What is a SIPP?
A Self-Invested Personal Pension (SIPP) is a type of UK pension scheme, registered with the UK’s HM Revenue & Customs (HMRC), which benefits from preferential tax treatment. It’s established inside the UK and holds your investments until you start to make withdrawals, which cannot be before age 55.
Why would I use a SIPP?
A SIPP can often provide greater investment flexibility than traditional company or personal pensions. You can invest in a wide range of assets like company shares, corporate and government bonds, collective investment funds and cash, giving your investment the potential to grow over time.
Unlike a defined benefit or ‘final salary’ scheme a SIPP provides you with the flexibility to take your income in any manner you wish be it a lump sum or regular payments. A SIPP will also allow to pass the residual value of your pension fund to your spouse or next of kin.
Investments are normally held, and benefits paid in pounds sterling although, some SIPP providers will allow you to hold investments in different currencies and pay income in the currency of your choice helping you to avoid currency exchange rate risk.
If you move back to the UK, it is possible to make contributions to a SIPP and benefit from tax relief at your marginal tax rate. For higher rate tax payers this is currently 40%.
Even though you’ve moved overseas, you may prefer for your assets to remain with a UK pension provider. If things go wrong SIPP members benefit from protection through the UK’s Financial Services Compensation Scheme (FSCS). However, for international pensions, the investor protection available is dependent on the jurisdiction in which the pension is based.
SIPPs offer much of the flexibility of international pension schemes, although typically the charges are significantly lower.