Latest news with #Sipp
Telegraph
10 hours ago
- Business
- Telegraph
‘Are pension investment returns included in my tax-free lump sum?'
Write to Pensions Doctor with your pension problem: pensionsdoctor@ Columns are published weekly. Dear Charlene, Please can you help me understand how the tax-free element of a Sipp (self-invested personal pension) works? I have a Sipp from which I have already taken several withdrawals. My question relates to the basis of the 25pc tax-free cash part element. Using hypothetical figures, if I started with an uncrystallised amount of £300,000, I understand I can withdraw up to 25pc from that tax-free. If I then crystallised some of my pension and withdrew £10,000, that leaves a balance of £290,000. Being the beneficiary of a defined benefit pension, I didn't need to access any more of my Sipp funds again for a while, by which time the remaining £290,000 had grown to £330,000. My question is – if I take some more tax-free cash in future, is the 25pc tax-free benefit based on the £290,000 figure, or on the new, higher value of £330,000? Any clarification would be much appreciated. Regards, – Jonathan Dear Jonathan, Although tax-free cash is often thought of as a one-off event, you don't have to take it all at once. You can take it in stages or chunks, as you've chosen to. You're correct that most people can take up to 25pc of the value of their pension pots tax-free, subject to an overall lump sum allowance of £268,275. The money and investments in pensions like Sipps that have not been accessed are known as 'uncrystallised funds'. So the £300,000 uncrystallised Sipp value in your hypothetical example could give you a tax-free lump sum (25pc) of up to £75,000 in one go, assuming you still have plenty of the lump sum allowance left. If £75,000 was paid out, three times this amount, the remaining £225,000, would be moved into your chosen income option, such as drawdown. What is left in the pot is labelled as crystallised funds. Without any new contributions being paid into the pot, there would be no uncrystallised funds, and no further tax-free cash available from it. The same principle applies if we look at releasing smaller chunks of tax-free cash instead. When taking the tax-free lump sum of £10,000, you would crystallise a total of £40,000. The £10,000 tax-free lump sum is paid out and £30,000 is moved into crystallised funds. This can stay within the same Sipp, but the value is labelled and tracked separately. The remaining £260,000, out of the initial £290,000, is still uncrystallised. The uncrystallised funds are what you can take more tax-free cash from in future. You can take an income from the crystallised, drawdown funds as and when you need to, but no more tax-free lump sums will be available from them. The exact mechanics of this will depend on your pension provider, but investment growth (or loss) will usually be allocated in proportion across the uncrystallised and crystallised drawdown funds in your Sipp. The individual investments and cash may not be earmarked specifically to either part. If you took any taxable income, the value is deducted from your drawdown funds, and the split adjusted accordingly. The opposite would apply to any new contributions paid in – the value (and any tax relief) would boost the uncrystallised pot value. Assuming no new money has been paid in or income taken out, the hypothetical Sipp now valued at £330,000 would be approximately split as £34,000 drawdown and £296,000 uncrystallised funds. Up to 25pc of the £296,000 uncrystallised funds could be taken as a tax-free lump sum at that point, or £74,000. But as I mentioned earlier, you also need to have an eye on the lump sum allowance, and possibly the old lifetime allowance too. If you accessed a pension before April 6 2024, you would have used a percentage of the lifetime allowance at the time. This includes when your defined benefit scheme started. There's a standard calculation to work out how much of the new lump sum allowance you've got left. I've covered the calculations before, but the main point is that if you'd already used 100pc of your lifetime allowance, you'd have no remaining lump sum allowance left using the standard calculation. If you have protection from the old lifetime allowance, the starting allowances in the calculation will be higher. For any pensions accessed on or after April 6 2024, you should deduct the value of the tax-free lump sum you took from the remaining lump sum allowance each time. Although the new lump sum allowance makes things simpler for people accessing their pensions now for the first time, people who have already taken money out or have started to be paid a pension before April 6 2024 still need to have a copy of the old rulebook to hand. In my view, the best way to do this is to get regulated financial advice on your real personal circumstances before you make any further withdrawals. You'll have to pay for advice, but it could help you maximise your tax-free cash, put your mind at rest and help avoid any costly mistakes. Wishing you a long and happy retirement, – Charlene
Daily Mail
09-06-2025
- Business
- Daily Mail
Interactive Investor launches pension cashback of up to £2,000: Is it a good way to boost your pot?
Interactive Investor has launched a cashback offer paying up to £2,000 for those opening a Sipp on the platform in June. Investment platforms often run cashback offers in a bid to win customers at the start of the new tax year. But earlier deals have been disappearing, with cashback offers from both InvestEngine and Nutmeg closing in May. This makes Interactive Investor's deal an appealing option for do-it-yourself investors already considering opening a Sipp or switching from an existing pension provider. The cashback on offer ranges from £100 for those with more modest pots, to £500 for someone switching a pension worth £200,000 to £500,000, and £2,000 for those moving hefty £1million-plus funds. Interactive Investor's offer comes as it reveals 83 per cent of UK adults don't know how much they're paying in pension fees, according to research conducted with Opinium. > Find out more about Interactive Investor's cashback deal* While cashback is attractive, it shouldn't be the deciding factor when considering where to stash your money. Work out whether the platform suits your investment needs and goals by analysing fees, investment choice and the range of research available. > Read our round-up of the best Sipps Interactive Investor's cashback offer Interactive Investor's cashback* is offering payments for those who open a new Sipp and add funds either by making a new contribution or transferring from an existing provider. The payments are highlighted below, with those wanting to gain the maximum amount needing to move a very substantial pension pot of more than £1million. Open with £10,000 to £49,999.99: £100 cashback Open with £50,000 to £199,999.99: £250 cashback Open with £200,000 to £499,999.99 : £500 cashback Open with £500,000 to £999,999.99: £1,000 cashback Open with more than £1,000,000: £2,000 cashback Make sure you read all the terms and conditions of the deal before going ahead – and check that you won't lose any valuable pension benefits before transferring a pension. Interactive Investor is also offering £100 of free trades* when you open an Isa or trading account. If you do want to take advantage, be quick, because both offers end on 30 June 2025. Interactive Investor: This is Money's view Interactive Investor's stand-out feature is its flat-fee subscription model. Other platforms tend to charge account fees as a percentage of the value of your investments. A percentage fee can work out cheaper if you have a smaller pot but a flat fee is likely to pay off for bigger pots. Once the size of your portfolio reaches a certain threshold – around £30,000 on Interactive Investor's 'Pension Essentials' tier for example – you might be better off paying the flat fee, which helps you keep costs under control. When deciding whether to open an account, keep in mind cheapest isn't always best – it depends on what type of investor you are. For instance Interactive Investor charges £3.99 for fund dealing whereas some other platforms offer this for free, and its foreign exchange charges are on the higher side. Check how much you're paying for your pension Interactive Investor says 83 per cent of UK adults aren't aware of how much they're paying in pension fees, which means there could be millions left in the dark about the value they're really getting from their plan. Craig Rickman, pensions expert at Interactive Investor, said: 'The cost of pension plans varies widely – not just in size, but also in how they're applied. From account fees and fund charges, to trading and exit fees, it can be difficult for consumers to understand the total cost.' A self-invested personal pension allows you to take more control over saving for retirement. Consolidating pensions can help make fees more transparent and keep costs under control, and a Sipp gives you greater choice over where to invest your money – read our round-up of the best Sipps.
Daily Mail
29-05-2025
- Business
- Daily Mail
Can I avoid inheritance tax using loophole of owning a historic listed building?
My wife and I are both approaching 80 and we own our home as tenants-in-common. It is situated in a conservation area, and could well be listed as it is an original stone coach house dating back to 1860. I am reasonably au fait with the proposed changes being introduced in April 2027, which will bring pensions into the inheritance tax calculation. This will create a problem for me as I have saved most of my life into a Sipp, and consequently have pension monies that will take me well over the inheritance tax exemption limits. It has been mentioned to me that if our home is established as a listed building, then the value of our home will be excluded from the inheritance tax calculation. It is our intention to pass our home down to our children thereby establishing the extra £350,000 inheritance tax exemption. The value of our home is probably around £650,000, which is higher than the current inheritance tax home exemption. The problem is that I cannot seem to find out if the idea of a listed building being outside the scope of inheritance tax has any validity or is it simply a lot of hot air? Heather Rogers replies: How lovely to have such an interesting and unusual property to call your family home. I will explain the rules and I will then answer your specific question at the end. There are some special rules regarding not just inheritance tax exemptions but also capital gains tax exemptions for what are known as 'heritage assets'. The relief is given under the Conditional Exemption Tax Incentive Scheme. However, first of all we have to define what a heritage asset is and furthermore, the asset and its owners have to meet all the criteria to claim relief. There are many beautiful buildings in this country, but the term 'heritage asset' does not just apply to buildings, it can apply to any asset of significance. What defines a heritage asset? A heritage asset is one of the following: - Buildings, estates or parklands of outstanding historical or architectural interest; - Land of outstanding natural beauty/spectacular views; - Land of outstanding scientific interest including special areas for the conservation of wildlife, plants and trees; - Objects with national scientific, historic or artistic interest, either in their own right or due to a connection with a historical building. Are there any conditions the owner has to follow? Yes. The owner of the heritage asset must agree to: - Look after the item; - Make it available for the general public to view; usually without prior appointment for objects (eg works of art) at least for a certain number of days each year; - Keep it in the UK. The conditions above forming the agreement are normally known as the 'undertakings'. What tax exemptions are available? Under what is known as the Conditional Exemption Tax Incentive Scheme, the assets can be exempt from inheritance tax and capital gains tax when they pass to a new owner, either as the result of a death or as a gift. The idea is twofold: - To avoid noteworthy land/buildings being broken up into smaller lots due to the sale having to take place to pay inheritance tax on the death of the owner - To avoid noteworthy national assets being sold and leaving the country. What happens if a heritage asset is sold? If either the owner of the heritage asset does not keep to the undertakings or sells the asset, the conditional exemption is withdrawn and capital gains tax would be due on the sale. Additionally, if relief from inheritance tax was claimed when the asset transferred to the new owner, who has now decided to sell, that inheritance tax relief will be clawed back. Is a listed building a heritage asset qualifying for conditional exemption? Not necessarily. A listed building is one of special historic or architectural interest. Buildings can be listed in three ways: Grade I – these are deemed of exceptional interest; Grade II*- very important buildings; Grade II – special interest buildings. More about how this is determined can be found here: Principles of selection for Listed Buildings. You can find out if your building is already listed here. Who decides what is a heritage asset? HMRC will determine which assets qualify for conditional exemption on the advice of the government's various heritage advisory agencies. If you have a query about an asset, either yours or one on the list, you can contact the HMRC Heritage Team to get help and advice. Include HMRC's reference number if you have a current exemption. If you do not have a current exemption or designation, you need to email the team rather than send a letter. More details can be found here: Tax relief for national heritage assets A list of heritage assets can be found here (the link is not secure though so be careful if you use it). How much is inheritance tax? Tax of 40 per cent is typically levied on a deceased person's assets worth over and above £325,000, which is called the nil rate band, explains Heather Rogers. Many people are allowed to leave a further £175,000 worth of assets without them becoming liable for inheritance tax, if their home forms part of their estate and they leave it to direct descendants. That means children, including adopted, step or fostered, and those children's linear descendants. This extra sum is what is called the residence nil rate band, and it is available to claim on deaths on or after 6 April 2017. Both protected amounts or 'bands', adding up to £500,000 per person, can be transferred to a surviving spouse or civil partner if unused on the death of the first spouse. What about your property? In your case, you have an unusual building but you are not sure if your building is listed, or could qualify as a heritage asset. You can therefore take the following steps. 1. Find out if your building is already listed here. 2. If it is not yet listed, find out more about the criteria here. 3. Apply for listing of your building here. 4. You can contact Historic England for help and advice. Customer Services via email at customers@ or by phone at 0370 333 0607. 5. You can email the Listing Helpdesk at for specific advice relating to listing applications. They will then be able to advise if you have a case for the conditional exemption. 6. If you believe you have a case, contact the HMRC Heritage Team about a conditional exemption: mailpoint.f@ If your home qualifies as a heritage asset, then you can pass it on free of inheritance tax but the new owner must follow the rules above, as must you. If it doesn't qualify, then it will be included in your estate in the normal manner. Ask Heather Rogers a tax question Heather Rogers, founder and owner of Aston Accountancy, is our tax columnist. She is ready to answer your questions on any tax topic - tax codes, inheritance tax, income tax, capital gains tax, and much more. If you would like to ask Heather a question about tax, email her at taxquestions@ Heather will do her best to reply to your message in a forthcoming monthly column, but she won't be able to answer everyone or correspond privately with readers. Nothing in her replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons. Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes. If Heather is unable to answer your question, you can find out about getting help with tax here, including sources of free professional advice if you are elderly and/or on a low income. You can also contact MoneyHelper, a Government-backed organisation which gives free assistance on financial matters to the public. Its number is 0800 011 3797.
Daily Mail
26-05-2025
- Business
- Daily Mail
Should I switch my work pension to a Sipp run by a financial adviser? STEVE WEBB replies
I currently have a company pension scheme which is operated by a large pension firm, with my funds all in a tracker. A financial firm I work with has suggested it would be advantageous for me to move my pension funds into a Sipp with them. Apart from the fact it's actively managed and has greater diversification of holdings, I wanted to see if you were able to provide any impartial advice or perspective on the differences between the two options, and the pros and cons? Steve Webb replies: There are two separate questions for you to consider here. The first is whether you are better off saving via a workplace pension, or with a self-invested personal pension (Sipp) on a platform run by an advice firm. The second is whether, in general, you are likely to do better with investments which 'passively' follow market movements, or ones which are 'actively' managed, reflecting the judgments of fund managers. Workplace pension schemes versus Sipps In terms of the choice between a workplace pension and a Sipp, it is highly unlikely that you would do better to opt out of your workplace pension entirely. Your employer is required by law to pay in to your workplace pension and it is likely to be a good idea to make the most of any employer contribution. A second advantage of a workplace pension is that it is likely to be relatively low cost. Whilst cost is not the only consideration, you are likely to pay significantly lower charges overall with a workplace pension, particularly if you work for a big firm. There is a charge cap of 0.75 per cent on the main funds used in workplace pensions, and the average cost actually paid is typically closer to around 0.4 per cent. It is however possible that you are paying more than this if you have chosen to move your investments out of the 'default' fund choice. When it comes to a Sipp, hosted by a financial advice firm, there are multiple layers of charges to think about. First there are the charges on each underlying fund in your new portfolio. If these are 'actively manged' then you are likely to be paying more than in your workplace pension. In addition, your employer will have negotiated a competitive charge on behalf of all their employees for the workplace pension, whereas as an individual 'retail' investor you don't necessarily have the same buying power. Second, there may be a charge simply for having assets on the platform as well as potential charges for transactions. Third, you may also be paying advice charges. Financial advice can, of course, be good value, but you need to make sure you are clear what you would be paying and what service you would be getting for your money each year. It is also worth checking if the adviser is 'independent', meaning the firm will look at the whole market when recommending financial products to clients, or 'restricted', meaning they would only recommend those from certain providers. You will also want to consider the adviser's contractual terms, including how long you might be committed to staying with it and paying its annual ongoing charges, and any exit charges or rules in case you wish to move your fund elsewhere in future. Active versus passive funds You have sent me details of your proposed investment portfolio, and I see it includes some low-cost tracker funds with charges as low as 0.12 per cent as well as some actively managed funds charging up to eight times as much. The overall average charge comes out at 0.73 per cent, which is significantly more than most people are paying for a workplace pension. A workplace pension is managed on your behalf and all of the costs of doing this are included in the simple annual management charge, whereas with a Sipp run by an adviser you are paying extra for this service. On the other hand, the workplace pension is trying to cater for the needs of potentially millions of members whereas your adviser can tailor your investments for your particular needs and preferences. You may think it worth paying more for this. Turning to the debate about active versus passive investing, the obvious attraction of a passive fund such as an index 'tracker' is that it is likely to be very cheap. Managers of a tracker do not need to have particular insights about different asset classes or different markets, they simply have to make sure that the fund performance broadly matches the index which is being tracked. In addition, transaction activity is likely to be much lower in a passive tracker fund than in an actively managed fund, again reducing the overall cost. If you simply want to invest in the main UK stock market, or the US or global stock markets, then an 'active' manager is unlikely to add much value net of additional costs. Information about the biggest companies is readily available and so the potential for an expert fund manager to outperform the market on a consistent basis is limited. But there is research evidence that suggests that active managers have the potential to add more value in more specialist markets. One downside of simply investing passively in 'tracker' funds is that when you look at the companies which make up the index you may find them heavily concentrated in particular sectors. For example, the US stock market is heavily dominated by the so-called 'Magnificent Seven' technology stocks. As it happens, these stocks have done very well in recent years, but it is not inevitable that this will always be the case. By relying heavily on index trackers, your investments are unlikely to be well diversified and are likely to suffer greater volatility than a more broadly-based portfolio. One way to overcome this is to include trackers as part of a wider and more diverse set of investments, and I see that this is the approach taken in your proposed portfolio. Alongside low cost trackers, your investments would be globally diversified and includes investments in 'emerging markets', as well as specific funds for China and Japan. If your fund managers have specialist expertise in these areas then it's possible that they can add value and justify the extra cost. You should be able to look at fact sheets for different funds which will tell you how they have performed compared with relevant benchmarks. But you should be aware that just because a fund has outperformed an index in the past it doesn't automatically follow that it will always do so. Ultimately, this is a very individual decision. You clearly should think very carefully about opting out of your current workplace pension with its associated employer contribution and low cost investments. But if you think that your goals would be better met by something more tailored, albeit more expensive, then you could consider putting additional contributions into a Sipp and also potentially consolidate other pensions from other jobs into the Sipp. Your adviser will be able to recommend whether this is the right strategy for you. Ask Steve Webb a pension question Former pensions minister Steve Webb is This Is Money's agony uncle. He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement. Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock. If you would like to ask Steve a question about pensions, please email him at pensionquestions@ Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons. Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes. If Steve is unable to answer your question, you can also contact MoneyHelper, a Government-backed organisation which gives free assistance on pensions to the public. It can be found here and its number is 0800 011 3797.
Daily Mail
20-05-2025
- Business
- Daily Mail
IG offers a huge 8.5% rate on cash savings - is it worth taking?
IG has blasted its way into the investing platforms skirmishing to offer savers the most attractive headline interest rates, introducing a boosted 8.5 per cent rate on uninvested cash. IG's new rate* gives savers the opportunity to earn double the base rate on up to £100,000 until the end of August, after which the rate drops to match the Bank of England's benchmark. While the boost only lasts three months, the bumper rate may mean some consider it is worth taking. But cash savers should note that IG is an investment platform and to access the boosted rate, you must both place a trade before 31 May and hold an investment at the end of each of the three months. IG's custody fee could also catch out those who don't intend to actively invest. If you trade at least three times in a quarter then there is no account fee, otherwise IG charges £8 per month. Earlier this month, the Bank of England voted to cut its benchmark interest rate by 0.25 percentage points to 4.25 per cent. While interest on savings isn't necessarily tied to this base rate, providers take changes into account when deciding on rates to offer savers. Some have already cut rates in reaction to the drop. All this follows a heated battle at the beginning of April among a troupe of providers that kept inching up their three-month boosts as the end of the tax year approached. Two providers from that clash are still duking it out: CMC Invest* and Moneybox. Three-month fixed boosts from these providers mean savers opening one of these accounts today should comfortably beat the base rate until August. High earning potential for savers prepared to invest While providers have generally been boosting rates on Isas, IG's 8.5 per cent rate * applies to uninvested cash held in any of its accounts – whether it's an Isa, Sipp or General Investment Account. The catch is that as an investment platform, IG is offering the rate to encourage cash savers to start trading. This means it's more suited to those who have some experience with investing already. New customers (and existing customers who haven't yet placed a trade) must open an account and make an investment before 31 May to be eligible for the offer. You'll receive a boosted rate each month that you hold the investment, until 31 August. You'll also be eligible for the rate for each month you buy or sell an investment or hold one of IG's Smart Portfolios, which are its ready-made investment option. IG says if you opened an account on 9 May, had £20,000 in cash and met all the conditions each month, you'd earn £520 in interest. If you want to invest, IG is just one of many available investment platforms, and because it charges a fee for holding assets if you don't trade, it's potentially a more costly choice than others. This fee could catch out savers going for the boost who don't intend to trade actively. If you make less than three trades each quarter you'll be charged £24, but there's no fee if you make more than three trades. It's important you check the terms and conditions of the deal and read more about the fees that IG charges. Finally you should make sure you open an investment account and not a trading account, which includes spread betting and CFD trading. IG says that 71 per cent of investors lose money when trading in this way on the platform. > Find out more about IG's deal* What alternatives are there for cash savers? Savers can beat the base rate with both CMC Invest* and Moneybox, who are offering more straightforward boosts on cash Isas. Although the earning potential isn't as high, there's no obligation for cash savers to invest. In our view CMC Invest's 5.7 per cent account, including a 0.85 per cent three-month boost, beats Moneybox's because it offers more flexibility around accessing your money. Keep in mind Moneybox has announced that its headline boosted cash Isa rate is going down to 5.46 per cent on 29 May, including a 1.51 per cent three-month bonus. CMC Invest hasn't announced a cut, yet. When looking at cash Isas with short bonuses it is important to consider what the average rate over a whole year will be. CMC Invest's account averages 5.06 per cent over a year (but is yet to be cut) while Moneybox's will average 4.33 per cent after its looming cut. In contrast, Trading 212* has already lowered its rate in response to the Bank of England cut and is paying 4.86 per cent, including a 12 month 0.76 per cent bonus. For more alternatives you can also read our regularly updated round-up of our favourite cash Isas.
