One interesting option for the larger pensions saver who wishes to have more control over their pensions investment is the Self-Invested Pension Plan (SIPP).
A SIPP offers a wider range of investments than the conventional stakeholder pension. A SIPP is best suited to those able to devote larger than average sums to their pension, because the charges involved in operating a SIPP are higher than a personal pension. A sensible basis on which to set up a SIPP would be a lump sum of £100,000 or a monthly contribution of £1,000.
One key attraction of the SIPP is the facility of buying commercial property through the pension fund. It is now possible to sell commercial property which you own to your own SIPP, in order to encash part of the value of your property without selling to a third party.
“A company director who wishes to raise money can now sell part of his own commercial party to his pension fund. For example, if he has a commercial property worth £200,000, he can sell half of that to his pension fund for £100,000. His company can then pay rent for the property into his pension fund, which is not taxable and builds his pension fund even more,” said Gareth Flanagan, independent financial planner at Principle First.
This has the additional advantage that, were the company to go into liquidation, creditors could not claim that part of the commercial property, as it is now owned by the pension fund.
However, due to the higher costs of a SIPP, it is a vehicle generally set up with a particular purpose in mind, rather than being created purely to enable an individual to access various investment funds.
If having a pension with a broad access to various investment funds is the priority, then a personal pension can be created that has the ability to be transformed into a SIPP at any time, Flanagan said. ‘ This is known as a ‘deferred SIPP’.
Without a doubt the flexibility of a SIPP needs to be taken into account when deciding which pension scheme is best for you