The Rowanmoor SIPP offers you the widest choice of options available when taking your benefits allowing you to phase your retirement income, to suit your own circumstances.
You may start to take your benefits at any time from age 55. It may be possible to take benefits earlier if you are in serious ill health.
It is important you take advice from a suitably qualified professional before taking benefits, as the choices you make will affect both your retirement income and the level of contributions you can make to a pension scheme in the future.
The use of all or part of your fund to provide benefits is called ‘crystallisation’.
You do not have to retire or stop work in order to take benefits from your SIPP. Benefits may be taken in stages; the full value of your fund does not have to be used to provide benefits at one time.
When you take benefits from your SIPP, and again at age 75, the total value of the funds held within your SIPP and any other pension arrangements you have, will be tested against the current lifetime allowance. If the lifetime allowance is exceeded, there will be an additional lifetime allowance charge unless you have obtained pension protection.
Lump sum payments
Uncrystallised funds pension lump sum
To crystallise all, or part of your fund for immediate payment is known as an uncrystallised funds pension lump sum. This differs from flexi-access drawdown as the total fund crystallised is taken at once. Twenty five percent of the uncrystallised funds pension lump sum is paid tax-free, with the rest treated as earned income and liable to income tax. A money purchase annual allowance test is triggered when taking benefits this way. An uncrystallised funds pension lump sum is not available to you if you have tax-free lump sum protection, or rights to a lump sum of more than, or less than, exactly 25%.
Pension commencement lump sum
Normally, the maximum tax-free lump sum that you can take is 25% of the crystallised fund you use to provide pension benefits, up to the lifetime allowance. Therefore, the maximum tax-free lump sum is as follows:
|Tax Years||Maximum Tax-free Lump Sum|
Any pension taken from your crystallised fund will be treated as earned income and is therefore liable to income tax.
You may draw an income from the scheme through flexi-access drawdown. There is no restriction on the amount you can take, or on the frequency of payments. Following receipt of income from flexi-access drawdown a money purchase annual allowance test will be triggered.
A Rowanmoor SIPP provides you with the opportunity to take your benefits as a scheme pension.
A scheme pension is a secured income paid to you for life. Unlike income drawdown, a scheme pension can provide a guaranteed income. On your death, the pension is normally paid to your nominated beneficiaries for the remainder of the guarantee period.
A scheme pension allows you to receive an income direct from the SIPP. The SIPP provides you with a set level of pension in return for your fund. The level of pension is calculated by Rowanmoor’s Actuarial Department and is designed to pay out your fund over your expected lifetime. The amount of scheme pension payable is normally reviewed every three years and may vary, depending on the investment performance of the scheme assets.
If your life expectancy changes, for example due to ill health, the Actuary can review the payment of your scheme pension to reflect any shorter life expectancy.
To enable us to provide this type of pension, we must register your SIPP as an individual pension scheme with HMRC. This is only available under the SIPP’s full investment option. Further details can be found in our SIPP literature library.
Please contact us for further details if you are considering the scheme pension option. We recommend that you seek financial advice from a suitably qualified professional before proceeding with this method of taking benefits.
A lifetime annuity is purchased from a life assurance company. The annuity must be payable up to your death, or the end of any guarantee period should you die within this period.
The annuity may be level or incorporate annual increases and may also allow for dependants’ pensions to be paid after death of the annuitant.
Short term annuity
A short-term annuity is purchased from a life assurance company and is payable for a term of no more than five years.
Up to 5 April 2015, income could be taken from a pension fund as capped drawdown. Under capped drawdown, pension payments are limited and have to be regularly reviewed to ensure they do not exceed the permitted maximum. If you are already taking capped drawdown income you can continue to do so. Alternatively, you can convert capped drawdown funds into flexi-access drawdown, which will mean your income will not be subject to the capped drawdown limits and review requirements but a money purchase annual allowance test will be triggered.
This information relates to the Rowanmoor SIPP. If you have specific queries relating to the information provided on this page, please contact us, email us or send your questions via the enquiry box on the right hand side. Alternatively, please visit our SIPP literature library.