Group SIPP
The popularity of the group sipp pension (self-invested personal pension plan) has risen steadily over the past few years. Much like other occupational pension schemes, a group Sipp is an individual contract that allows staff to save for retirement in a tax-efficient way, but it is the product’s flexibility that is behind its true appeal.
Group Self Invested Pension plans operate in the same way as other occupational pension schemes, but offer a wider range of investment choices and give members greater control. Employees can roll shares from matured employee share plans into a Sipp tax-efficiently.
With standard personal pension schemes, your investments are managed for you within the pooled fund you have chosen. Group SIPPs are a form of personal pension scheme that give you the freedom to choose and manage your own investments. Or you can employ and pay for an authorised investment manager to make the decisions for you.
Most Group SIPPs allow you to select from a range of assets, such as:
- particular stocks and shares quoted on a recognised UK or overseas stock exchange;
- government securities;
- unit trusts;
- investment trusts;
- insurance company funds;
- traded endowment policies;
- deposit accounts with banks and building societies;
- National Savings products; and
- commercial property (such as offices, shops or factory premises).
This list is not exhaustive and different Group SIPP operators will offer different ranges of investment choices.
It’s unlikely that you will be able to invest directly in residential property within a SIPP. Residential property can’t be held directly in a Group SIPP with the tax advantages that usually accompany pension investments. But, subject to some conditions including restrictions on personal use, residential property may be held in a SIPP through collective investment vehicles, such as real estate investment trusts or property trusts, without losing the tax advantages. However, not all Group SIPP operators accept this type of investment.
The tax breaks available through Sipps are significant and, for some employers, running a group Sipp may be cheaper than offering a stakeholder pension or group personal pension. Tony Filbin, MD of corporate wealth at Legal & General, says there is a false perception in the marketplace that group Sipps are more expensive than other types of defined contribution pension schemes.
If employee contributions are made through a salary-sacrifice arrangement, the tax savings can help to fund the scheme. Staff receive full personal tax relief of up to 40% on all contributions made, depending on which tax bracket they are in, and their Sipp is also exempt from capital gains tax if it grows in value.
Group Sipp providers charge for their products with either a per capita fee or a fee based on a percentage of the funds under management. Charges will be affected by the type of organisation, annual management costs, transactional charges, and fees for specialist investments like property.
Family SIPPs
Family SIPPs require all members to invest in the same holdings so there is one fund managed for the group while the pension fund accumulates. Growth in the family sipp can be reallocated between your fund’s individual members when you are ready to turn this into a retirement income.
A Family SIPP is ideal for families, grandparents, parents and grandchildren can all be members and the fund can be invested under a common family strategy. Scheme Pension can be paid to the senior members and funds can accumulate for the younger ones in a number of ways.
There are no restrictions on the number of members and members can choose to act as Trustees. Members’ funds can be invested individually or pooled to follow a common investment strategy. Family SIPPs can also accept transfers of Protected Rights.
If this sipp pension isn’t enough to capture your imagination, legislation may soon force you to take a fresh look at retirement planning. Personal accounts are scheduled to come into force in 2012, requiring all employers to auto-enrol employees either into the personal accounts scheme or into a ‘qualifying pension scheme’, a private pension arrangement which meets certain minimum criteria. At some stage, as a business owner you will need to think about the ramifications of this. Your first recourse should be an independent financial adviser, who will help you navigate the options available to you.
Who are the main Group SIPP providers in the market?
Some of the SIPP providers are Axa, Hargreaves Lansdown, JP Morgan, Legal & General, Aviva, Origen, Pointon York Sipp Solutions, Prudential, Punter Southall, and Standard Life
