Who is it for?
A Directus SIPP is a simple Self-Invested Personal Pension (SIPP) that can be set up by any UK resident - there's no minimum age, so a SIPP can be established anytime and can even be set up for children.
Once established, you can enjoy the flexibility of making standard and straightforward investments like stock and shares. This provides you with the opportunity to decide your investment strategy rather than relying on standard fund investments that mainstream pension schemes use.
The tax relief that is awarded on pension contributions is extremely attractive You can pay up to £60,000 each year and receive full tax relief at your highest marginal rate. So, if you are a basic rate taxpayer, this will only cost you £48,000 which means that you get an immediate return on your investment of 25%! And it's even better if you're a higher rate taxpayer as it could only cost you £24,000 an immediate return of over 66%!
And as long as you have been in some form of pension arrangement previously, the DSIPP also allows you to sweep up unused allowances from the previous three tax years. This means that you could pay up to four years' worth of contributions in your first year. Whilst this is out of reach for most us, it does provide a great opportunity for the self-employed and business owners who often have an unpredictable pattern of earnings.
What about the pension?
This is where the DSIPP really cones into its own as it offers the full range of pension income options from age 55 (age 57 from 2028)
Annuity - You use your pot to buy an insurance policy that guarantees you an income for the rest of your life – no matter how long you live.
UFPLS - Allows you to draw lump sums from the pension pot, 25% will be tax-free cash.
Flexible Drawdown - Your pot is invested to give you a regular income. You decide how much to take out and when, and how long you want it to last.
Tax-free cash - You can take money from your pension pot as and when you need it until it runs out. It's up to you how much you take and when you take it. Each time you take a lump sum of money, 25% is tax-free. The rest is added to your other income and is taxable.
Don't worry if these sound too complicated as there is a wealth of support to help you navigate these options (Financial Advice/ML/Pensionwise)
What happens if I die?
If you die before your 75th birthday, the pension funds can be paid to your beneficiaries tax-free. The tax treatment is the same regardless of whether the beneficiaries choose to take a lump sum or income.
In the event of death after your 75th birthday, the death benefits will be taxed.
If your beneficiaries use the funds to take income or as a lump sum, this will be taxed at their marginal rate of income tax.
You can nominate whoever you like to receive your death benefits. This could be your spouse, children or grandchildren, or you can even nominate someone unrelated to you if you wish.
You do not need to leave the benefits to just one person, you can split them in whatever proportion you like, so each of your beneficiaries receives a share of your fund.
So the DSIPP is a great product to use if you want to dabble in simple standard investments, or can be used as a stepping stone to our Qualitas SIPP which allows more adventurous investments, like commercial property for example.
The information above is based on our understanding of the legislation applicable to UK Registered Pension Schemes, and HM Revenue & Customs rules. It is provided as a summary only and should not be taken as advice - Morgan Lloyd SIPP Services Ltd and Morgan Lloyd Administration Ltd are not authorised to give financial advice and will not be responsible for any decision or action taken as a result of relying on this information. If you are a retail client you should seek financial advice from a financial adviser who is authorised by the Financial Conduct Authority and/or seek guidance from the Government’s Pension Wise service.