Self Invested Personal Pensions are a popular choice for Retirement Planning

Self Invested Personal Pensions are a popular choice for Retirement Planning

Self invested personal pensions (Sipp’s), were introduced in 1999 to the UK. Basically, it is a Tax Wrapper in the same way as any other personal pension. Tax Relief is applied to contributions and is granted at your highest rate of taxation. If you are a basic rate taxpayer you will receive 20 per cent tax relief. An £80 contribution will be grossed up to £100 invested. Also, lifetime contribution allowances are the same as a standard Personal Pensions. However, the main difference is the owner of the SIPP can make their own decisions as to where the money is invested (within certain guidelines).

At present, there are over 600,000 SIPPS in use in the UK. Anyone can have one (even Children receive Tax Relief). A SIPP offers flexibility, transparency (you know where your money is invested) and access to direct/alternative investments unavailable to a standard personal pension (and therefore not likely to be invested in the same old, under performing funds).

The shocking statistic is that 77% of Britons are retiring with their pensions providing an income of £2,000 per year or less! Making the most of your existing or preserved pensions has therefore never been so important.

So Why Self Invested Personal Pensions?

There are MILLIONS of Preserved, Frozen or Under Performing Personal Pensions in the UK. Within a SIPP, it may be possible to give the pension an opportunity to be more active, tailored to choice in the pursuit of investment returns. You can take control of your investments.

SIPP’s can also be a fantastic option pre-retirement as this type of arrangement can add flexibility as to how income is received in retirement. Though the maximum tax free lump sum is still 25%, the remaining funds can be reinvested to suit requirements. Whereas, with a standard personal pension, any residual fund (after taking the tax free cash) would have to purchase an annuity at a set rate for the rest of your retirement. The Sipp would allow benefits to be taken at age 55 and would offer a pension draw-down facility where the retiree can withdraw income at a level they choose, again subject to allowable levels.

Another major consideration for considering a SIPP is to provide a legacy. With a standard personal pension, in retirement should you die it is likely that your children would not receive any of your pension and your spouse may receive a a percentage of your pension if any at all. With a SIPP the remaining pension funds are paid to your beneficiaries, though subject to taxation. Who would you prefer to benefit, an Insurance Company or your family?

The investments Silvinvest highlight, are not only available for Pension Transfers but also direct cash investment. However, Preserved Pensions are not new money. Preserved Pensions have already accumulated funds and have a value.

Types of Preserved Pensions

Previous Employer Pension Scheme

Previous Personal Pension Scheme

Existing Personal Pension Scheme

SERPS (Contracted Out Personal Pensions/Protected Rights)

Are you considering using an existing pension to invest?

Establish what you have and what you are likely to receive, via a full pension report.

Here at Silvinvest we can put you in touch with Regulated IFA’s who can advise you on your options.

Don’t depend on the State to provide you with a pension safety net. Take control of your retirement planning.

The information contained in this article should not be construed as financial, tax, legal or any other professional advice or service. Please seek a professional opinion from your IFA prior to making any investment decision. The information in this article is for guidance only. While every effort has been made to offer current and accurate information, errors can occur.

Reducing Portfolio Risk with Timber Investment

Reducing Portfolio Risk with Timber Investment

Investing in Timber is something that has become increasingly popular in recent years and this is largely because it is seen as a way to protect your portfolio in hard economic times. Retail investors as well as institutional investors have started using timber investment as a way to add a great deal of stability to their portfolios. Timber is becoming a great alternative to bonds and stocks which are seen as more volatile financial products in times where the economy is in turmoil.

One reason why the price of timber is so stable, making it such a secure investment, is because prices are negotiated for timber ahead of time. Supply contracts mean that manufacturers are able to hedge potential movements in prices in the market, making investing in timber a safer option for those looking for a low risk investment.

Cash flow in timber is rather interesting because it can often be a while before the investment matures. Once you have major investment it is likely you’re going to have to wait several years before the investment becomes profitable. The rate at which the investment matures largely depends on the sort of wood that you’re investing in as different trees grow at different speeds.

Interestingly, it can sometimes be financially sensible for the company to harvest the trees before the intended period. This is because trees are used for many different purposes, and not all of them require the trees to be fully mature. It will often depend on supply and demand in the market whether the trees are harvested early or not.

This can best be explained through an example: If timber is being grown and it is intended to be harvested for construction purposes when it is mature, this can change if the demand for wood pulp increases. If the demand has increased for wood pulp, then its price is going to increase as well, and it can be effective for companies to harvest the trees before they are mature, pulp them, and return
the money to the investors.

Alternatively, if the price of pulp is very low, then trees that were intended for pulping, might be grown to maturity and sold at a later stage in order to return a higher amount to investors, although they are going to have to wait for a while.

There are several simple reasons why timber is going to be a good investment, and why it is going to become an even better investment in the future. One is the simple fact that the demand for timber is consistently increasing. Despite increased levels of recycling, the amount of wood pulp required continues to grow every year.

Investing in an industry which has constantly increasing demand is a sensible financial decision. Timber is also a good investment because it consistently beats the stock-market for returns and as we have already mentioned, is a safer investment.http://www.silvinvest.co.uk