There are significant tax advantages to retirement planning with a registered pension scheme and a SIPP benefits from all of these, the main ones of which are:
- Tax relief of up to 50% on your personal contributions subject to your relevant UK taxable earnings and the annual allowance;
- Tax relief to an employer on their contributions;
- Accumulated investments within the SIPP grow free of income tax;
- Sale and disposal of any investments (including equities, bonds and property) will not be subject to capital gains tax;
- The ability to normally take up to 25% of the fund as cash free of tax upon first crystallisation of your benefits;
- On death before any benefits are crystallised, the accumulated fund can normally be distributed tax-free to your spouse and/or dependants.
Other key points to consider are:
- Benefits can only be drawn (crystallised) from the fund after the age of 55;
- Any income you receive when you are taking benefits will be taxed at your marginal rate;
- If your SIPP were to invest in some assets HMRC deem as ‘taxable property’ then there will be significant tax charges applied;
- The fees payable for having a SIPP.