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4.10 Self Invested Personal Pensions

  • A self invested personal pension (SIPP) is a type of personal pension where the member takes the investment decisions. The contribution and benefit limits are the same as for personal pensions.

  • The facility is, therefore, aimed at high earners and where perhaps a partnership or other group of people with a common interest can pool their funds together for investment purposes. Taking into account any unused relief from earlier years it may be possible for substantial amounts to be invested, perhaps enabling the purchase of a property for the partnership to occupy, with rental income being received by the fund.

  • The SIPP approach may be of particular interest to those with large transfer values which, through the purchase of property, may assist in the setting up of another business. The fund must be able to service and ultimately repay any such loan.

  • The IR SPSS restricts the type of SIPP investments that are allowed.

Permitted investments include:

    deposit accounts;
    stock market securities;
    overseas securities;
    investment trusts;
    unit trusts;
    OEICs;
    units in insurance linked funds;
    futures and options
    and commercial property (including property rented back at a market rate).

  • Prohibited investments are:

    • residential property (unless occupied by an employee as a condition of employment)

    and

    assets already owned by a member or connected parties.

  • SIPPs can borrow only in order to purchase property.

  • SIPPs can be used for pension fund withdrawal.

  • A SIPP is written under a separate trust and whilst an insurance company or other approved provider is needed to act as pension provider and trustee, other parts of the personal pensions package such as advice, investment management and investment administration, can be arranged elsewhere as the individual member requires.

  • The scheme assets are held by the scheme trustee on behalf of the member. Charges will be specific and levied as fees, paid by the member direct or from his fund. Fees will usually be structured as initial and annual, with additional charges in relation to specific transactions. Charges for significant work such as that involved in the purchase of property will often be charged on a time cost basis.

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