SIPP - Starting Out
A SIPP can be started by an individual or by an employer. To start up a SIPP, you will need to approach an HM Revenue-approved provider. These include insurance companies, pensions consultants and fund managers, among others.
Depending on the type of provider, the plan will involve at least a scheme provider and a scheme administrator (which may be the same organisation). If the SIPP is trust-based, and you are not going to be the trustee, the provider or another specialist must act as trustee.
A SIPP can be started from scratch or by transferring funds from another plan.
- Do I need a substantial fund to invest in a SIPP?
No, but the larger the fund, the greater the investment opportunities. Also charges levied by providers are often subject to a minimum flat rate amount, which can mean that very small contributions are not viable.
However, the SIPP market has become very competitive and there are some providers whose charges are geared to attracting the smaller investor.
Note that if you want to use your SIPP to invest in property, the SIPP must have sufficient funds to buy the property (either outright or with a mortgage). A SIPP is restricted in the amount it can borrow.
- Who runs a SIPP?
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SIPPs are provided by insurance companies, pensions consultants and fund managers, among others. A full list of providers is available from their industry body, the Association of Member-Directed Pension Schemes (AMPS).
- Why can’t I just do it myself?
In order to qualify for the tax relief from the Revenue, an authorised provider must be used.
- How much can I pay in to a SIPP?
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The maximum contribution that attracts tax relief for someone with earnings is the lower of £235,000 and 100% of earnings in each tax year. Contributions above 100% of earnings can be made but no tax relief is available on the excess. A tax charge will be imposed on any contributions over £235,000 in a tax year.
If you do not have any earnings, the maximum tax relievable contribution is £3,600 (gross) in any tax year.
Contributions by individuals are paid net of basic rate tax; contributions by employers are paid gross.
Q & As
