Does the Lifetime Allowance apply to SIPPs?

There is no lifetime allowance charge for 2023 but it is due to be removed by tax year 2024.

Self-Invested Personal Pension (SIPP)

Q: What is the difference between a SIPP and a personal pension?

SIPPs work in very similar ways to a personal pension however they are more flexible and offer you more control over investment. This means a SIPP is a great option for those who want to self-manage their pension.

Q: Are the death benefits different with a SIPP?

SIPPs operate in the same way a personal pension, so you can pass on your pension to your loved ones in the event of your death.

Q: What happens if the annual allowance is exceeded?

If you contribute more than the annual allowance, your excess contributions will not receive any tax relief, and your excess contribution will also be subject to a tax charge.

Q: Do I receive tax relief on SIPP contributions?

SIPPs work in the same way as personal pensions, which means they are highly tax efficient as the government provides tax relief on your contributions up to certain limits.

Q: Can I access my SIPP from 55?

Yes, you are able to draw down [ draw down link - https://www.sjp.co.uk/advice-and-products/pensions-retirement/retirement-options/pension-options/drawdown ] on your SIPP from age 55 however you choose. You will be entitled to 25% as a tax free lump sum[ 25% as a tax free lump sum link - https://www.sjp.co.uk/advice-and-products/pensions-retirement/retirement-options/tax-free-lump-sum ], and can take the rest as taxable income or lumps sums.

Q: How much can I pay in and receive tax relief?

The annual allowance is applied to your SIPP along with your other pensions, which means you can contribute up to £60,000 for 2023/24 per year, or, 100% of your earnings if less and receive tax relief.

SJP sipp

A Self-Invested Personal Pension, or SIPP, is a flexible type of pension that offers you access to a diverse range of investments, over and above a typical personal pension.

A SIPP is also a type of Defined Contribution (DC) based pension.

SIPPs will not be suitable for everybody and generally only those who are fairly experienced at actively managing their investment should consider this type of investment. They also tend to have higher costs than a standard pension.

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

The value of a SIPP can fall as well as rise. You may get back less than the amount invested.

Why invest in a SIPP

SIPPs offer increased flexibility and control with the ability to invest in a wide range of assets.

This differentiates a SIPP from a workplace pension as it gives increased control and flexibility over to you. If this is what you are looking for, then speaking to a financial adviser is a good idea to understand what level of investment risk you are prepared to take, especially if considering different assets to invest in.

How does a SIPP work?

A SIPP works in much the same way as a standard personal pension, in that it is used to build retirement wealth over time, and then after age 55 allows you to draw down on it, with 25% payable tax free.

There are many types of pensions available, and a SIPP provides a great deal of investment flexibility, however this may not be the right choice for everyone. Having a broad range of investment choices brings complexity and so you need to be fairly experienced and have an understanding of how different investments work.If you don't have this knowledge and experience then a SIPP will not be suitable for you.

And it's good to know that...

Tax relief on your SIPP contributions works in the same way as a personal pension.

You can access the benefits from the age of 55 rising to 57 in 2028.

Personal pension or SIPP

SIPPs can be appealing due to the scope of investment assets they enable you to hold. By comparison to standard personal or stakeholder pensions, this additional investment flexibility often comes at an extra cost. You should consider this carefully if you are unsure whether you will fully utilise your SIPPs capabilities, as you could be paying more for something you might not use to its fullest. To add to the complexity, there are ‘low cost SIPPs’ and ‘full SIPPs’ which offer different levels of flexibility and cost, so it pays to speak to a financial adviser first.

The value of a SIPP can fall as well as rise. You may get back less than the amount invested.

What can a SIPP invest in

A SIPP allows you to invest in:

Funds

SIPPs will typically have many hundreds or even thousands of different investment funds and are also likely to have readymade portfolios for different saving purposes. 

SIPPs usually allow you to buy and hold shares alongside your other investments.

Bonds

These are listed and traded in a similar way to shares.

How to set up a SIPP

If you have decided this is the right choice for you, speaking to a financial adviser is the next step.

Getting your investment goals right can be a complex process; a financial adviser is the best way of making sure all areas are covered.

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up.  You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

Frequently asked questions 

What is the difference between a SIPP and a personal pension?

Are the death benefits different with a SIPP?

What happens if the annual allowance is exceeded?

Do I receive tax relief on SIPP contributions?

Can I access my SIPP from 55?

How much can I pay in and receive tax relief?

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What next?

Learn more about budgeting and the benefits of long term saving, including understanding some of the risks, and what some of the differences are between saving into a pension and any other form of savings.

Learn more