Sipp Tax Benefits
The advantage of a sipp is that, unlike a traditional pension where you pay all or part of your fund to an insurance company to buy an annuity, it offers far more flexibility in how you draw out an income. With a SIPP you are able to take an income from the age of 55 provided you have sufficient funds in your pension pot. Additionally another major advantage of a sipp is that the holder is able to draw a 25% as a tax free lump sum.
Most people are likely to use the rest of the funds to buy an annuity however it is also possible to continue to draw down and income from their pension fund, this is known as an Alternative Secured Income.
Those who can afford to live on a reduced income will also be able to avoid purchasing an annuity. Annuities have taken something of a battering in recent years as governments around the world have adopted a strategy of pouring more money into their economies. This is all well and good to increase the amount of money in an economy, but it can be disastrous for savers and investors who are not keeping a close eye on how wealth is being eroded.
Another killer is tax, which can be a further headache when it comes to investing in alternatives, the beauty of a sipp is these concerns can be left behind allowing you the possibilty of enjoying a better retirement.
Sipp Tax Benefits Summary
- Tax Free
- Get 20% free top-up from HMRC when cash is placed in new scheme
- Up to £50,000 claimed tax relief from new system
- Golden of new scheme 25 % tax-free lump sum withdrawal at 55
- No Capital Gains (CGT) when selling assets in the new pension
- Consolidate and control everything in one place
- Pass the whole pension onto your family on death