Earlier this month, the government implemented some long-awaited and much-anticipated reforms to UK pensions. The dramatic overhaul was intended to remedy inadequacies in the system, making pensions fairer for all.
One of the central aims of the Conservative ministers responsible for shaping the scheme was to improve pension freedom. They wanted to give those approaching retirement a greater say over the future they had: how much capital they would have access to; when they could access it; how they would spend it; and so on and so forth.
For those who share these aims, self-invested personal pensions (SIPPs) can be the ideal pension option. Offering control, flexibility, choice, and a multitude of tax benefits, they’re the perfect vehicles for securing the retirement that you want. Here are just three reasons why they might be the ideal choice for you…
SIPPs Offer a Wide Range of Investment Choices
The central aim of the pension reforms was to give people more control over their futures, and SIPPs can be the perfect tool to wrest power from pension providers and place it in your own hands instead. Traditional personal pension schemes have long been criticised for their limited investment choices, but SIPPs share no such fault. They put the power to decide where to invest your capital under your control, rather than handing it to professionals with a vested interest in your stead.
SIPPs are Flexible
One of the greatest tools in the quest for pensions freedom is flexibility: getting to choose where to invest your funds and how, and also being in control of how and when you’ll spend them. Thankfully, this is a privilege that SIPPs providers are prepared to grant. It is entirely down to you to decide where to put your capital, when to take it, and how you’ll spend it.
SIPPs Offer a Multitude of Tax Benefits
Perhaps the greatest advantage of investing in a SIPP is the multitude of tax benefits that go along with it. Foremost among these is a generous amount of tax relief. For basic rate taxpayers, this is set at 20 per cent, meaning that for every £8,000 you invest, you’ll receive a further £2,000 courtesy of the government. For higher rate and additional rate taxpayers, this offer is even more lavish, with tax relief of 40 and 45 per cent respectively. Furthermore, you will not be liable to pay either capital gains or income tax on your fund, and your heirs can inherit it tax-free in the event of your death.
Could a SIPP be the ideal pension option for you?