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SIPP Trading Account

What is a SIPP?

A Self Invested Personal Pension or SIPP is a personal pension arrangement which allows you to make direct investment choices from a wider range of investments. A SIPP offers you a tax efficient way to build up a fund to use when you retire. A SIPP offers up to 45% tax relief on contributions. Any investment gains that arise from your SIPP are free from income, dividend and capital gains tax. If you are self employed, or your employer does not have a company pension scheme, a SIPP could be the right way to save for your own retirement. SIPP can also be used to top up the benefits you will receive under a company pension scheme.

Is a SIPP right for me?

A SIPP could be right for you if you:

  • Are looking to build up a pension fund in a tax-efficient way
  • Are prepared to commit to having your money tied up, normally until at least age 55 (but set to go up to 57 from 2028)
  • Understand that investment growth is not guaranteed
  • Are looking to build up a portfolio of investments, including UK shares, funds and ETFs

It may not be suitable if you:

  • Want unrestricted access to your money, or
  • Wish to invest directly into assets, such as commercial property, that are not available through this SIPP.

What is SIPP Trading Account?

SIPP Trading Account allows you to save tax efficiently for your retirement. You have access to a range of investments including funds, ETFs, investment trusts and UK shares.

The pension scheme provider of this account is Hartley Pensions Limited and the investment platform provider of this account is James Brearley and Sons Ltd. They are appointed by Simply Ethical as a service provider for the provision of this service.

Who is the SIPP provider of the SIPP Trading Account?

Hartley Pensions Limited is a UK registered company under number 09469576 which is authorised by the Financial Conduct Authority (FCA) to provide regulated products and services. The trustee of the SIPP is Hartley Pensions Trustees Limited, a UK registered company under number 09962237. Hartley Pensions Limited and Hartley Pensions Trustees Limited have entered into a service agreement with Hartley-SAS Limited, a UK registered company under number 06037774.  

Who is Hartley Pensions?

Hartley Pensions Limited is a UK registered company under number 09469576 which is authorised by the Financial Conduct Authority (FCA) to provide regulated products and services. In 1981, the company established itself as a SSAS provider and in 2001 opened its first SIPP. Hartley has over 35 years experience in the financial services industry.

Who can open a SIPP Trading Account?

You can open SIPP Trading Account, if you are aged 18 or over and:

  • Have earnings that count for UK income tax; or
  • Are resident in the UK at some point during the tax year; or
  • Want to make a transfer from another registered pension scheme

Is it possible to open a SIPP in joint names?

No. The SIPP must be held in a single name.

Which investments can I invest in?

All investments available through your account will have been screened for both Ethical and Sharia compliance in accordance with the set criteria in the Ethical Investment Policy Statement. This document can be viewed on Simply Ethical website.

Subject to the screening restrictions that apply to your access to investments, the service enables you to transact in following investments:

  • UK Equities (Shares)
  • Investment Trusts
  • Exchange Traded Funds (ETFs)
  • Open and Closed-ended Funds (e.g. Unit Trusts, OEICs)

What are the charges?

Please read our Charges Schedule for complete details. This is accessible through our website under ‘Key documents and terms’ section’ or by contacting us.

What is the minimum amount needed to open a SIPP Trading Account?

The minimum investment to open an account is £5,000 or £3,000 plus £100 per month. This can be in the form of new pension contributions or transferring existing pension(s).

Will I have a Scheme bank account?

Yes, a bank account will be set up in the name of your SIPP at one of a selection of UK-licensed deposit holders which Hartley may change at there discretion. In compliance with Sharia law, no interest will be payable to your SIPP bank account. 

Are there limits on what I can pay in?

There is no limit to the amount of contributions that can be paid, but tax relief is only available on contributions if you are a ‘relevant UK individual’ (i.e. if you are under the age of 75 with earnings chargeable to UK income tax and/or you are a UK resident for tax purposes). You receive tax relief on contributions up to £3,600 gross each year, if you are a UK resident for tax purposes but have no taxable earnings. You can pay in more than this and still receive tax relief and the maximum is based on the lower of your UK Relevant Earnings and the Annual Allowance (set by HMRC).

The Annual Allowance is currently £40,000 gross. The Annual Allowance applies as a total limit on personal tax relief across all of your registered pension schemes in a tax year. It covers:

  • Your personal contributions;
  • Employer contributions made on your behalf; and
  • Any increase in the value of retirement benefits you may earn from a final salary/defined benefit pension arrangements.

The Annual Allowance does not apply in the year of death or where benefits are taken early as a result of “serious ill health”. The Annual Allowance does not include transfers in from other pension arrangements as they have already qualified for tax relief when the contributions were originally invested in a pension scheme.

Your annual allowance may be lower if you have income above £150,000 (Tapered Annual Allowance may apply) or if you have flexibly accessed your pension (Money Purchase Annual Allowance applies). Moreover, you may be able to ‘carry forward’ unused allowance from the last three tax years to increase your limit for the current tax year. Carry forward relief is not available when the Money Purchase Annual Allowance (MPAA) applies. Please read the relevant section for more information.

Can I claim tax relief on what I pay into my SIPP?

Contributions can attract tax relief as outlined below:

  • If you are a relevant UK individual and are not earning, you can pay up to £3,600 gross contributions (i.e.before tax relief) per annum, which means you can pay a net contribution of up to £2,880 (being the amount after adjustment for basic rate tax relief at 20%). Hartley Pensions will claim the basic tax relief from HMRC on your behalf and invest it in your SIPP account.
  • If you are employed or self-employed, you pay contributions net of basic rate tax. Hartley Pensions will claim basic rate tax relief from HMRC and invest it in your scheme.

It should be noted that claiming tax relief generally takes between six and ten weeks. Tax relief monies can only be invested once they have been received from HMRC. If you are a higher rate taxpayer, you can claim the extra tax relief through your self-assessment tax return.

Is there any tax relief on employer contributions?

Employer contributions are not taxable as a benefit in kind for you and your employer will normally get tax relief on employer contributions as a business expense.

To what age can I keep paying in?

You can keep paying in to your SIPP up to the age of 75. After that you won't qualify for tax relief.

Is my pension scheme taxable?

Pension funds don’t generally pay UK tax on contributions or investment growth (although tax credits deducted from UK dividends and some overseas dividends cannot be reclaimed by the SIPP provider).

What is the Annual Allowance?

It's the total that you, your employer and anyone else making payments on your behalf can together pay in or build up in any one tax year across all registered pension schemes in your name. It limits the personal payments on which you can actually claim tax relief. For 2018/19 the standard Annual Allowance is £40,000, unless you are already taking money out from a pension, when it is more likely to be £4,000 i.e. Money Purchase Annual Allowance (MPAA) for 2018/19.

The Annual Allowance applies as a total limit on personal tax relief across all of your registered pension schemes in a tax year. It covers:

  • Your personal contributions;
  • Employer contributions made on your behalf; and
  • Any increase in the value of retirement benefits you may earn from a final salary/defined benefit pension arrangements.

The Annual Allowance does not apply in the year of death or where benefits are taken early as a result of “serious ill health”. The Annual Allowance does not include transfers in from other pension arrangements as they have already qualified for tax relief when the contributions were originally invested in a pension scheme.

Your Annual Allowance may be lower if you have income above £150,000 (Tapered Annual Allowance may apply) or if you have flexibly accessed your pension (Money Purchase Annual Allowance applies). Moreover, you may be able to ‘carry forward’ unused allowance from the last three tax years to increase your limit for the current tax year. Carry forward relief is not available when the Money Purchase Annual Allowance (MPAA) applies. Please read the relevant sections for more information.

What is Tapered Annual Allowance?

Since 6 April 2016, if your income exceeds certain thresholds in any tax year, your annual allowance for pension savings in that tax year will be reduced. You may be subject to a gradual tapering of your annual allowance if your total income (including savings and investment income), which is subject to tax, is more than £110,000 in any tax year.

The way that the tapering will work is that for every £2 of income that exceeds £150,000, £1 of annual allowance will be lost. The maximum reduction is £30,000 – it will be reached if you have income of at least £210,000 - resulting in an annual allowance of £10,000. However the tapered annual allowance is applied each tax year separately and you may have a tapered annual allowance in one tax year and a full annual allowance in the following tax year depending on your income.

What if I go over my Annual Allowance?

You will have to pay a tax charge on anything over your annual allowance, unless you can use up any leftover annual allowance (carry forward) from up to the three previous tax years.

What is ‘Carry forward’?

Carry forward allows you to make use of any annual allowance that you may not have used during the three previous tax years, provided that you were a member of a registered pension scheme. To use carry forward, you must make the maximum allowable contribution in the current tax year (£40,000 in 2018-19) and can then use unused annual allowances from the three previous tax years, starting with the tax year three years ago. You can’t receive tax relief on contributions in excess of your earnings in a tax year and you only receive higher rate tax relief to the extent that you have paid it.

Can I carry forward left over annual allowance?

You can carry forward left over annual allowance if you were a member of a registered pension scheme in the years you want to carry forward from. But even if you use carry forward you can never pay in more than your total earnings in the tax year you are carrying forward to. You can't carry forward unused allowance if you have no earnings or you are on the reduced annual allowance of £4,000 i.e. Money Purchase Annual Allowance (MPAA) for 2018/19.

What is Lifetime Allowance?

The maximum total value that all of your pension arrangements can reach without incurring special tax charges is called The Lifetime Allowance (LTA). This is currently £1,030,000.

You may have to pay tax on the value of the excess over the LTA when you access your pension savings unless you have a form of transitional protection. Every time you take benefits from any of your pension arrangements, whether you withdraw lump sums and / or regular payments, some of your LTA is used up and checks against the LTA are carried out. In addition, an LTA check is also carried out if you die and at some other points, such as reaching age 75. At each of the above stages, an allowance is made for any LTA tests previously carried out.

Once the LTA is fully used up, special tax charges apply to any further benefits. The current 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 Pay as your earn (PAYE).

When can I take benefits?

You can access your SIPP at any age from age 55 (but set to go up to 57 from 2028). You may also take benefits earlier if you suffer illness or an accident which leaves you permanently unable to carry out your current occupation and you cease that occupation.

Are pension payments taxable?

Pension payments are treated as earned income and are taxable through the PAYE system, so SIPP provider will deduct income tax before payment is made to you. It is your responsibility to provide SIPP provider with your current tax coding.

How can I take pension benefits?

You have the following options:

  • Take no action - Your plan will remain as it currently is and the value of your fund will rise and fall depending on your investment choices. You are able to access your pension savings when you reach your minimum retirement age of 55, at a time that suits you.
  • Tax Free Cash (Pension Commencement Lump Sum) - A proportion of your fund, up to 25%, may be taken tax free when you reach your minimum retirement age of 55. The payment may be withdrawn at any time from age 55 and does not have to be taken all at once. Tax free cash is normally paid before either an annuity is purchased or a drawdown pension arrangement is entered into.
  • Capped Drawdown - Capped Drawdown is the existing arrangement that a member of pension scheme may use to access their pension income. Note: Capped Drawdown is no longer available unless you have previously accessed your pension under this method. It is different from an annuity contract, as it is not a secured pension for life. A member is able to take an annual pension amount (at their chosen frequency) up to their maximum permitted income limit. Various factors affect your maximum income limit (such as your age, the value of your remaining fund, gilt yields and rates set by the Government Actuarial Department (GAD). Income limits must be reviewed regularly (every three years up to the age of 75 and annually thereafter) which means the income available to you under Capped Drawdown is not guaranteed. It is likely that your maximum income limit will rise and fall from one review to the next. For an existing Capped Drawdown arrangement, you will be able to continue as long as you do not exceed the maximum annual income, or you can choose to convert to a flexi-access drawdown arrangement (explained below).
  • Flexi-access Drawdown - This is a method of accessing your pension savings, after your tax free cash sum has been paid, as a one-off income payment or in amounts of your choosing, at a time that suits you. Each income payment will be taxed at your applicable rate of income tax through PAYE (i.e. basic rate 20%, higher rate 40% and / or additional rate 45%). There is no maximum limit on the income and you can take the whole value of your SIPP and no periodic reviews will be carried out. As soon as you take income using Flexi-access Drawdown, your Annual Allowance is reduced to the new Money Purchase Annual Allowance (MPAA). Currently, the Annual Allowance is £40,000 and the MPAA is £10,000 (although the MPAA is proposed to reduce to £4,000 from 6th April 2017). Please note under MPAA you are not able to utilise previous tax years unused contribution allowances (‘Carry Forward’), so £10,000 (or £4,000 from 6th April 2017) is the maximum you can pay into your pension.
  • Uncrystallised Funds Pension Lump Sum (UFPLS) - UFPLS is a benefit payment made directly from pension funds which haven’t been accessed before. It is different from any of the drawdown options, as the payment does not take your SIPP into drawdown. The payment is split between a 25% tax free element and the remaining 75% is taxed as income at your marginal rate of income tax through PAYE. The payment could affect the rate and amount of income tax that is paid in a tax year, as the UFPLS may affect your tax code and take you into another tax band if you already receive income from other sources. You must also have remaining Lifetime Allowance to take this benefit payment. The Lifetime Allowance is the amount of pension fund you can build up without paying a tax charge. If you have Enhanced or Primary Protections in place and you have protection for lump sum rights which exceeded £375,000 on 5 April 2006, you are unable to access your pension benefits using UFPLS.
  • Small Pots - A small pot is a fund which is less than £10,000 in value, taken at the age of 55 or later. A tax free element of up to 25% of the fund may be taken and the remainder of the fund is taxed at your highest applicable rate of income tax. A member may take a small pot from up to three pension arrangements. Taking a small pot benefit payment will not affect your ability to contribute to a pension arrangement up to £40,000 per annum. A small pot is a fund which is less than £10,000 in value, taken at the age of 55 or later. A tax free element of up to 25% of the fund may be taken and the remainder of the fund is taxed at your highest applicable rate of income tax. A member may take a small pot from up to three pension arrangements. Taking a small pot benefit payment will not affect your ability to contribute to a pension arrangement up to £40,000 per annum.
  • Lifetime Annuity - A Lifetime Annuity is a type of retirement income offered by insurance companies which provides you with a regular guaranteed payment for life. In exchange for your pension funds, you will receive a secured income from the Annuity Provider for the rest of your life. The amount you receive will depend on the type of Annuity you purchase and the rates applicable at the time of purchase and this can vary between providers. The income you receive from the insurance company is subject to Income Tax under the PAYE system.
  • A combination of any of the above - A combination of any of the pension benefits described above is available to you. The way in which you take benefits is flexible and can be structured to meet your individual requirements.

What is Money Purchase Annual Allowance (MPAA)?

Since 6 April 2015 a reduced annual allowance in respect of money purchase pension contributions, known as the Money Purchase Annual Allowance (MPAA), applies to individuals who have flexibly accessed their pension benefits. In his 2016 Autumn Statement the Chancellor announced a consultation on the subject of reducing the MPAA from £10,000 to £4,000. This reduction takes effect from 6 April 2017.

HMRC introduced the MPAA to ensure that there are no potential recycling issues with individuals claiming further tax relief on any new contributions made having just taken their pension benefits under the new flexibility rules.

It is only when pension benefits have been flexibly accessed that the MPAA will apply. This includes various different options (known as trigger events) such as:

  • Taking an uncrystallised funds pension lump sum (UFPLS).
  • Taking income above the maximum GAD limit from an existing capped drawdown arrangement.
  • Being in flexible drawdown at any time before 6 April 2015 as a member (not a dependant). (whether the member had  taken income or the flexible drawdown policy still existed at 6 April 2015 is irrelevant).
  • Going into flexi-access drawdown from an existing capped drawdown arrangement or with uncrystallised funds and then subsequently taking income.
  • Taking a stand-alone lump sum from a money purchase arrangement where someone has primary protection and a protected tax-free lump sum greater than £375,000 at 5 April 2006.

The MPAA will NOT apply in the following circumstances:

  • Taking income from an existing capped drawdown arrangement which is within the existing GAD limit.
  • Taking a pension commencement lump sum, and buying a lifetime annuity (i.e. not accessing new flexible annuity options), or moving to a flexi-access drawdown arrangement and taking NO income. 
  • Taking a small pots lump sum.
  • Taking income from a beneficiary’s flexi-access drawdown.

A trigger event will not occur where the whole of the fund is made up of a disqualifying pension credit at the time of a payment from the member’s flexi-access drawdown fund. A disqualifying pension credit is where the pension credit in relation to a pension sharing order comes from benefits already in payment.

The MPAA only applies to money purchase contributions being made. So it is still possible for an individual to accrue benefits in a defined benefits (including final salary) scheme up to the current standard annual allowance of £40,000, but taking into account any money purchase contributions that will be counted against the  MPAA as detailed above. If the money purchase contributions exceed the MPAA then an ‘alternative annual allowance’ (the standard annual allowance minus the MPAA) plus any carry forward will apply to any defined benefits accrual. For the 2017/18 tax year, the alternative annual allowance was £36,000 pa (£40,000 less a £4,000 MPAA).

What is Pension Commencement Lump Sum (PCLS)?

A proportion of your fund, up to 25%, may be taken tax free when you reach your minimum retirement age of 55. The payment may be withdrawn at any time from age 55 and does not have to be taken all at once. Tax free cash is normally paid before either an annuity is purchased or a drawdown pension arrangement is entered into.

What is Flexi-access Drawdown?

Flexi-access Drawdown is a method of accessing your pension savings, after your tax free cash sum has been paid, as a one-off income payment or in amounts of your choosing, at a time that suits you. Each income payment will be taxed at your applicable rate of income tax through PAYE (i.e. basic rate 20%, higher rate 40% and / or additional rate 45%). There is no maximum limit on the income and you can take the whole value of your SIPP and no periodic reviews will be carried out.

As soon as you take income using Flexi-access Drawdown, your Annual Allowance is reduced to the new Money Purchase Annual Allowance (MPAA). Currently, the Annual Allowance is £40,000 and the MPAA is £10,000 (although the MPAA is proposed to reduce to £4,000 from 6th April 2017). Please note under MPAA you are not able to utilise previous tax years unused contribution allowances (‘Carry Forward’), so £10,000 (or £4,000 from 6th April 2017) is the maximum you can pay into your pension.

What is Uncrystallised Funds Pension Lump Sum (UFPLS)?

UFPLS is a benefit payment made directly from pension funds which haven’t been accessed before. It is different from any of the drawdown options, as the payment does not take your SIPP into drawdown. The payment is split between a 25% tax free element and the remaining 75% is taxed as income at your marginal rate of income tax through PAYE.

The payment could affect the rate and amount of income tax that is paid in a tax year, as the UFPLS may affect your tax code and take you into another tax band if you already receive income from other sources.

By taking an UFPLS the client will trigger their Money Purchase Annual Allowance (MPAA). You must also have remaining Lifetime Allowance to take this benefit payment. The Lifetime Allowance is the amount of pension fund you can build up without paying a tax charge. If you have Enhanced or Primary Protections in place and you have protection for lump sum rights which exceeded £375,000 on 5 April 2006, you are unable to access your pension benefits using UFPLS.

What about small pension pots’?

A small pot is a fund which is less than £10,000 in value, taken at the age of 55 or later. A tax free element of up to 25% of the fund may be taken and the remainder of the fund is taxed at your highest applicable rate of income tax. A member may take a small pot from up to three pension arrangements.

Taking a small pot benefit payment will not affect your ability to contribute to a pension arrangement up to £40,000 per annum.

What happens to my pension when I die?

The benefits that will be available to your beneficiaries and/or nominees from your scheme after you die will depend on your age at the date of death and whether you have commenced taking benefits from your pension.

 

Crystallised

 

Uncrystallised

 

If you die before age 75

Can pass on completley tax free to any beneficiary as a lump sum or drawdown pension

 

Can pass on tax free to any beneficiary as a lump sum or as a drawdown pension (up to the lifetime allowance)

 

If you die on or after age 75

Any beneficiary can receive the death benefits as a pension or lump sum. Any income drawn down is taxed at their marginal rate and lump sums are also taxed at their marginal rate

Any beneficiary can recieve the death benefits as a pension or lump sum. Any income drawn down is taxed at their marginal rate and lump sums are also taxed at their marginal rate 

*Income is taxed at the beneficiary's/beneficiaries' rate of income tax.

What are the main risks of a SIPP?

Self Invested Personal Pension (SIPP) is not suitable for everyone, particularly if you do not require access to the wide range of investment choices accessible in SIPPs.

There are a number of key risks to consider:

  • A SIPP is intended as a long-term investment and you must be prepared to keep your money invested and will not have access to it, normally until at least age 55.
  • If your investments perform well, you may be able to retire early. However, if they do not perform well, you may have to delay your retirement or increase your contributions to achieve your required level of income on retirement.
  • Future changes to tax rules could affect tax relief on contributions, the taxation of your investments and the taxation of benefits when you come to take them.

To read more about the risks connected to a SIPP, please read the Simply Ethical SIPP Key Features Document.

If, after reading the documents for Hartley Pensions SIPP, you are still unclear about any aspect of the product or are unsure whether the SIPP is right for you, we strongly suggest you take advice from a Financial Adviser.

Can I transfer my SIPP to another provider?

Yes, you can transfer out to another provider as long as the provider is HMRC approved. Hartley Pensions do not charge a transfer out fee. Please read our Charges Schedule for more information.

You should speak to your financial adviser before making a transfer. 

Can I cancel my SIPP?

Yes, you have a legal right to cancel the establishment of your SIPP, within 30 days of when you receive our welcome pack which contains a cancellation notice. Please note that any fees incurred during the time between the establishment of the SIPP and the cancellation will be borne by you. Simlarly, any losses on investments are borne by you.


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