Benefits from SIPP
Benefits can be paid directly from the IPM Personal Pension Scheme from age 50 onwards (this minimum age increases to 55 with effect from 6th April 2010). Receiving benefits from the SIPP is split into two separate payments; a pension commencement lump, free from tax and an on-going income/pension, which is paid subject to PAYE.
IPM’s approach to paying benefits aims to maximise the flexibility offered by HMRC giving clients the choice as to how they wish to receive benefits.
Unsecured Pension (USP)
The payment of the pension commencement lump sum accounts for 25% of the vested fund. The balance of the fund is available to provide an income, either directly from the fund or by purchasing an annuity with an insurance company.
Unsecured pension (USP) is the term used when a pension is paid directly from the fund, prior to age 75.
The calculation to determine what can be paid as an annual pension is prescribed by the Government Actuaries Department (GAD).. IPM calculate and advise the maximum pension that is payable in each case. There is no minimum income requirement therefore the client can elect to take their 25% lump sum and not draw any income.. Each year the client can choose how much pension will be drawn up to the maximum.
USP can be paid annually, monthly, in advance, in arrears etc. and the decision regarding frequency and amount of income can be amended at any time. We will require a signed letter of instruction by the client. All income monies are processed so that they are in the client’s account by the last working day of the month with tax deducted at source through PAYE.
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Alternatively Secured Pension (ASP)
Alternatively secured pension (ASP) is the term used when a SIPP is paying benefits to a client over the age of 75.. Whilst ASP works on the same principal as USP there are some major differences:
- the maximum income payable is much reduced, being 90% of the GAD maximum and a minimum income of 55%
- all entitlement to a pension commencement lump sum must have already been exercised by age 75 otherwise this entitlement is lost
IPM operates ASP in the same way as USP.. We will make contact prior to client’s 75th birthday to ask what the intentions for the SIPP are.. IPM will require a formal request to be made by the client should he wish to take up the ASP option.. If a client elects to take ASP, IPM will perform the necessary calculations and then pay income in line with the client’s request.
Pension Commencement Lump Sum (PCLS)
Generally, the maximum PCLS available under our SIPP is 25% of the fund value as at the date of “crystallisation”.. The PCLS is paid directly to the member’s bank account without the deduction of any tax.
It is not a requirement to take the maximum entitlement all in one go.. It is possible to stagger the drawing of the PCLS, over several years if required.
A letter requesting the payment of benefits sets the procedure in motion and IPM will then undertake the necessary work to effect the payment directly to the client’s bank account.
The benefit crystallisation event form can be found on the download section of our website.
This is assuming that the client does not have protection on a higher percentage of lump sum which was transferred from a previous arrangement.
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Protection
A client is able to obtain protection on their pension fund should the value of their total pension benefits exceed or be close to the lifetime allowance as of 6 April 2006.
Protection should be sought by the client in conjunction with their financial adviser.. IPM is happy to assist with the provision of information required by the client to make the application to Her Majesty’s Revenue and Customs (HMRC) however protection is a personal matter and is not obtained by IPM on our clients’ behalf.
The deadline to obtain protection from HMRC is 5 April 2009.. A copy of the protection certificate should be supplied to IPM once obtained
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I.P.M. SIPP Administration Limited, Cintel House, Watton Road, Ware, Hertfordshire SG12 0AD Tel 0845 130 3443 Fax 0845 230 3443
email info@ipm-pensions.co.uk I.P.M. SIPP Administration Limited is authorised and regulated by the Financial Services Authority.
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