Small Business Owners Call Out for SIPPs
What SIPP Property investment means for small businesses and the tax benefits that can come with it
A Self Invested Personal Pension (SIPP) is a great product that can help investors of all shapes and sizes, but truly excels when it comes to high net worth individuals. When SIPP products began there was a much clearer outline as to what a SIPP could provide, however due to its growth in recent years it is difficult to distinguish it as one product.
A Self Invested Personal Pension allows an individual to choose where they want their retirement savings to be invested; alternative to the pension company making the decision. As there is a wide variety of investment options available from funds and shares to commercial property, it is important for investors to take control of their funds and consequently their future.
Along with the investment flexibility of a SIPP, comes flexibility in retirement. Income drawdown gives the client the ability to initially take a 25% tax free lump sum and then keep most of their fund still invested whilst drawing down an annual pension from their pot. The other option of course is buying an annuity, however once this option is exercised there’s usually no turning back. The government recently brought in flexible drawdown as well, where a client has no limit on how much they can take from their pension if they can satisfy a minimum secured income requirement of £20,000pa. This has made the income drawdown proposition even more attractive.
After auto enrolment takes its toll and nearly all businesses have company pension schemes in place, it will be the forward-thinking employers that can offer certain high-earners in the company the added flexibility of a company SIPP; rather than the usual GPP (Group Personal Pension). This strategy is useful for small businesses, as the employee gets a more attractive and flexible pension scheme to attract better staff and the employees get more investment options to use in their retirement planning.
Many investments can be placed within a SIPP however commercial property is an important element to offer any high net worth investors, in particular small business owners. Small business owners currently hold the greatest demand for property investment. A SIPP allows small business owners to buy their premises and hold the property tax-efficiently within their pension.
There are many advantages when purchasing a property within a SIPP; the rent paid in to a SIPP is tax free, and in addition has no capital gains tax to pay on the sale of the property.
If you would like to find out more on SIPP Property investment and tax benefits, Liberty Pensions have developed the most flexible property purchase structure in the market. Visit the Liberty SIPP website for a range of SIPP solutions.