About SIPPs - Your Personal Pension
Start planning now for the life you want to lead, with the income you’d like when you retire. The future you will thank you for it.
New pension rules from April 2015 give you greater choice freedom to manage your retirement income. But first you need to build your pension fund. That’s where we can help.
Control over your costs
Our simple, clear charges mean you’ll know where you are from the start.
Unlike some other providers, we don't ask you to pay fees that come as a percentage of your portfolio. We believe you deserve to hold on to the growth you create, so instead we charge a flat fee which means you aren't penalised for the size or positive growth of your pension.
Our trading fees are the same whatever you invest in, and our Regular investment service means you can build your investment portfolio each month for just £1.50 per purchase. Whilst you don’t need income from your pension fund you can also reinvest your dividends to buy more shares.
You can find out more about charges below.
Flexibility and choice with an Interactive Investor SIPP
An Interactive Investor SIPP gives you the flexibility to create a pension fund that fits your life and finances, both now and in retirement. It puts you in control.
Paying-in: pay-in regularly or in one-off lump sums. Have your employer contribute too. We’ll help you keep track of your contribution so you don’t need to worry about exceeding the annual or lifetime tax-relief levels . Bring together other personal pensions you’ve accumulated over the years and, with all your pension funds in one place, it’s easier to manage it the way you want.
Investing your money: our SIPP gives you the freedom to invest where, and when, you want. From gilts and bonds, UK and international shares, ETFs, unit trusts/oeics and investment trusts to more adventurous options such as smaller companies, commodities and structured products, you’ll find the choice you need. And the tools to help you pick the ones you want.
We’re also here when you’re in need of ideas or inspiration. Our expert share tips and ready-made portfolios can be a great starting point. Use our pension calculator to see how your pension might grow, based on your contributions and investment growth.
Taking your pension income: when it comes to taking your pension income, our SIPP is just as flexible. Take a lump sum to start with – up to 25% tax-free, or leave it invested for future growth. Set up a regular income stream to replace your regular salary - or part of it if you’re winding down - or withdraw money as and when you need. You can also buy an annuity for a guaranteed retirement income. Mixing these options is also an available option: it’s your money and your choice. You could even withdraw it all – though you’ll have a tax bill to pay and risk running out of money too soon. The Government’s Pension Wise scheme is there to help you decide and we’ll help you work out how long your pension fund might last under different options.
Use our pension calculator to see how long your pension might last you once you start drawing on it.
How tax relief boosts your pension
The government encourages you to save for retirement by giving you tax relief on pension contributions. Money you pay in is net of basic rate relief tax. If you pay in £80, the Government adds another £20. Over time, that initial extra payment of tax relief makes a big difference.
Here’s an example. Let’s say you pay £5,000 into a pension and invest it over 20 years with an average return of 5% pa (ignoring charges and fees). You can see below how it compares to that same investment made outside a pension.
That’s an extra £2,653 from just that one initial boost of £1,000 in tax relief. Just imagine the impact if you added £5,000 every year …
When you’re paying tax above the basic rate, you can claim higher or additional rate relief on that contribution (so long as you’ve paid sufficient tax at that rate). So that initial £5,000 could actually cost you only £2,750. Contributions into a personal pension from your employer will be paid gross.
So, the sooner you start, and the more you pay in, the better the change you have of getting the pension income you want
Some company schemes don’t allow their contributions to go into a SIPP, but if they don’t you can still contribute to a SIPP alongside a company scheme. For example, you might contribute to a company scheme, ensuring you maximise their matching payments, and pay additional sums into a SIPP.
Don’t let charges eat into your pension
Make sure you’re not paying more than you need in charges – they can all too easily eat into your pension pot.
Some providers charge percentage fees based on the value of your SIPP. We don’t. We make an annual charge of £96 for administering your SIPP, and one flat fee of £80 to provide the day-to-day investment service - that’s a total of £176, and includes two regular trades each quarter. Clear, simple charges.
How might this compare? Let’s take a simple example:
- You have an existing pension fund valued at £200,000 and you pay-in £300 a month before tax relief, for the next 20 years.
- Your investment mix is 60% funds, 40% shares
- Investment growth of 5% pa
On the costs side, let’s say you pay:
- 0.45% as a SIPP administration charge.
- You make one fund and two equity trades each month and pay £10 for equity trades, but fund trades are free.
- Fund holdings have an annual management charge of 0.75%.
|Charges||Pension value after 20 years||Charges over 20 years|
|0.45% pa dealing fees of £10 for non-funds trades only||£554,462||£72,322|
Interactive Investor - £176pa
dealing fees of £10 on all trades.
|The Interactive Investor difference||£51,163 more in your pension||£33,030 saved in charges|
Remember, this is an illustration only: the actual charges will depend upon the fees you pay, including any dealing charges, and growth will depend upon the actual rate of growth which may be more or less than we have used on this illustration.
Comparing Old and New Pension Arrangements
How the new and current arrangement compare:
|Before 6 April 2015||After 6 April 2015|
|Take up to 25% tax-free cash||Yes||Yes|
|Guaranteed income with an annuity||Yes||Yes|
|Flexible income – ‘capped drawdown’||Yes||No|
|Ad hoc lump sums||No||Yes|
|Take you whole pension as cash||No||Yes|
New ways to provide a retirement income
- Take all the money out as cash in one go
- Make unlimited withdrawals through a new type of income drawdown plan known as Flexi-Access Drawdown: you can take as much as you want when you want it, as a monthly income, ad-hoc lump sums or a mixture of both
- Continue to take a guaranteed income via an annuity
- Take a combination of the above options
Whichever option you choose the money you take over and above the 25% tax-free cash will be treated like income, so will be subject to income tax at your highest marginal rate.
Your retirement starts here
Open your SIPP today and start planning for life after work
A SIPP is a type of personal pension, best suited to those who wish to make their own investment decisions. Please be aware of the risks involved. The value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. Your can normally only access the money in a pension from age 55. Tax treatment depends on your individual circumstances and may be subject to change. If in any doubt as to whether a SIPP is right for you, please seek advice.
Is your pension on track?
See how your pension might grow - and how long it could last - with our Pension Calculator
Are you paying too much for your SIPP?
Compare SIPP charges here and see how you might save with an Interactive Investor SIPP
Looking for a tax-efficient investment you can draw on when you need?
Check out the Interactive Investor ISA and make use of your annual ISA allowance.