There are significant tax advantages to retirement planning with a registered pension scheme, the main ones of which are:
- Tax relief of up to 45% (up to 46% for Scottish taxpayers) 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;
- If you die under the age of 75 your beneficiaries will be able to take lump sum or income payments tax free.
Other key points to consider are:
- Benefits can normally 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.