Alternatively
if excess funds are paid as a lump sum (only available for non-protected
rights) the lifetime allowance charge is 55%. SIPPCentre will deduct this
tax charge from your fund and pay it to HMRC before paying your benefits.
Clearly, this can be a problem if you over-fund
your pension and/or if you are otherwise fortunate enough to benefit from a
high rate of growth within your SIPP investments.
If you have built up substantial pension savings
before 6 April 2006 and have registered for enhanced and/or primary
protection (‘transitional protection’) with HMRC then this may reduce, or
eliminate, any lifetime allowance charge that would otherwise be payable.
Further details on benefit options are
available in our “Benefits Guide” Available on request. |
