Self Invested Personal Pensions
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Quite simply, a SIPP works in much the same manner as a personal pension plan. Contributions are paid in the form of regular contributions and single contributions (subject to HMRC limits), or other pension benefits can be transferred in. Transfer payments and income from investments do not count as contributions. The SIPP will enjoy the same tax reliefs and tax advantages as any other registered personal pension plan. The key difference is that contributions are invested in accordance with the individual's specific instructions into the allowable investments. Prior to the investment instruction being received and executed, contributions are held in a trustee bank account where they will usually earn a competitive rate of daily interest.
A number of providers stipulate that a minimum amount must be retained in their insured pension funds which cannot be used for self-investment purposes.
Who can invest in a SIPP?
Under the post A Day rules any individual can invest in a SIPP. Even members of occupational pension schemes are will be able to simultaneously contribute to a SIPP as the concurrency rules no longer exist. It's just a matter of whether contributions will be tax relievable.
‘In specie’ transfers.
Where there is a transfer from another pension arrangement, which holds a property, the property does not have to be realised to transfer the benefits. Instead, so long as the SIPP provider agrees to accept this property, the property can be transferred ‘in specie’. The market value of the property will represent part of or the whole amount of the transfer value. Property can even be ‘paid into’ a SIPP in lieu of a cash contribution – see the SimplyBiz guide to ‘In specie contributions’ for tax relief issues.