What is a SIPP?
A self-invested personal pension, also known as a SIPP, is a type of pension that gives you greater choice and flexibility when choosing how your pension money is invested, right up to your retirement and beyond. With the greater choice and flexibility in investments, you’ll need to be comfortable making your own investments decisions and there are always risks with investing. As you know, the value of your investments can go down as well as up, so you could get less than you put in.
How many SIPPs can I have?
You can have more than one SIPP and some individuals have a SIPP or multiple SIPPs alongside a workplace pension.
How many SIPPs can I have with IG?
You can choose to invest in a SIPP using IG's share dealing platform or using an IG Smart Portfolio. If you want to use both services, you can have one of each account type.
Company pension v SIPP
SIPPs deliver exactly the same tax advantages as a salary sacrifice workplace pension and will likely give you greater choice over your investments (workplace pensions are usually limited to a 'default' fund and a few other funds chosen by your employer).
Who are Options?
Options is an independent administration and trustee company providing specialist pension services and products to the UK market ultimately owned by STM Group plc, a firm listed and traded on the Alternative Investment Market on the London Stock Exchange. Options is committed to delivering high quality pension administration solutions to individuals, financial advisors and companies.
How long will it take to open my SIPP?
Opening your new IG SIPP usually will take between 3 - 5 days, but sometimes a little longer. You will first need to setup your SIPP plan with Options. Once your SIPP plan is open, IG will then link it to your IG Share Dealing SIPP or IG Smart Portfolio SIPP. The following guide gives an overview of the steps to opening your SIPP.
Pension allowances and tax relief
Who can open?
You can have a SIPP with us if you’re 18 and resident in the UK. To start the SIPP, you need to provide a minimum of £10,000 either by a transfer from another pension provider or a single contribution, or set up a regular deposit plan of more than £1,000 per month.
What is the Annual Allowance?
This is the maximum amount of pension savings you, your employer, or any other person on your behalf can pay into all your pension schemes each tax year (5 April to 5 April) and benefit from tax relief. The current annual allowance is £40,000. The annual allowance applies to all of your pension schemes. If you have more than one pension this includes:
- the total amount paid into a pension scheme in a tax year by you, your employer or any other person on your behalf
- any increase in a final salary pension scheme in a tax year
The annual allowance is the total contribution amount after any tax relief has been applied.
If your employer makes contributions on your behalf, this will count towards the annual limit but doesn’t count towards your tax relief limit. Employer contributions are paid gross and your employer will claim tax relief when they contribute.
If you have used up the annual allowance in the current tax year (but didn’t use all of your annual allowance in any of the last three tax years) it may be possible to carry it forward. To be able to carry forward you:
- must have been a member of a pension scheme during the year you want to carry forward
- must have earned income in the current tax year equal to the amount of contribution being paid (including any carry forward)
If your contributions exceed the annual allowance, you’ll have to pay a tax charge on the excess.
In some circumstances, your allowance may be less than £40,000. The three main reasons why you may have a lower annual allowance are:
- you have flexibly accessed your pension savings
- you are a high income earner
- your annual income is less than £40,000
Once you’ve flexibly accessed your pensions savings, a lower annual allowance of £4,000 will apply to contributions to all money purchase pension schemes including the SIPP. This lower annual allowance is also called the money purchase annual allowance. If you are a high income earner you’ll have a reduced (‘tapered’) annual allowance if both:
- your ‘threshold income’ is over £200,000
- your ‘adjusted income’ is over £240,000
This means for every £2 of ‘adjusted income’ above £240,000, your annual allowance is reduced by £1. The maximum reduction is £36,000.
If your ‘Adjusted Income’ is £312,000 or more, then your Annual Allowance will be reduced to the minimum of £4,000. The definitions of ‘threshold income’ and ‘adjusted income’ are complex and if this is likely to apply to you, you should seek specialist tax advice.
Do I get tax relief on my contributions to the SIPP?
If you’re under the age of 75, you can get income tax relief added to your personal contributions, up to a maximum of 100% of your UK relevant earnings, but there’s an annual limit (also known as the annual allowance) on how much you can get tax relief on. If you pay more than your limit, you won’t get tax relief on the excess.
All of your personal contributions are payable at a net of basic rate tax (20% in 2021/22). The basic rate tax will be claimed by us from HMRC and credited to the SIPP cash account after 6 to 11 weeks. If you pay tax above the basic rate you can claim the extra tax relief by contacting HMRC.
If you live in Scotland or Wales, you may be entitled to a different rate of tax relief on your pension contributions. Please
contact HMRC for further details or see https://www.gov.uk/scottish-income-tax and https://www.gov.uk/welsh-income-tax for more details.
The table below illustrates the maximum personal contribution limits which you can receive tax relief.
Your gross UK relevant earnings (per year)
Your maximum total contributions receiving tax reflief (per year)
No earnings/earning below £3,600
Earning up to £200,000
100% of your earnings or £40,000 whichever is lower
Your limit is on a sliding scale ranging from £40,000 to £4,000
When can I access the SIPP?
Currently you can access your pension at any time from your 55th birthday, regardless of whether or not you are still working. It might be possible to access the SIPP before your 55th birthday, if you’re unable to work because of ill health or you’re seriously ill and your doctor says that it’s likely that you have less than a year to live. Please get in touch with Options if you need more information.
Before deciding to access the SIPP you should take financial advice from a financial adviser regulated by the Financial Conduct Authority, you can find a financial adviser by using the FCA website at https://www.fca.org.uk/consumers/finding-adviser or seek guidance from Pension Wise at https://www.moneyhelper.org.uk/en.
Please note the pension age is increasing to age 57 from 2028 in line with the state pension age increasing to 67.
Do I pay tax on my pension income?
All pension income payments are subject to income tax. Options will deduct the tax due before paying your pension. The rate of tax you pay is determined by the tax code we are issued by HMRC.
How much will I get when I retire?
We can’t say for certain and the actual amount may differ from that estimated on any personal illustrations that you may have received. The final value of the SIPP will depend on a number of factors including how much you have paid in, for how long you have been in the SIPP, and the performance of the investments after charges.
Is there a limit to how much I can take when I retire?
No, but if you go over the lifetime allowance you will have to pay a tax charge. Some people have a personal lifetime allowance, that is more than the standard lifetime allowance which is currently £1,073,100. If you applied to ‘protect’ your lifetime allowance with MRC, they’ll have issued you a confirmation of your personal lifetime allowance. If this does apply to you, then you will need to let us know and provide us with your HMRC reference number. Please remember if you do have a personal lifetime allowance any further contributions from you, your employer or any other person on your behalf could affect this protection.
What options are available to me when I access the SIPP?
You can take up to 25% of your pension fund as a tax-free cash lump sum, which is currently from the age of 55. From 6 April 2028 this will rise to 57 in line with the increase in retirement age.
The rest of your pension fund will be used to provide you an income. You can choose how and when you would like this paid, this includes taking a regular income by either buying an annuity or by income drawdown. Alternatively, you can take your pension fund as a single or a series of lump sum cash payments (also known as uncrystallised funds pension lump sum). 25% of this will be tax-free and the rest of the payment will be taxed as income.
How to transfer your SIPP?
Options can accept transfers from any UK registered pension scheme or recognised overseas pension scheme. Before they will confirm acceptance for the transfer, Options will require copies of the transfer analysis and suitability report from your financial adviser. You can transfer your existing pension value in cash and/ or transfer your existing pension investments if they are permitted investments within the Options SIPP. Transfers from a final salary pension scheme are not permitted unless an appropriately qualified financial adviser has advised you to transfer to our SIPP. When you set up your SIPP you will be asked to obtain discharge documentation from your ceding scheme. Options UK will request this from your ceding scheme, however most providers will revert back to you for clarification and request that you complete their documentation to forward onto us.
Options are reliant on timeframes from the Pension Provider you are transferring from (often known as the ceding scheme). Options will chase regularly for updates if funds have not received. The average time to transfer a SIPP is around 4 weeks.
Before you transfer (Defined Benefit Scheme)
Transfers from a final salary pension scheme (also called a Defined Benefit Scheme) are not permitted unless an appropriately qualified financial adviser has advised you to transfer your SIPP.
You, your employer (if you have one) or any other person on your behalf can make contributions to the SIPP. You can pay contributions by standing order or electronic transfer.
You, or any other person on your behalf can make contributions to the SIPP. You can pay contributions by standing order or electronic transfer.
Direct debits/standing orders
Regular contributions must be paid by standing order.
Can I change my contributions?
You can stop, start, reduce or increase your regular contributions at any time. You can also make single one-off contributions. Please let Options know if you make changes to your regular standing order.
SIPP ideas - Share Dealing or IG Smart Portfolio
If you wish to pick and choose your own investments to build your own SIPP portfolio then you can use IG's share dealing platform. You can choose from over 12,000 shares, exchange traded funds and investment trusts. Trade US shares commission-free and pay as little as £3 per trade on UK stocks, with foreign exchange fees at just 0.5% - far lower than most of our competitors.
You can invest for your retirement using our managed portfolio service called IG Smart Portfolios. We can help match you to one of five expertly managed portfolios based on your investment goals and risk profile. Over time, we will make adjustments to your portfolio as market conditions change, and reinvest any dividends or income you receive from your investments free of charge.
Fees and charges
Options annual admin fee
How are fees collected?
Your first annual admin fee will be deducted from your funds transferred on establishment, and then from Investment by way of a regular annual withdrawal.