Pension Talk: The Tax Benefits Of SIPPs


A lot of UK expats that move to Australia opt for a SIPP. SIPP stands for ‘Self-Invested Personal Pension’. This is a special type of pension that gives individuals the opportunity to choose and manage their investments. Consequently, there is a great degree of positivity surrounding this type of pension plan, as people like the flexibility that it brings.

It is worth pointing out that in order to maximise the flexibility associated with this type of pension, you should seek expert advice. A financial advisor will help you to pick the best investments in relation to your circumstances and help you with your SIPP.

But, before you rush off to seek their assistance, it is important to point out that flexibility is not the only advantage to be gained by opting for a SIPP. In addition to this, you have the potential to reap many rewards for the future when it comes to tax. And, aren’t tax benefits something everybody is on the lookout for?

Keeping that in mind, read on to discover what the tax benefits of SIPPs are…

  • Investment returns are not diminished by income tax or capital gain tax – First and foremost, when you make any type of investment in relation to your SIPP, you need not worry about income tax or capital gain tax. Your investment will be free to grow without such hindrance.

  • Even if you don’t pay tax, you can still receive tax relief – Non-tax payers are able to claim the full basic rate tax on their personal contributions.

  • Receive basic rate tax relief on all your contributions – In addition to the points that have already been mentioned, you will also have the benefit of automatically receiving basic rate tax relief on all of the contributions you make to your SIPP.

  • When you reach retirement you will benefit from tax breaks – This benefit relates to those who are over the age of 55 years old. Once you reach this age you will be able to take a tax-free lump sum, which is up to a quarter of your pension pot. You are free to do with this as you choose – spend it on what you like or invest it on what you like. A lot of people take it out to fund moving into a retirement community, such as an over 55 lifestyle village. In addition to this, if you were to die before taking any benefits, your dependants can have your total pension account as a lump sum. This will be free of any tax as well.

  • Additional taxpayers and higher rate taxpayers can claim back more tax relief – Last but not least, any 40 per cent taxpayer can complete a self-assessment in order to claim back an additional two thousand pounds on a ten thousand pounds contribution.

All in all, when you take all of these points into account, it is not difficult to see why SIPPs come so highly recommended. Nonetheless, make sure you take the advice offered from the experts in the industry if you are to really capitalise on all this type of pension has to offer.