The Finance Act 1989 first introduced Self-Invested Personal Pensions (SIPPs) to give personal pension holders greater investment freedom. SIPPs are available to both the employed and the self-employed and offer a wide range of investment opportunities, flexible income patterns in retirement and potential for providing more favourable death benefits. 

SIPPs have become increasingly popular since the government introduced "income drawdown" in the Finance Act 1995. This means that income can be paid directly from the SIPP on retirement, rather than having to buy an annuity at the going rate. The Inland Revenue currently require an annuity to be purchased by age 75, but until then the member can continue to control the investment strategy of the SIPP and, subject to certain limits, the amount of pension which is actually drawn down. However, from 6 April 2006, the role on having to buy an annuity at age 75 will disappear.

Payment of contributions 

All contributions paid by individuals, whether employed or self-employed are paid net of basic rate tax. The basic rate tax is reclaimed from the Inland Revenue and paid into the SIPP bank account on a monthly basis. 

Any contributions paid by the company on your behalf are paid gross and can be treated as a business expense

The Investments 

There is a wide choice of investments available to a SIPP, including: 

• Stocks and Shares quoted in the UK and Overseas; 

• Unit Trusts, Investment Trusts and OEICs; 

• Insurance Company Funds; 

• Deposit Accounts; 

• Commercial Property including syndicated property. 

• Residential; Property (from 2006)
  

It is also possible for a group of SIPP holders to pool together their SIPP assets and jointly purchase a property for commercial use or purchase a syndicated property. 

A SIPP can borrow to assist with a commercial property purchase or development. 

We can advise you on the limits imposed on the amount which can be borrowed.
Whilst the choice of allowable investments is fairly wide, there are some restrictions which we can discuss with you.
In 2006 the investment restrictions are set to be relaxed although the rules are still to be finalised.

From 2006 SIPPs will be able to invest in residential property and foreign property. So SIPPS funds will be able to buy residential property in Spain, France, Florida and other foreign counties.

Buy to Let SIPPs may also be possible.

Drawing the Benefits 

SIPP benefits may be taken at any age between 50 and 75. Up to 25% of the fund can normally be taken as a cash sum, free of tax. However, this may be subject to restrictions if all or part of the transfer relates to a previous company pension scheme. 

The balance of the fund can be taken by way of "Income Drawdown". This means that the pension payments are made directly from the fund each year, within minimum and maximum levels on a basis set down by the Government Actuary's Department.