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Skandia Self-Invested Personal Pension (SIPP)

The Skandia SIPP is a tax-efficient, registered personal pension scheme, the performance of which is linked to the value of the assets you hold. It is a type of personal pension with a wider investment choice, as the investments are not restricted to insurance company funds. Currently a SIPP can hold investments such as commercial property, land and stocks and shares.

A J Bell Management Limited, the Scheme Administrator, is responsible for the maintenance and running of the Scheme. Sippdeal Trustees Limited, a wholly-owned subsidiary of A J Bell Management Limited, is the trustee. A J Bell Management Limited is a part of the A J Bell Group, which specialises in providing actuarial, trustee and administration services for SIPPs, and is one of the largest and fastest growing administrators of SIPPs in the UK.

Who can take out a Self-Invested Personal Pension?

Any UK resident, subject to our age limits and minimum scheme criteria.

Minimum and maximum ages

There is no minimum age and the maximum is 74 years. If under age 18, the personal pension must be taken out by a parent or legal guardian.

Minimum contributions

£150 monthly (no minimum top-up).
No minimum initial single contribution (£1,000 top-up).

Maximum contributions

The Skandia SIPP will only accept personal contributions that qualify for tax relief. This means you can personally contribute up to £3,600 each year into a Skandia SIPP regardless of your earnings or employment status. If you have UK earnings chargeable to UK income tax, you can pay up to 100% of those earnings as personal contributions each year, or £3,600 if greater.

If you are employed, your employer can also make contributions into your SIPP.

The Annual Allowance is the maximum amount that you can build up in all registered pension schemes before you become liable for tax. If your earnings are greater than the Annual Allowance, you may still contribute 100% of your earnings and receive full tax relief, however any contributions exceeding the Annual Allowance will be subject to a tax charge.

The Annual Allowance has been set for the tax years shown as follows:

2008/09 – £235,000
2009/10 – £245,000
2010/11 – £255,000
2011/12 – £255,000
2012/13 – £255,000
2013/14 – £255,000
2014/15 – £255,000
2015/16 – £255,000

If the total amount built up in all your registered pension schemes exceeds the Annual Allowance, you will be personally liable to a tax charge of 40% on the excess.

Your financial adviser will be able to provide you with more information.

Term

There is no minimum term, however contributions to your pension must cease by age 75.

Advantages

Wide investment choice

You can benefit from Skandia’s pioneering MultiManager approach by investing in Skandia Investment Management or Self Select funds through a Skandia Pension Trustee Bond or a Collective Investment Account.

In addition to this wide choice of funds, the Skandia SIPP offers you the option to invest in:

  • UK quoted stocks, shares, gilts and debentures
  • shares quoted on the Alternative Investment Market (AIM)
  • stocks and shares traded on a recognised overseas stock exchange
  • authorised unit trusts, investment trusts and OEICs
  • insurance company funds
  • commercial property and land.

Tax efficiency

There are a number of reasons why a Skandia SIPP can be a tax-efficient way of saving. These include the following:

  • You receive income tax relief on contributions.
  • You can take 25% of your fund as a tax-free cash sum when you start taking your pension benefits.
  • The funds you invest in are free from capital gains tax and generally free from income tax. With less tax paid, more goes towards the growth of your fund.

There may be a tax liability in some circumstances, for example where:

  • Contributions into your plan are funded from a tax-free cash sum received from a registered pension scheme.
  • The total amount built up in all your registered pension schemes exceeds an amount known as the Annual Allowance (see maximum contributions for more details).
  • The total value of all your pension benefits exceeds the Lifetime Allowance when you start to draw benefits. For the 2008/09 tax year this is £1.65 million and it is set to rise in stages to £1.8 million by 2010/11 and remain level until 2015/2016.
Your financial adviser will be able to explain this to you in more detail if you think this applies to you.

Flexibility

The Skandia Self-Invested Personal Pension can accept regular contributions, single contributions and transfer payments from other UK-registered pension schemes.

Regular contributions can be stopped, reduced or increased without incurring extra costs or penalties.

Flexible benefit options

The Skandia SIPP offers you a number of ways to use your fund to provide benefits at your pension age.

Normally, 25% of your fund value used to provide payments can be taken as a tax-free cash sum. With the remainder of the fund you can:

  • Purchase a lifetime annuity from the provider of your choice.

  • Buy your lifetime annuity in a number of stages, thereby phasing your benefits over a period of time. (Skandia does not offer an annuity product.)

  • Remain invested in the SIPP, while taking income withdrawals from your pension fund up to age 75. This is known as Unsecured Pension. At age 75 you may be able to continue taking income withdrawals by converting to an Alternatively Secured Pension. By doing this you retain the potential for further tax-efficient growth.

Death benefit

The Skandia SIPP will pay out 100% of your fund value on your death before age 75 and before drawing benefits. This is paid at the discretion of the Scheme Administrator, A J Bell Management Limited, so you should tell them who you would like to receive the benefits. Benefits are normally paid free from inheritance tax.

Regular reviews

Each year A J Bell Management Limited will send you a statement showing the current value of your pension and the projected benefits at your pension date.

Risks

You need to be aware that there are risks involved in taking out a Skandia SIPP and we cannot guarantee the value of your pension fund and resulting benefits for a number of reasons. Some of these are detailed below:

  • The value of your SIPP when you draw benefits cannot be guaranteed as it will depend on investment performance.

  • The value of fund units can go down as well as up and investment growth cannot be guaranteed.

  • The tax benefits and governing rules of SIPPs may change in the future.

  • The level of pension benefits payable cannot be guaranteed as they will depend on interest rates when you start taking your benefits.

  • The value of your SIPP may be less than you expected if you stop or reduce contributions, or if you take your pension earlier than you had planned.

There is an extra risk of losing money when shares are bought in some smaller companies, including penny shares. There may be a big difference between the buying price and selling price of these shares. If they have to be sold immediately, you may get back much less than you paid for them. The price may change quickly and it may go down as well as up.

You may be able to deal in a range of investments, each of which may carry a different level of risk.

The cost-effectiveness of your SIPP may depend on a number of factors:

  • the size of your SIPP in relation to the initial and ongoing costs

  • the type of investments held

  • the frequency with which you buy and sell fund units

  • the size of the transaction you undertake.

If you have a smaller fund or buy and sell excessively, the value of your SIPP may be eroded and the costs may be disproportionate to the value of the SIPP. Multiple investments and frequent dealing in small amounts may also result in excessive costs.

This web page is only intended as a general introduction to the Skandia Self-Invested Personal Pension. For full details of the product, and to consider if it is suitable for you, you should contact your financial adviser.

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