A Group Sipp can be used to hold a wide range of investments from shares, gilts, unit trusts, investment trusts, insurance company funds and commercial property (but not private property). A SIPP can be used for income drawdown.

This is particularly useful for owners of small businesses, who can buy premises through their pension funds. There are attractive tax advantages in using the fund to buy commercial property. The rental income is received tax-free by the fund and when the property is sold, which must be before the pension is drawn. There is no capital gains tax.

Someone with their own business might decide to use the property assets – such as offices, factories, agricultural land and warehouses – as part of a retirement nest egg. In this case, they would pay rent directly into their own pension fund rather than to a third party – usually an insurance company.

For specialist advice on SIPPs,  pension drawdown or annuity rates call 0800 043 0725

One of the attractions of SIPPs is that they can be used to invest and develop commercial property, such as offices, industrial units or shops. Your pension fund does not even have to be large enough to buy a property outright as you can borrow up to 50 per cent of the fund’s net value.

In other words, if it is worth £150,000, you could borrow another £75,000 to buy a property for around £225,000. The rent from the property can be used to cover the mortgage repayments. If there is no mortgage, the rent will remain in your SIPP fund and can be used for other investments.

However, it is important to bear in mind that the costs of buying and managing a property in a SIPP can be fairly hefty. SIPP providers typically quote fees of between £500 and £750 for property purchase and there will also be legal and valuation fees to pay. In addition, ongoing annual management charges will be payable.

It is not possible to invest directly in residential property via a SIPP, although a commercial property with a residential element such as a caretaker’s flat may be permitted.

An alternative for those who want to invest in residential property may be to do so via property syndicate or collective fund. These schemes are allowed within SIPPs providing they have at least 10 investors and own at least three different properties worth a minimum of £1m in total.

Not all SIPP providers will currently accept these schemes and before investing, you should look carefully at how they work. Find out the level of borrowing as this will increase the risk and the amount you may have to pay for the maintenance of the properties as well as the costs to be covered when there are ‘void’ periods between lettings. Most importantly of all, you should find out your options for selling your investment.

Other property-related schemes which may be available within a SIPP are buy-to-let hotel room investments in the UK. It has been suggested that similar schemes abroad including ski chalets may also be suitable but some leading SIPP providers still feel this is a grey area. As the trustee, your SIPP provider has the final say on what can go into your pension.

By far the greatest demand for property investment within a SIPP is from small business people who want to buy their own business premises. Changes to the pension rules in April 2006 mean such purchases are now possible even if the property is already owned by the investor or someone connected to them.

Buying your own business premises within a SIPP can have several tax advantages. The rent paid into your SIPP is free of tax because it is a tax deductible expense. There will be no capital gains tax to pay on the property when it is sold within the pension fund and if you die before age 75 and before you start drawing your pension, your beneficiaries can receive the proceeds of the sale of the property free of inheritance tax.

To find an Independent Financial Adviser that can advise on SIPPs call 0800 043 0725

An Independent Financial Adviser is the only financial adviser who can provide advice that is specific and personal to your circumstances from products and services available from the whole market. An IFA will work for you and not the product provider.

Retirement Solutions is an independent financial adviser that specialises in giving advice in the annuities and equity release market.

Retirement Solutions Limited is a whole of market financial adviser. However, we choose to provide advice only in the areas where we have the necessary experience and expertise; annuities and equity release

If you would like us to arrange for an IFA to contact you then please click the form link below. We will then select the IFA who is best suited to advise you.

http://www.formexperts.com/forms/OI31IWVMTT65

The Prudential Flexible Retirement Plan (FRP) offers the following benefits:

• Single product wrapper containing a personal pension, income drawdown and SIPP options
• Account style structure allowing ease of transition between the different components of FRP
• Ability to hold protected rights and non protected rights
• Lifetime value charging structure with AMC discounts for fund size and longevity of investment (excludes the Self-Invested Fund and the Income Drawdown Holding Account)
• Transparent and flexible
• Wide range of investment options including the recent addition of our PruFund Cautious Funds, and PruSelect fund range

Find out more about how this product could benefit you call 0800 043 0725

Kevin Stelfox, Retirement Solutions, Independent Financial Advice on Income Drawdown

Where an individual is aged over 60 (but less than 75) and their total funds from all pension schemes is less than 1% of the Standard Lifetime allowance (SLA) the entire fund can be taken as a lump sum. For the tax year 2009/10, this will equates to £17,500

For example 2008/9 (SLA £1,650,000) if the fund is £16,500 or below, 25% can be taken as tax free cash (£4125) with the balance taken as cash but taxed as earned income.

Time Limit

If you wish to cash-in more than one pension, assuming you meet the qualifying criteria above, you must do so within 12-months of cashing-in the first one.  You will not be able to cash-in any pensions after that 12-month period has expired.

New Rules From 1 December 2009 (occupational schemes only)

These new rules apply to occupational pension schemes only.  They do not apply to personal pensions, stakeholder pension and SIPPs.

They allow small occupational pensions to be cashed-in under triviality rules even if the main rules above have not been met.

The following are the main qualifying criteria:

* You must be between 60 and 75;
* You must not be a controlling director of the sponsoring employer;
* The payment must not exceed £2,000;
* The payment extinguishes your right to benefits under the scheme; and
* There must not have been a transfer-out of the scheme in the 3 years preceding the date of payment; and
* The first 25% of the payment is tax-free, with the remaining 75% taxable under PAYE.

To get over the perceived lack of flexibility and the potential erosion of your income due to inflation, with profits annuities work by investing your lump sum in the with profits fund of your chosen insurance company. By doing this, you bear the investment risk, not the insurance company.

At outset, rather than opting for a level annuity or one which increases each year, you assume a bonus rate. This will be the bonus rate applying to your with profits fund and if the fund achieves the bonus rate that you have assumed, your with profits annuity will remain level. If the bonus rate applied to the with profits fund is higher than that which you have assumed, your annuity for that year will rise and conversely, if the bonus rate falls, then your annuity will also fall for that year, or until bonus rates rise again above the level of bonus rate that you assumed at outset.

So, if you assume a bonus rate of 3%, and that is what is achieved, your annuity remains level. If after three years, the bonus rate increases to 5% (because of favourable equity markets) then your annuity income will rise too.

Thinking of buying a With Profits Annuity? Our Annuity Service provides:-

• Depending on your pension provider up to 30% More Annuity Income
• Specialist advice on different types of annuity arrnagement including investment annuities
• Assessment of your circumstances to find the most suitable type of annuity for you or whether there are any other options more suited to you.
• Information & Advice on lifestyle annuities - including  smoker annuities and impaired health annuities you may get even more annuity income.
• Comparing annuity rates to ensure that you maximise your annuity income.
• Explaining the annuity options available to you.
• Helping you with the relevant paperwork to ensure that you annuity is processed smoothly.

Call us on 0800 043 0725

If your annuity does not give you the income you need then you can always look at equity release as a means to help you boost your income.

UK equity release schemes allow you to take an income or tax-free cash from your property. Available from age 55, if you have no mortgage or very little on our mortgage then you may qualify for an equity release scheme.

For a 65 year old typical amounts you can release are around 25% of the property value. So for a property worth around £200,000 this will allow you to release about £50,000 to spend on what you like. You could if you prefer drawdown a monthly amount instead and perhaps this would allow you to have a monthly income of £200.

These equity release schemes are similar to the reverse mortgages that are available in the US.

Scheme Pension is an alternative way to take an income (pension drawdown is an other) and is based on a client’s individual circumstances. It offers the potential for taking a higher income in certain situations because it is not restricted by HMRC limits.

A client has two choices at outset as to how his Scheme Pension is established and these are as follows:

Annuity v Drawdown Income Rates

The tables below show the amount of annual income that can be derived from an Annuity and an Income Drawdown or Pension Drawdown as it is sometimes called. Rates after different for a men and women. 

This income is based on the FTSE 15-year gilt yield of 3.75% for October 2009. This rate can vary on a monthly basis so these figures are for guidance only.  An Income Drawdown allows you to take an income that is 120% of the Government Actuary Department (GAD) rate which is 3.75% for the examples shown.  The annuity income is based on a single life with no guarantees and level income.

The first table shows the amounts for a man with an initial fund of £133,333.  The income is based on the fund of £100,000 after the 25% tax-free lump sum of £33,333 has been paid out.

On 6 April 2010 the minimum age at which pension scheme members will be able to access their pension benefits will jump from 50 to 55. Does it affect you?

From this date it will no longer be possible for you to receive an income or a tax-free lump sum from a private pension before your 55^th birthday, except on the grounds of very poor health.

How does this affect you?

• Aged 50 – 54 on 5 April 2010: if you will be aged between 50 and 54 on 5^th April 2010 and wish to access your pension benefits in the near future you must do so before 6^th April 2010, otherwise you will lose access to your pension for up to five years.
• Under 50 on 5 April 2010: if you won’t reach age 50 until after 5^th April 2010, but were planning to retire before your 55^th birthday you will now have to wait until age 55 to receive an income or take a tax-free lump sum from your pension.

If I am going to be between 50 and 54 on 5 April 2010

What options do I have?

There are a number of options available to you – three of the most common options are:

1. Buy an annuity

You could choose to buy an annuity before the change in the minimum retirement age takes place. Annuities provide a regular income, usually for the rest of your life, in return for a lump sum payment from your pension plan.

2. Transfer to an income drawdown plan If you need to withdraw an income from your pension, an income drawdown plan could achieve this for you. This is an alternative to buying an annuity.

It allows you to take an income from all or part of your pension while leaving the rest invested. You can increase and decrease your income, within set limits, to suit your needs.

3. Do nothing You may be sure you won’t need access to your money until age 55

So what do I need to consider?

You should consider taking independent financial advice to discuss the options available and which would be most appropriate for you. Visit our website for more information http://www.annuitysupermarket.com