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SIPPS - ESSENTIAL KNOW HOW H


Have you considered the benefi ts (and risks) of investing in property through a SIPP? Perhaps you’ve heard of the , but you’re not sure


term SIPP


exactly what it means? Or maybe you’ve seen investment properties advertised as ‘SIPP compliant’ and you want to fi nd out more. Possibly you even have a SIPP already, but you don’t know if you can use it to invest in property? Whatever stage you are at, this guide will explain the basics and fi ll in any gaps in your knowledge.


What is a SIPP? A SIPP is a Self-Invested Personal Pension. There are two great advantages to a SIPP: you are fee to invest the assets of the pension fund as you choose, within certain boundaries. You also get tax relief at your higher rate of income tax on any money you save within your SIPP (if you are a basic rate taxpayer at 20 per cent, if you save £80 in a SIPP HMRC will top that up to £100).


How does it work? You can make regular contributions into your SIPP


,


invest one or more lump sums or even move funds from other pension arrangements into your SIPP


. In fact, moving funds from old, frozen or under-


performing pensions into a SIPP and then using those funds to invest in property has been very popular over the last fi ve years as many people have looked for alternatives to the stock market. There are some other important considerations to bear in mind though. Firstly, when it comes to investing in property, only commercial property is allowable within a SIPP – you can’t use your pension to buy your house in the UK or a second home abroad. That isn’t to say that you can’t use your SIPP to invest in overseas property, but it must have a commercial designation, and you can’t enjoy any personal benefi t from it (i.e. you can’t stay there without paying full price to the operator!) Secondly, not all SIPP operators allow investment


into overseas property. Some of the lower cost SIPPs keep their charges down by only allowing very easy to administer investments to be held within the SIPP


, such as stocks and shares. So if you are considering opening a SIPP


, check that it is suitable


for you and the types of investments you are thinking of making.


Risks and benefi ts Going down the self-invested route is exciting and can be a great way to unlock the value in


28 AIPP CONSUMER GUIDE


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