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Investor Overview

SIPP Overview: Everything You Need to Know

A Self-Invested Personal Pension (SIPP) is a UK pension scheme that provides individuals with greater control over their retirement savings. Unlike traditional pensions, SIPPs offer a broad range of tax- efficient investment options, allowing individuals to choose and manage their investments according to their financial goals and risk tolerance.

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What is a SIPP?

One of the UK's Most Popular Tax-Efficient Investments

A Self-Invested Personal Pension (SIPP) is a UK pension scheme designed to provide individuals with greater control over their retirement savings. Since its introduction, SIPPs have gained popularity for their flexibility and diverse investment choices, allowing individuals to tailor their pension portfolios to meet personal financial goals.

SIPPs offer tax-efficient investment benefits, enabling contributions to grow tax-free while providing a wide range of investment options, including stocks, bonds, funds, and commercial property, though it's important to understand any associated charges. This flexibility, along with the potential for tax relief on contributions, makes SIPPs an attractive choice for those seeking to actively manage their pension savings and maximise their retirement potential.

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01 | Wide Investment Range

SIPPs allow individuals to invest in various assets, including stocks, bonds, mutual funds, ETFs, and commercial property, providing flexibility to create a diverse portfolio.

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02 | SIPP Tax Relief Benefits

Contributions to a SIPP receive tax relief at the individual's highest rate, and investment growth within the SIPP is tax-free, enhancing overall returns.

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03 | Control Over Investments

SIPP holders have direct control over their investment choices, enabling them to make informed decisions based on their risk tolerance and financial goals.

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04 | Accessible from Age 55

SIPP members can access their pension funds from the age of 55 (rising to 57 in 2028), providing greater flexibility for retirement planning.

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05 | SIPP Contribution Limits

SIPPs are subject to an Annual Allowance, typically £60,000 per tax year (2024/25), with the ability to carry forward unused allowances from previous years.

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06 | Inheritance Tax Efficiency

SIPP assets can usually be passed on to beneficiaries without incurring Inheritance Tax (IHT), making them an effective tool for estate planning.

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Key Facts

Benefits and Risks of SIPP Investments

Self-Invested Personal Pensions (SIPPs) provide individuals with the flexibility to take control of their retirement savings and invest in a wide range of assets. With options to invest in stocks, bonds, commercial property, and more, SIPPs allow for tailored investment strategies that can align with personal financial goals. The tax relief on contributions and tax-free growth within the scheme further enhance their appeal as a powerful tool for maximizing retirement savings.

However, SIPPs come with risks that investors should consider. The value of investments can fluctuate due to market conditions, and poor investment decisions can lead to capital loss. Additionally, managing a SIPP requires a solid understanding of investment strategies, potential charges, and regulatory compliance, which can be complex. Consulting a financial adviser can be beneficial to navigate these complexities and make informed decisions. It’s essential for SIPP members to evaluate these factors and make informed decisions that align with their long-term financial objectives.

01
Investment Flexibility

SIPPs offer a broad range of investment options, including stocks, bonds, mutual funds, ETFs, and commercial property. This flexibility allows individuals to build a diversified portfolio that aligns with their specific financial goals and risk tolerance, making it possible to adapt to changing market conditions. However, poor decisions can lead to capital losses.

02
Tax Relief Benefits

Contributions to a SIPP receive tax relief at the individual's highest tax rate. This means that for every £100 contributed, higher-rate taxpayers can effectively reduce the cost to £60 after tax relief. Additionally, the investment growth within the SIPP is tax-free, significantly enhancing the overall value of retirement savings.

03
Direct Control Over Investments

SIPP holders have the ability to make their own investment decisions, enabling them to tailor their portfolios according to their knowledge and preferences. This level of control is appealing for those who wish to actively manage their investments rather than relying on a fund manager.

04
Potential Higher Returns

With access to a wider array of investment options, SIPPs can potentially deliver higher returns than traditional pension schemes. Investors can take advantage of various asset classes and market opportunities, which may lead to greater capital growth over time.

05
Commercial Property Investment

SIPPs can be used to invest in commercial property, which can generate rental income and may appreciate in value over the long term. This investment can provide a steady income stream for the pension fund, diversifying the portfolio further and adding an element of stability.

06
Inheritance Tax Efficiency

Funds held within a SIPP can generally be passed on to beneficiaries without incurring Inheritance Tax (IHT), making SIPPs an effective tool for estate planning. This feature allows individuals to leave a tax-efficient legacy to their heirs, ensuring that more of their wealth is preserved for future generations.

07
Investment Risks And Complexity

Managing a SIPP requires a good understanding of financial markets and investment strategies, which can be complex for those without experience. Moreover, SIPPs can incur higher fees compared to traditional pension plans, and there are strict regulatory requirements that must be adhered to, adding to the administrative burden.

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Free Investor Guide

An investor's guide to tax efficient investing

Providing an insight into the tax efficient investment options accessible to UK investors, our free guide is a useful introduction to the schemes and wrappers that can help you maximise returns and savings while minimising risk when investing into early stage companies.
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SIPP FAQs

Key Questions

Should you have any further queries surrounding SIPP Investments (Self Invested Personal Pension), we have compiled a list of frequently asked questions below.

  • A Self-Invested Personal Pension (SIPP) is a type of pension scheme that allows individuals to have greater control over their retirement savings. SIPPs enable members to choose and manage their own investments from a wide range of options, including stocks, bonds, and commercial property.

  • Anyone can open a SIPP as long as they are a UK resident and over the age of 18. This includes employees, self-employed individuals, and directors of limited companies, allowing for flexibility in retirement planning.

  • SIPPs allow for a diverse range of investments, including individual stocks, mutual funds, ETFs, bonds, commercial property, and even cash. This flexibility enables individuals to tailor their investment strategies to meet their specific financial goals.

  • The Annual Allowance for contributions to a SIPP is typically £60,000 for the 2024/25 tax year. You may also carry forward any unused allowance from the previous three tax years. Contributions beyond this limit may incur tax charges.

  • Contributions to a SIPP receive tax relief based on your highest tax rate. Additionally, any investment growth within the SIPP is tax-free, meaning you won't pay Capital Gains Tax on profits, which can significantly enhance the overall returns on your investment.

  • You can start accessing your SIPP funds from the age of 55 (rising to 57 in 2028). At this point, you can take a lump sum, regular withdrawals, or purchase an annuity, depending on your retirement strategy.

  • Yes, SIPPs typically involve various fees, including setup fees, annual management fees, and transaction fees for buying or selling investments. It's important to review these costs, as they can affect your overall returns.

  • Yes, you can transfer funds from other pension schemes, such as workplace pensions or other personal pensions, into a SIPP. This can help consolidate your retirement savings and provide greater control over your investments.

  • SIPP assets can usually be passed on to your beneficiaries without incurring Inheritance Tax (IHT), provided certain conditions are met. This makes SIPPs an effective estate planning tool for leaving a tax-efficient legacy.

  • SIPPs carry investment risks, as the value of investments can fluctuate. Poor investment choices can lead to capital loss, and managing a SIPP requires knowledge of financial markets. Additionally, there are regulatory requirements that must be followed, and non-compliance can result in penalties.

If you have any questions that aren't answered here, please feel free to browse our insights library or contact us directly by leaving a message.

Insights
Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong.
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Risk Summary

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

  • You could lose all the money you invest
  • Most investments are shares in start-up businesses or bonds issued by them. Investors in these shares or bonds often lose 100% of the money they invested, as most start-up businesses fail.
  • Checks on the businesses you are investing in, such as how well they are expected to perform, may not have been carried out by the platform you are investing through. You should do your own research before investing.

You won't get your money back quickly

  • Even if the business you invest in is successful, it will likely take several years to get your money back.
  • The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
  • Start-up businesses very rarely pay you back through dividends. You should not expect to get your money back this way.
  • Some platforms may give you the opportunity to sell your investment early through a 'secondary market' or 'bulletin board', but there is no guarantee you will find a buyer at the price you are willing to sell.

Don't put all your eggs in one basket

  • Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. Learn more here.

The value of your investment can be reduced

  • If your investment is shares, the percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
  • These new shares could have additional rights that your shares don't have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

You are unlikely to be protected if something goes wrong

  • Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker.
  • Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here.

If you are interested in learning more about how to protect yourself, visit the FCA's website here.

For further information about investment-based crowdfunding, visit the crowdfunding section of the FCA's website here.
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Growth Capital Ventures (GCV) is backed by funds managed by Maven Capital Partners, one of the UK’s leading private equity and alternative asset managers.