A greater control of retirement funds and assets could become normal
Self-invested personal pensions (SIPPs) could become a normal part of employee benefit packages in the near future, offering more individuals the chance to take greater control of their retirement fund and invest it in a wide variety of assets.
In January this year GlaxoSmithKline, the pharmaceutical company, offered its employees the chance to take membership of a group SIPP. The Glaxo scheme allows members to take assets accumulated in the company’s previous pension schemes, and invest them in a large number of funds.
As there is a movement in pensions towards individual responsibility there could come a time in the future when both SIPPs and personal accounts are the only pension options. Personal pension accounts are part of the Government’s initiative to automatically enroll all employees into an employer sponsored pension plan. They are due to launch in 2012.
The accounts would contain a range of default funds and be priced competitively. But a group SIPP would offer the chance for wider investment opportunity and would sit at the opposite end of the spectrum. SIPPs are now well established vehicles for pension savings, with around 300,000 individual SIPP investors.
For companies, group SIPPs offer the chance to provide a pension scheme that covers everyone, from general staff to executives. Individuals can choose with whom they wish their money to be invested and how much. SIPPs also offer companies the chance to offer share schemes that can be invested as part of a pension. Employees would be able to purchase subsidised shares in the company and over time roll this into their SIPP to make the investment tax-efficient.
SIPPs can now be set up with small sums of money and are no longer limited to individuals with large pension pots to invest. For those interested in having more autonomy over their pension investments, they offer a wide variety of options.
One of the arguments used against SIPPs was their inability to contain protected rights funds built up by contracting out of the second state pension. But these will also now be permissible in SIPPs.
The benefit of a SIPP is very clear in the current market climate, so it makes sense to put as much as you can in now.
Levels and bases of, and reliefs from, taxation are subject to change.
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