Many individuals have several pensions that they often forget about or are not growing as effectively as they could. A SIPP can consolidate all these pensions into one, allowing for improved visibility, better control and easier management.
Capitalise on high transfer values
Defined Benefit Pension Companies are currently paying out historically high cash values to transfer your final salary pension to another pension scheme. This enables you to take advantage of this large cash amount now to invest, grow and safeguard for the future.
A recent example of this was where a client had a final salary pension of approximately £23,000 per year. We liaised with the pension provider and the client received a cash transfer value of almost £900,000 (39 times their final salary amount).
You can choose to draw your pension income from age 55, whereas most other Defined Benefit Pensions have an age restriction of 60 or 65.
A SIPP allows the individual to decide on the type of investments depending on their investment risk profile and timescale to retirement.
In addition, the investment options available under a SIPP are much wider than employer or personal pensions. These include stocks and shares, unit trusts, investment trusts, ETF’s, OEIC’s, insurance company funds and even commercial property.
Having a wider choice of investment options enables individuals to minimize charges, properly diversify, manage investment risk appetite, and provide liquidity and flexibility throughout retirement.
Maximize benefits for beneficiaries
If you have Defined Benefit Pension, usually your spouse will receive a reduced percentage benefit on death and nothing will be left to your children.
A SIPP allows 100% of your funds to be passed to your beneficiaries who have the choice of what they want to do with the SIPP. They can withdraw the whole amount, choose to take regular withdrawals, or they can leave the pension invested and untouched.
If your death occurs before age 75, the amount will be tax free for the beneficiary (subject to Lifetime Allowance). If your death occurs after age 75, then withdrawals will be subject to UK Income Tax rules.
Hold and invest your pension fund in any currency
Instead of being restricted to GBP in the UK, you can hold and invest your funds in any currency (eg GBP, EUR, USD, AUD). This allows greater investment choice and can reduce currency exposure risk.
Flexible income draw-down
You have the flexibility to withdraw as much or as little as you wish each year.
You can use the SIPP balance to provide you with a pension through income withdrawal whilst leaving the remainder of the fund to grow in value. Alternatively you can purchase an annuity or take a series of lump sums – the choice is yours.