Pension SIPPs and SSASs
What are SIPPs?
Self Invested Personal Pensions, or SIPPs as they are commonly known, are individual pension arrangements offering a wide range of investment opportunities.
Sipp's have been around since 1989 and have always been allowed to invest in commercial property, such as offices, shops and industrial units, but have not been permitted to invest in residential property. This has changed from April 2006.
What are SSASs?
SSAS is a company pension scheme where the members are usually all company directors or co-owners. A SSAS is set up by a trust deed and rules and allows greater flexibility and control over the pension assets.
How does a SIPP work?
A specialist consultancy firm or an insurance company normally carries out the administration of the SIPP and acts as the Trustee. However the choice of investments lies with the member who can either manage his own investments or appoint a specialist advisor. Care is needed in choosing a SIPP provider as some will impose an extra layer of restrictions on investments on top of the rules laid down by the Inland Revenue.
SIPP & SSAS pension fund regulations »
Many Investment simplifications for pension plans
From A-Day, 6 April 2006, there is only one set of investment standards for pension schemes. This means that Small Self Administered Schemes (SSASs) and Self Invested Personal Pensions (SIPPs) are covered by the same set of rules as every other type of pension scheme.
Investments after A-Day are more straightforward and flexible and it is possible to invest in a much wider range of assets.
The limits on Trustee's borrowings and the amount of money that a scheme can lend in some cases is less than under previous current rules. It is therefore important that people who currently have deferred SSAS, full SSAS and SIPP schemes are contacted so that any future investments are discussed.
Residential property in UK and Spain
Another big change is the new rule is that it now allows to invest pension schemes in residential property. The new rule allows people to use their pensions to buy their own home, a holiday home or a buy-to-let home.
Property and Land using SIPP
Below we will specify what type property is allowed to be held by a SSAS and a SIPP:
- Company property - Allowed
- Residential property - Allowed
- Hotels, guest-houses and nursing homes - Allowed
- Residential property with planned conversion to commercial use - Allowed
- Holiday property - Allowed
- Riding stables, golf courses, forestry, woodlands and agricultural land - Allowed
- Non-income producing land - Allowed
- Spanish Overseas property - Allowed
What if I do not have a SIPP or a SSAS?
The majority of pension plan holders will not have these types of pension plans but not all is lost as it is often possible to convert certain existing plans.
Special Feature: SIPPs - The £500 billion opportunity?
Predictions of half a million self-invested personal pensions (SIPPs) by 2010 may have looked optimistic when they were made back at the turn of the millennium (after all, there are probably only around 100,000 true SIPPs even now), but key changes in the market mean that the figure could end up being nearer to five million than just 500,000. So what's happening?
SIPPs are gradually being positioned as a mainstream pension product, offering all the flexibility and options a client could want from their pension, and as new, more streamlined and much more cost-effective.
Taking control of your retirement!
SIPPs give you the chance to take control of your pension; check ScottishLife article what you might gain from investing using personal and commercil pension plans:
Investing via SIPP & SSAS pension plans »
Simpler pensions could draw millions into SIPPs
SIPPs pool together for property investing. More personal pensions are clubbing together to maximise their commercial property holdings.
Elaine Bancroft, director of Hornbuckle Mitchell Trustees, said she had noticed a rise in the number of self-invested personal pension fund holders attempting to cash in on growth in the UK property market.
She said that despite a fall in buy-to-let and a slowing in commercial markets, there was growing interest in group SIPP arrangements, whereby members of SIPPs agree to put a percentage of their fund into a joint account, which is then used to buy commercial property.