SIPP Key Features
The Lifetime SIPP Company Limited - KEY FEATURES OF THE INTERACTIVE INVESTOR SIPP
The Interactive Investor SIPP is provided by The Lifetime SIPP Company Ltd which is authorised and regulated by the Financial Conduct Authority to operate Self Invested Personal Pensions (SIPPs).
What is the Structure of The Interactive Investor SIPP?
The Interactive Investor SIPP has been established under a master trust deed and set of rules, copies of which can be made available on request. The SIPP Trustee Company Limited is the scheme trustee and as such is the legal owner of the Interactive SIPP account. The Lifetime SIPP Company Ltd and The SIPP Trustee Company Ltd have entered into a Service Agreement with Hartley SAS Ltd, whereby the day to day administration of The Interactive Investor SIPP is delegated to Hartley SAS Ltd. Hartley SAS Ltd is also responsible for collection of all fees due under The Interactive Investor SIPP.
The Interactive Investor SIPP:
- This enables you to use a single stockbroker who handles all the investments and provides valuations on a regular basis – we do not need details of transactions as they are undertaken within the portfolio
- Interactive Investor will provide dealing, custody and investment administration services for your Interactive Investor SIPP account as per clause 1.3 of the terms & conditions
- The terms & conditions also set out how the dealing services will be provided by Interactive Investor for your SIPP account including how you may use those dealing services and the terms on which you are authorised by the Scheme Administator (Lifetime) to give instructions to Interactive Investor in relation to your Interactive Investor SIPP
Interactive Investor will be able to notify you of the costs involved.
Who can have an Interactive Investor SIPP?
There is a minimum age of 18 years for the Interactive Investor SIPP membership and you can join by completing an application form and supporting documentation. Upon receipt of the duly completed forms a bank account will be opened for you with the Royal Bank of Scotland. Please see the Terms and Conditions of the RBS account on page 6.
Who is responsible for managing the investments within the SIPP?
As the SIPP is a “member directed” pension you manage your own investments. We do not provide advice and the service is considered execution only.
What can I invest in?
Your SIPP is allowed to invest in a wide range of investments, provided they do not give rise to any tax charge imposed by HMRC – you will be notified if such a charge could arise. Acceptable investments include equities, investment funds, unit trusts and cash on deposit with a bank or building society.
Am I committed to making a certain level of contribution?
The Interactive Investor SIPP offers total flexibility on the amount and frequency of contributions, subject to the limits set by HMRC for tax relief. You can make regular contributions, ad hoc payments, or stop or reduce/increase contributions as your personal circumstances dictate at any time.
The purpose of this document is to summarise the key features of the SIPP. You should contact your authorised financial adviser or investment manager for more information on pension arrangements generally.
The aims of The Interactive Investor SIPP
The aims of your SIPP are:
- To enable you to save for your retirement in a tax efficient way.
- To allow you to choose from a wide range of investment opportunities, to build up your pension fund.
- To allow you to make your own investment decisions, in conjunction with your adviser(s), even if you are drawing an income.
- To provide a retirement income, or to take a lump sum payment in lieu of part of such income.
- To give you the option of choosing when you draw benefits and being able to take the benefits in stages, if desired.
- To provide your dependant(s) with a lump sum, pension income or combination of both, on your demise.
- Flexibility on payments in to the scheme to reflect changes in your personal and financial circumstances.
- To receive transfers of existing pension schemes in to the SIPP including benefits accrued from contracting out of the second state pension scheme.
Your commitments are:
- To make at least one contribution by you or your employer, or a transfer from a previous pension arrangement, to your SIPP.
- To inform us if your pension contributions to all your pension arrangements in a given tax year exceed your annual earnings for that tax year.
- To complete such paperwork as is requested in connection with the establishment of your SIPP and the subsequent arranging of investments.
- To normally wait until you are at least 55 before taking your retirement benefits.
- To accept that your contributions may need to be reviewed if you want your pension to keep up with your income as you approach retirement.
- To settle all fees and charges in respect of your Interactive Investor SIPP promptly.
- Once your benefits have commenced to let us know the desired level of income to be paid each year, within the HMRC limits.
- To take on the responsibility of managing the investments within your SIPP, you can do this personally or appoint a suitable investment manager.
- To comply with our Trust Deed & Rules and those agreed with any third party in connected to The Interactive Investor SIPP. The trust deed & rules can be obtained from us upon request.
The Interactive Investor SIPP will not accept transfers from Defined Benefit Schemes until suitable qualified advice has been taken from a FCA registered Pension Transfer Specialist confirming that the transfer is suitable in relation to the client’s circumstances and attitude to risk. This also applies to transfers with safeguarded benefits.
Many things could happen to affect the level of your pension at retirement. Any illustration you may receive is an indication only, based on statutory assumptions, which SIPP providers must adhere to.
- The fund and benefits it provides are not guaranteed. They are dependent on the future investment performance and market conditions at the point of your retirement.
- The benefits payable could be lower than anticipated if:
- Investment growth is not as expected or in line with the initial expectations.
- You decide to take your pension earlier than your original selected retirement age.
- You are unable to maintain an initial level of contributions.
- You draw a higher pension income than anticipated causing a greater reduction in the fund value unless the fund performance is very good. High withdrawals of income are unlikely to be sustainable during the income drawdown period. This could also reduce any eventual annuity you may buy.
- Annuity or GAD rates used to calculate a pension income may be lower when you retire, than rates used for the purpose of earlier illustrations.
- Changes to legislation or tax rules.
- You transfer your SIPP to another pension arrangement with higher charges or the new arrangement achieves a lower growth rate.
- You may not hold sufficient cash deposits to settle the benefit payments and fees which could result in investments needing to be surrendered when markets are low.
- It may take time to sell some investments within the scheme
- The risks associated with your SIPP may increase for certain categories of underlying assets as chosen by you or your investment manager. You should also be familiar with the content of the key features that may be issued by the product provider of any underlying investment.
- The charges under your SIPP may increase more than assumed in earlier illustrations.
- The favourable tax treatment for HMRC registered pension schemes may change in the future.
- The longer you wait before buying an annuity from an insurance company, the more income you draw from the SIPP, and the funds eventually available to purchase an annuity, may be at risk from underlying investment performance.
If you are planning to transfer the value of other pension benefits into your SIPP, it is essential that you seek advice from your financial adviser or investment manager before doing so. You will need to be made aware of any potential loss of valuable benefits for you and your dependants, and possible guarantees, written into the terms of the pension being transferred.
For all transfers of pensions with Defined or 'Safeguarded' Benefits you will need to obtain confirmation from a suitably qualified financial adviser that the transfer is in your best interests. Without this, we will not be able to accept the transfer.
- Your financial adviser will advise you regarding your eligibility to invest in a SIPP, especially if you have already taken benefits.
- Provided you are subject to UK income tax your personal contributions to the SIPP are paid net of basic rate tax and your SIPP administrator reclaims tax in accordance with rules set by HMRC on your behalf and remits the tax reclaimed to your SIPP. The limit on Personal Contributions on which tax relief can be claimed is the higher of £3,600 gross or 100% of your UK earnings. Regular contributions are made by direct debit mandate.
- If you are subject to higher rate income tax you will be able to reclaim further tax through your self assessment tax return.
- If you are employed, as opposed to self-employed, contributions by your employer are permitted. Such payments to your SIPP are made gross, without any tax deduction. Checks will be made to ensure the validity of the source of the contribution. If the total contributions paid to all registered pension schemes for your benefit exceed the “annual Allowance”, currently £40,000, tax charges will be applied on the excess.
- If you make any withdrawals from a pension worth more than £10,000 in addition to any tax free cash, the annual allowance could be reduced to £10,000. Further information is given in the Payment of Benefits Guidance Notes.
- You can transfer other assets i.e. shares and property, in to your SIPP as “in specie contributions” however independent financial advice should be sought before paying in any in specie contributions are there may be additional fees or tax charges applied.
The default pension input period for the SIPP is 6 April to 5 April – this means contributions are treated as being made in the tax year.
Is there a limit to my SIPP?
The maximum you can take from all your pension arrangements without incurring special tax charges is called the Lifetime Allowance (LTA) and is currently set at £1 million.
You may have to pay tax on the value of the excess over the LTA when you take your benefits. You may have taken steps to avoid this tax charge by applying for HMRC protection; if you think you have HMRC protection you should speak with your adviser, especially before you pay in money into your Personal Pension. Every time you take benefits from the plan, some of your LTA is used up. Checks against the LTA are carried out at various points, including:
- Whenever you use part of the fund for tax-free cash and start income withdrawal and/or pension purchase,
- At age 75 (if funds are still invested in the plan),
- When funds used for income drawdown are used to purchase a pension.
At each of the above stages, an allowance is made for any tests that have already been carried out.
Special tax charges apply to any further benefits once all the LTA is used. Currently the tax charge is 55% where the excess over the LTA is taken as a lump sum or 25% where the excess is taken as pension (because the pension attracts PAYE tax).
Normally you will not be able to start drawing benefits until you reach the minimum pension age of 55. The point at which you take your benefits is known as “crystallisation”. You do not have to retire to crystallise your fund. From 6 April 2015, the benefits available to you are:
Lump Sum Options
Pension Commencement Lump Sum
Before drawing any income from the pension scheme you have a choice to draw a pension commencement lump sum of up to 25% of your fund value. This lump sum is currently tax free and must be paid at the commencement of the benefits otherwise the option is lost
UFPLS (Uncrystallised Funds Pension Lump Sum
Under this option you can take money from funds that have not been crystallised, usually 25% will be tax free and the rest taxed at your marginal rate. These funds will need to be paid to you personally.
Flexi – Access
This option allows you to take smaller lump sums, as and when you like. If you have not taken your 25% tax free entitlement then 25% of each tax free and the rest paid at your marginal rate. If you have already taken your tax free entitlement then the entire amount will be taxed at your marginal rate.
Full Fund Payment
This is accessible under Flexi-access or Small Pots, the full value of the fund will be transferred to you personally and the SIPP will be closed. If you have not taken your 25% tax free entitlement then 25% of each tax free and the rest paid at your marginal rate. If you have already taken your tax free entitlement then the entire amount will be taxed at your marginal rate.
An annuity is a financial product which turns some or all of the money in your pension fund into an ongoing income in retirement. The Lifetime SIPP Company does not offer annuities. You will be required to transfer or all part of pension fund to an annuity provider to take this option.
There are many different types of annuity, each designed to suit your own personal circumstances.
You can shop around, this is known as the open market option, to find the Annuity Provider that will give you the highest income.
This option is where by the pension income is calculated and paid from the pension scheme. The pension is calculated using your age and the Gilt Yields and Government Actuary Department (GAD) rates at the date your benefits are calculated. Once the pension levels have been calculated and any
chosen lump sum has been paid you can draw a pension income from the scheme at any level between zero to the maximum calculated. All pension income is taxed via PAYE. The pension levels calculated last for 3 years and then they are recalculated as at the anniversary date of the original benefit calculation.
Under Flexible drawdown you are not restricted to the maximum pension calculated and can draw any level of income desired from your Lifetime SIPP which is taxed via PAYE.
When drawing a flexible income it is important that you take in to consideration of their future financial needs and the needs of your dependents.
All pensions are taxed as paid income, and paid on either the 14th or 28th of the month. Benefits will only be paid if there are sufficient funds to pay any tax due.
In order for the Trustee to pay benefits on your death you must complete an Expression of Wish Form. This can be done at any point during the life of the SIPP.
Death before age 75
If you die prior to the age of 75, the scheme’s trustee has discretion to pay the following benefits from your Funds:
- The value of your fund can be paid out tax free to a previously nominated beneficiary.
- The value of your fund can be used to provide a tax free pension for a financial dependent or nominated beneficiary. This can be by means of an income paid from your SIPP or by the purchase of an annuity with an insurance company.
Death after age 75
If you die after age 75, the scheme’s trustee has discretion to pay the following benefits from your fund:
- The value of your fund can be paid out to a previously nominated beneficiary. This will be taxed at the beneficiary's marginal rate
- The value of your fund can be used to provide a pension for a financial dependant or nominated beneficiary, as above
- A mixture of the above benefits can be paid
(These arrangements apply once the provisions of the Finance Bill 2016 have received Royal Assent.)
If the contributions paid to the Interactive Investor SIPP and any other registered pension schemes exceed the annual allowance, you will be personally liable to pay a tax charge.
If you are unsure whether your SIPP is suitable for you, you should consult your financial adviser or investment manager.
Your right to change your mind
When your SIPP commences you will receive a Cancellation Notice. This will give you the right to cancel your SIPP during the next 30 days. You can waive your right to cancel your SIPP.
If you cancel your SIPP you will entitled to a refund of any contribution other than a transfer value that you have invested in your SIPP. If the value of your investment falls prior to you exercising your right to cancel you will not receive back the full value of your investment. You may also incur additional charges imposed by the company(s) in which you have decided to invest.
Upon receipt of a request to transfer benefits from another scheme to The Interactive Investor SIPP you will be issued with a Cancellation notice allowing you 30 days to change your mind. Please note that if you change your mind regarding any transfer in to the SIPP it may not be possible to return the transfer value to the scheme you transferred from, as this may be dependent on its Terms and Conditions. Should this happen you will need to arrange for an alternative pension provider to accept the transfer value. Charges will, however, still be payable due to the work already undertaken in respect of the transfer to your Interactive Investor SIPP.
If an investment is to be completed before the 30 days has passed then your right to cancel the SIPP will need to be waived before we can proceed with the investment.
Having accepted a quotation of retirement benefits provided by us at the point you are looking to take benefits from your SIPP, you will be issued with a Cancellation Notice allowing you 30 days to change your mind. If you do decide to cancel the commencement of your benefits from the scheme within the 30 day period then you will be obliged to return any payment received in respect of this transaction.
The Interactive Investor SIPP annual fees are taken annually in advance on the SIPP anniversary date. Adhoc fees are shown on the SIPP’s full fee schedule, which is available from Interactive Investor. All fees are subject to VAT and may increase with RPI.
The annual fee covers
• Professional responsibility and independent Trustee of the scheme.
• Ongoing responsibility as scheme administrator.
• Routine administration of the SIPP including carrying out non reportable transactions, routine record
keeping, regular advice to The Pensions Regulator and general technical and administration queries.
• Preparing and filing the Registered Pension Scheme event report
• Ongoing negotiations with, and ad hoc reporting to HMRC, including audit requests.
• Individual returns to HMRC.
• Issuing of Statutory Money Purchase Illustration statements as required by the HMRC pension legislation.
• FCA reporting.
• Revisions to the Trust Deed and Rules required as a result of a change in legislations or HMRC practice.
• Facilitating the purchase and sale of assets on behalf of the scheme.
• Reclaiming Tax Relief from HMRC on personal contributions, when applicable.
In addition to our fees set out in the fee schedule we also retain part of the interest earned on the SIPP bank account. This retention is to cover the ongoing cost of maintaining the bank account, and to also cover some of the transactional banking charges levied by RBS. Please refer to our website for the current interest rate and the amount retained.
Please ensure that you have sufficient funds available in the RBS account to settle the fees due.
Any changes to The Lifetime SIPP fees will be announced 30 days in prior to these changes coming into effect.
Financial Services Compensation Scheme
The Interactive Investor SIPP is covered by the Financial Services Compensation Scheme (FSCS). A SIPP Investor may be entitled to compensation from the FSCS if we can not meet our obligations. For further details please see the FSCS website http://www.fscs.org.uk/consumer
If you have any cause for complaint about the service you have received please contact:
The Interactive Investor SIPP
C/o The Lifetime SIPP
If you wish to pursue any particular issue further, you can contact the Financial Ombudsman Service at The Financial Ombudsman Service, Exchange Tower, London E14 9SR.
Tel: 020 7964 1000 / Fax: 020 7964 1001 / Email: email@example.com
The information provided in this Key Features Document is based on our understanding of current legislation, practice and taxation, and is subject to change as tax laws and legislation may change over time. In the case of a dispute then the Law of England and Wales will apply and by completing the Lifetime SIPP Application form you are agreeing to this.
Nothing in this Key Features Document should be taken as giving any sort of investment advice.
Head of Customer Contact
2 West Regent Street
Tel: 0345 882 3325
Email : firstname.lastname@example.org
Terms and Conditions of the Royal Bank Of Scotland Bank Account.
By completing the application for The Interactive Investor SIPP you are authorising the trustees to open an account with Royal Bank Of Scotland on your behalf and agreeing to the following Authority:
(i) We, The SIPP Trustee Provider Ltd, (the ‘Company Trustee’) and the Trustees named on the Authorised Signatories Sheet(s) (the ‘Individual Trustees’) set out separately and certified as correct by the undersigned Company Trustee being the Trustees of the The Interactive Investor SIPP (‘hereinafter called the Scheme’) request you to open or continue an Account in the name of the Scheme and authorise you to accept instructions [subject to section (ii) below in respect of instructions not in writing] (a) for operations on the Account and (b) to release items held in security or safe custody in our names as Trustees When signed by any two Company Trustee as named in the Authorised Signatory Sheet, even if the Account becomes overdrawn as a result of the instructions.
(ii) Where instructions to you are given in any form that is not in writing [‘writing’ means for this purpose a document bearing an original written authorised signature(s)] you are entitled to accept them if you are satisfied that the instruction is genuine. We accept that you may require us to enter into a separate agreement(s) with you and/or comply with any further conditions covering any means of providing you with instructions that are not in writing.
(iii) We agree that we can all and/or each be held fully responsible for any debt or other liability of whatever nature on the Account or otherwise arising with or owing to you save that, in the absence of fraud or negligence on the part of the Company Trustee the liability hereunder of the Company Trustee shall not be personal but shall be limited to the extent of the assets of the Scheme but without prejudice to the full personal joint and several liability of the Individual Trustees.
(iv) We wish the Account to be included in The Royal Bank of Scotland (the “Bank”) electronic services, Bankline and Royline and we refer to the Electronic services registration mandate for both Bankline and Royline between The Lifetime SIPP Company Ltd, the Company Trustee and the Bank whereby the Bank agrees to provide The Lifetime SIPP Company Ltd with electronic services (“Services”). We agree that we wish the Account to be added to the Services. In consideration of the aforegoing we agree to be bound by the Bankline Terms and Conditions and the Royline Terms and Conditions as if we were a party to each.
Interactive Investor Trading Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. Registered office: Standon House, 21 Mansell Street, London, E1 8AA. Registered in England with Company Registration Number 3699618.
The Lifetime SIPP Company LTD is Authorised and Regulated by the Financial Conduct Authority (464526). Registered Address: Vicarage Court, 160 Ermin Street, Swindon, SN3 4NE.