Frequently asked questions

Below, are some of the most frequently asked questions about Self Invested Personal Pensions that will help you decide whether a SIPP is right for you.

  • A Self Invested Personal Pension (SIPP) is a retirement savings account for investors who want to manage their pension investments themselves. With a SIPP, you're in control of when and how your money is invested.  You also decide how you take the benefits, as long as you stay within HMRC rules.

  • Our SIPP could be right for you if you:

    • are looking to build up a Pension Fund in a tax-efficient way
    • receive income from employment or self-employment or, if you don’t receive such income, want to contribute a maximum of £3,600 (including the 20% tax-relief top up from the government).
    • are comfortable choosing your own investments
    • understand the value of your investments can fall as well as rise
    • are prepared to commit to having your money tied up, normally until at least age 55
     

    Willis Owen Limited offers an execution-only service. If you are in doubt about the suitability of our SIPP, we suggest you seek advice from a suitably qualified Independent Financial Adviser.

  • You can have a SIPP with us if you are a resident in the UK and aged 18 or over.

  • You are free to contribute as much as you like subject to HMRC limits. We allow you to start, stop or restart contributions whenever you want to, without penalty.

    Single contributions can only be paid by debit card. Regular contributions can be paid by Direct Debit; payments are collected a date of your choosing between 1st and 28th of the month.

    Personal payments that qualify for tax relief can be paid into your SIPP. This means you can normally pay up to £3,600 a year into your SIPP regardless of your employment status, as long as you are a relevant UK individual (which broadly means that you are a UK resident for tax purposes or were UK resident at some time during the last five tax years).

    If you have UK earnings chargeable to income tax you can contribute up to 100% of these earnings. The amount of your contributions which may be eligible for tax relief will however be limited by the Annual Allowance. The Annual Allowance is currently £40,000 but which may be lower if you have already accessed benefits from a pension or your total income plus the value of pension savings made on your behalf by an employer are greater than £150,000. See ‘What is the Annual Allowance' below for more details.

    You can build up a total Pension Fund from all registered pension schemes up to the standard Lifetime Allowance. For 2019/20 the Lifetime Allowance is set at £1.055 million. See the section on Lifetime Allowance below.

    Note: You should also be aware of the content of the Key Features or Key Investor Information Document that may be issued by the product provider of any underlying investment.

  • The minimum contributions are as follows:

    • the minimum single contribution is £25 (excluding the 20% tax relief top-up provided by the government)
    • the minimum regular contribution is £25 (excluding the 20% tax relief top-up provided by the government)
  • What is the Annual Allowance?

    The annual allowance is the most that you or your employer can save into your pensions each year without suffering a tax charge.  For money purchase pensions (including the Willis Owen SIPP), it’s the total of yours and your employer’s contributions that are taken into account. For defined benefit schemes (for example final salary pension schemes provided by an employer), it’s the growth in the value of your pension and lump sum benefits. For most people, the annual allowance is currently £40,000 each year but it could be lower if either of the following applies:

    • The total amount of your income from all sources, when added to the total of pension savings made by your employer on your behalf during the year, is greater than £150,000. If that applies to you, read ‘What is the tapered annual allowance’ below.
    • You’ve already dipped into one or more of your pensions since 6 April 2015 - in which case read ‘What is the money purchase annual allowance’

    If your pension savings during a tax year are more than your available annual allowance, the difference is added to your income for the year and is subject to tax at your marginal tax rate. If the tax charge is more than £2,000, you can pay it out of your pension scheme.

  • If you have a registered pension scheme with another company and these are defined contribution schemes, you can transfer its value into your SIPP.

    By transferring benefits from another pension provider into your SIPP, you may give up the right to guarantees over the kind of benefits, the amount you will receive and the level of increases that will be applied to your pension in the future.

    Your existing pension provider may apply a penalty, or other reduction in the value of your benefits, if it is transferred. There is no guarantee that you will be able to match the benefits that you give up by transferring your pension to us.

    Your pension provider should be able to tell you if you will lose any benefits and if penalty charges are applicable.

    Defined Benefit schemes
    Please note that we will not accept transfers from final salary pension schemes.

  • The government applies extra restrictions on tax relief for very high earners through what’s called the ‘tapered annual allowance’. Broadly speaking, if your total income (all income from earnings, pensions, rent, interest and dividends) minus any personal contributions you’ve made to pensions during the year, is less than £110,000 you don’t normally have to worry about the tapered annual allowance. If it’s greater though, and if the total of your income when added to the value of any pension contributions made by your employer on your behalf is more than £150,000, your annual allowance is reduced by £1 for every £2 by which this total exceeds £150,000. HMRC have tools to help you calculate your tapered annual allowance on its website.

  • Yes. If you wish to request a transfer into : invest, you can simply initiate this online and then download the transfer form from the 'my documents' area. Complete and return this form and we will contact the provider of your existing SIPP to arrange the transfer.

  • The money purchase annual allowance is a significantly reduced annual allowance which might apply to you if you’ve dipped into one or more of your money purchase pensions since 6th April 2015 and have taken out more than just your entitlement to tax-free cash. If it applies, you’ll have an annual allowance of just £4,000 for any contributions you make to money purchase pensions in the future.

    If you trigger the money purchase annual allowance you’ll still be able to build up benefits in defined benefit schemes (for example final salary pension schemes provided by an employer) without those savings being subject to the £4,000 limit but you’ll only have what’s left of the normal £40,000 annual allowance for that purpose.

  • The pension administrator (Embark) will claim any basic rate tax relief you are entitled to from HMRC. All personal contributions (whether you are employed or self-employed) are payable net of basic rate tax (20% for 2019/20).

    As an example, if you contribute £80 into your SIPP, £20 tax relief will be credited to your SIPP and you will be able to invest this straight away.

    If you pay income tax at higher than the basic rate, can normally claim additional tax relief via your tax return if you complete one, or by contacting HMRC

    Please note that tax relief is not available for any contributions you make once you reach the age of 75.

  • Growth in the value of your SIPP is free from UK Capital Gains Tax and UK Income Tax. Any dividends received will not count towards your annual tax-free Dividend Allowance and any interest received will not count towards your Personal Savings Allowance. When you start to take benefits from your SIPP, with the exception of any tax-free lump sum to which you may be entitled, any income or lump sums you take will be subject to income tax at your highest marginal rate.

  • The Lifetime Allowance limits the amount you can build up in pension schemes before suffering a tax charge.

    The standard Lifetime Allowance for the 2019/20 tax year is £1.055 million.

    It may change in future years, but this is not guaranteed.

    Each time new pension benefits commence (also known as crystallisation) a portion of your Lifetime Allowance is used up. Once you have used up your Lifetime Allowance, any pension benefits paid above the allowance will be subject to the Lifetime Allowance charge. If excess funds are used to provide a pension, the Lifetime Allowance charge is 25% of the value of the benefits used to provide the income. This is in addition to any income tax which you may have to pay on the income itself. Alternatively, if excess funds are paid as a lump sum, called a Lifetime Allowance Excess Lump Sum, the Lifetime Allowance Charge is 55%. Embark will deduct this tax charge from your Fund and pay it to HMRC before paying your benefits.

    A test of the value of your pension benefits against your available Lifetime Allowance is also performed if you die before age 75 and, in all cases, if you have any funds remaining in your pension at age 75 from which you haven’t started to take benefits.

    When the lifetime allowance was introduced in 2006 and in subsequent years when it has been reduced by the government, those with benefits valued in excess of the lifetime allowance (or who predict that they may exceed it in the future), have been able to apply for ‘protection’ to protect the value of benefits they have built up (along with, in some cases, any future benefits they accrue). These protections are called:

    • primary protection
    • enhanced protection
    • fixed protection, and
    • individual protection.

    Each form of protection has its own conditions and you can find more details on the HMRC website. Individuals affected by the latest reduction to the lifetime allowance in 2016 are still able to apply for protection against this reduction.

    Willis Owen Limited offers an execution-only service. If you require advice regarding your pension, you should seek regulated financial advice.

  • You can choose to invest in a range of investment such as Funds, Shares, Investment Trust and ETFs subject to HMRC permitted investment regulations.

  • No. The size of your pension will depend on the size of your SIPP Fund when you reach retirement; this depends upon how much you have put into your SIPP and how long it has had to grow. It also depends upon the potential investment growth achieved. 

  • Benefits can currently be drawn from a SIPP from the age of 55 years. The Government has proposed that this will change to 57 in 2028, along with the rise in the state pension age to 67 years, though the legislation still has to be passed.

    The intention is that the minimum age at which you can start to access your pension fund will be linked to future increases in the state pension age (in order to maintain a 10-year differential between the normal minimum pension age and the state pension age).

    You may start taking benefits from your pension before age 55 only if you are forced to take early retirement through ill-health or if you have a protected pension age (which generally applied if the individual had one of a list of ‘high risk’ occupations defined by HMRC).

    Willis Owen Limited offers an execution-only service. If you have any doubts about when and how to take your pension, we recommend that you take advice from a suitably qualified Independent Financial Adviser.

  • Provided you’ve reached the minimum age at which you can take benefits, there are a number of options for drawing your pension benefits. You can, for example:

    • Take a pension commencement lump sum and /or a regular pension income even if you are still working. You can draw up to 25% of the value of your SIPP tax-free and then a regular income from the remainder which is subject to tax at your marginal rate.
    • Take your income via drawdown (where you draw directly from the Pension Fund, which remains invested and is known as a flexi access drawdown) or via an annuity (where you receive a secure income for life)
    • Take your whole pension pot as cash in one go with up to 25% tax-free and the rest taxed as income
    • Take lump sums, as and when required, with up to 25% of each withdrawal tax-free and the rest taxed as income
    • Take a combination of the options.

    Any entitlement to tax-free cash is limited by your available Lifetime Allowance so if you have a limited amount of Lifetime Allowance remaining, you may not be able to take the full 25% entitlement to tax-free cash.

    Willis Owen Limited offers an execution-only service. If you have any doubts about when and how to take your pension, we recommend that you take advice from a suitably qualified Independent Financial Adviser.

  • The charges you pay can be categorised into ‘account charges’ and ‘investment charges’. As part of your annual statement we’ll send you a detailed breakdown of the charges you’ve paid, broken down into these categories. For an FAQ on charges relating to the Aegon platform, click here.

    Account charges

    These are the charges you pay to Willis Owen for the services we provide to you, along with certain taxes you pay. This includes (amongst other things) the costs of:

    • administering your ISA, JISA, GIA or SIPP,
    • running and maintaining the Willis Owen :invest platform,
    • arranging to buy or sell investments on your behalf,
    • our independent investment research and insights, along with our ISA Guide,
    • providing you access to independent analysis from our expert research partner Morningstar, and
    • our dedicated customer support services.

    These costs are collected from you in the form of our simple ‘service fee’ which is type of ongoing account charge. If you buy or sell shares (excluding Exchange Traded Funds) or investment trusts you may also pay dealing charges, Stamp Duty and a PTM levy (which are collectively referred to as ‘transactional costs’ in your annual statement).

    Details of all of our ongoing and transactional account charges can be found within the products & services area of our website.

    Investment charges

    These are the charges which relate directly to the investments you buy. They are taken by the fund managers either from the capital or the income generated by the funds you invest in, and are not charged by, or paid to Willis Owen.

    These charges cover the costs of running your chosen funds, including:

    • the services of an expert fund manager (including any performance fees),
    • administration, legal, audit and registration fees incurred by the fund,
    • custodianship costs associated with keeping your investments safe,
    • commissions paid to brokers,
    • producing reports,
    • dealing costs and taxes, such as Stamp Duty incurred by a fund when buying and selling investments.

    Investment charges can be ongoing (for example administration costs), transactional (for example Stamp Duty paid by the fund when dealing in shares) or incidental (for example performance fees) and are referred to as such in your annual statement.

  • Drawdown allows you to take income directly from your Pension Fund without the need to purchase a lifetime annuity (an income for life). In turn, this allows your Pension Fund to remain invested in the assets of your choice whilst taking an income.

    There is no upper age limit on how long you may stay in drawdown but the taxation of death benefits will change when you reach age 75 if you have not withdrawn all of your benefits by this point. If you die prior to age 75 with all or part of your fund allocated to providing drawdown, the residual fund (or an income from it) can be paid to your beneficiaries without being subject to income tax. If you die after your 75th birthday with funds allocated to drawdown, any funds paid to your beneficiaries (whether as a lump sum or income) will be subject to income tax at their marginal rate.

    Drawdown can cease at any time and the residual Fund can be used to purchase an income for life in the form of a ‘lifetime annuity’. We don’t provide lifetime annuities but you are able to use your fund to buy an annuity with another provider using what’s called the ‘open market option’.

    Any income you receive from the SIPP (or an annuity) will be subject to income tax.

  • An annuity allows you to use your Pension Fund to buy an income for life from the provider of your choice. The annuity guarantees regular payments until you die. Normally once purchased it cannot be altered.

    There are different types of annuity available in the market and you should consider the best product to suit your circumstances. Annuity rates differ greatly between providers so it’s important that you shop around. If you suffer from health conditions which could mean that you have a lower than normal life expectancy, you may be entitled to buy an ‘enhanced annuity’ which could provide a higher level of income.

    You may take up to 25% of the Pension Fund as a tax free cash sum in return for a lower pension income. Some people may be eligible for a higher tax free cash sum although if you have limited Lifetime Allowance available, your entitlement could be less than 25%

    You can choose to purchase a lifetime annuity with your Drawdown Fund at any time.

    Willis Owen Limited offers an execution-only service. If you have any doubts about when and how to take your pension, we recommend that you take advice from a suitably qualified Independent Financial Adviser.

  • Upon receipt of a death certificate, the investments held under your SIPP will be realised and their full cash value used to provide benefits for your spouse/civil partner, dependants, family members or other beneficiaries nominated by you for this purpose.

    The Scheme Trustees will decide who will receive benefits and the form of the benefits, in their absolute discretion. However, they will take into account any wishes you have expressed through the completion of a death benefit expression of wish. You may complete a new nomination at any time and you’re strongly encouraged to keep your nomination up to date

    A beneficiary can usually elect to receive their benefit as a lump sum or by using Drawdown.. Alternatively they may be able to use it to purchase a Dependant’s annuity with an Insurance Company of their choosing.

    Payments of death benefits if you die before age 75 are normally free of any income or inheritance tax but we cannot guarantee that this will be the case. You should seek regulated financial advice if you are unsure.

    Any amount of the Fund which exceeds your available Lifetime Allowance may be subject to a tax charge.

    If a beneficiary dies whilst still in receipt of the death benefits left to them on your death, then the remaining benefits will be paid to a successor. The successor or successors will be selected by the Scheme Trustees in their absolute discretion and can be anyone appointed by the beneficiary or selected by the Scheme Trustees in light of the beneficiary’s personal circumstances.

  • Upon receipt of a death certificate, the investments held under your SIPP will be realised and their full cash value used to provide benefits for your spouse/civil partner, dependants, family members or other beneficiaries nominated by you for this purpose.

    The Scheme Trustees will decide who will receive benefits and the form of the benefits, in their absolute discretion. However, they will take into account any wishes you have expressed through the completion of a death benefit expression of wish. You may complete a new nomination at any time and you’re strongly encouraged to keep your nomination up to date

    A beneficiary can usually elect to receive their benefit as a lump sum or by using Drawdown.. Alternatively they may be able to use it to purchase a Dependant’s annuity with an Insurance Company of their choosing.

    Payments of death benefits if you die after your 75th birthday are normally free of inheritance tax but will be subject to income tax at the recipient’s marginal rate. You should seek regulated financial advice if you are unsure.

    If you die after your 75th birthday, the payment of any death benefits is not tested against your available Lifetime Allowance.

    If a beneficiary dies whilst still in receipt of the death benefits left to them on your death, then the remaining benefits will be paid to a successor. The successor or successors will be selected by the Scheme Trustees in their absolute discretion and can be anyone appointed by the beneficiary or selected by the Scheme Trustees in light of the beneficiary’s personal circumstances.

    If you do not leave a surviving spouse/civil partner or dependants then the value of your Fund may be paid to a charity nominated by you for this purpose. Any funds paid to a charity will be exempt from tax.

  • You can transfer the value of your SIPP to another UK registered pension scheme at any time.

    If you have started taking benefits from your SIPP, then you must transfer the whole of that part of your Fund from which you are drawing benefits to your new scheme. If you have uncrystallised Funds (i.e. no benefits have commenced) you can choose to transfer all, or only a part, of those uncrystallised Funds to another pension scheme.

    The transfer can be in the form of a cash payment, in which case you will have to sell all of the investments held under your SIPP before the transfer is completed, or you may be able to transfer them in their existing form (known as an “in-specie transfer”).

  • If you take out a Willis Owen SIPP, you have 30 days within which to change your mind. The 30 days starts from when we issue your Confirmation Schedule.

    If you have invested in assets during this period, you will need to sell the relevant holdings. Where there has been a fall in the market, you will receive back the original investment less any shortfall. Where a profit has been made, you will receive back the original investment plus any profits made.

    The same 30 day cancellation rights will also apply in relation to any funds you decide to transfer into the Willis Owen SIPP from another registered pension scheme.

    Please note that it may not be possible to return the funds received from a transfer-in to the original pension arrangement should you cancel the transfer within the cancellation period. In this instance you will need to arrange for another pension arrangement to accept the transfer.

    If you opt to enter into drawdown you will also receive a separate cancellation notice for this. This gives you the right to cancel the chosen option during the next 30 days. If you choose to cancel, you will need to return any pension commencement lump sum and income paid to you.

  • No, we are not authorised to provide any advice on financial planning or tax related matters.

    If you need any advice you must contact a suitably qualified Independent Financial Adviser. Your adviser will give you details about the cost of any advice.

  • A beneficiary is a person, Trust or Charity that you would like to pass your pension on to in the event of your death.

    Please note that you can only pass your pension on to a Charity if you have no dependants. 

  • This is the form you use to let the scheme trustees know who you want your pension to be passed on to in the event of your death. Although this form is not legally binding, the pension trustees will take into consideration what you have expressed. 

  • Yes. You can amend this form at any time. If you have fewer than 4 beneficiaries (an individual or an organisation) you can amend their details online. This can be found within 'my sipp details'.

    If you would like to have more than 4 beneficiaries, you will need to complete a paper form to print, complete and sign. This can be found in your document library within : invest 

  • Yes. You can amend the expression of wish (up to four beneficiaries) anytime online. This is found within 'my sipp details' and you will need to select the beneficiary type as 'organisation'. 

  • Scamming methods are becoming more sophisticated, if you think you have come across a pension scam, you should contact the Pensions Advisory Service (TPAS) on 0300 123 1047.

    Some classic signs of a scam includes:

    • cold calling about a free pension review (which is now illegal)
    • you are pressurised to make a decision due to the "limited offer"
    • the contact details given are a mobile phone and a PO box address
    • they are reluctant for you to call them back
  • 6 months before your selected retirement age, we will send you a wake up pack. This will usually include your benefits statement, your retirement options, a pension guide from Money Advice Service and information about Pension Wise.

    Once you have decided what you would like to do, you can download the 'benefit options form' from your document library and send the completed form back to us. We will then process your instructions.

For further information you may find these external websites useful:

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