Isle of Man Self-Invested Personal Pensions (SIPPs)

Isle of Man Self-Invested Personal Pensions (SIPPs)

Could you get more for your money?

A Self-Invested Personal Pension (SIPP) allows individuals to make their own investment decisions in relation to their retirement planning from a wide range of different investment options including (but not limited to) stocks and shares, Unit Trusts and OEICs and both Commercial and Residential Property.

Would you like to semi retire or change your hours to part time at the age of 50? Perhaps the tax free cash from your SIPP at age 50* is enough to pay off your mortgage, reducing your outgoings sufficiently to allow this?

In the Isle of Man, those with a SIPP can take their benefits from the age of 50, and many are entitled to 30%* tax free cash and an income, to be taken immediately, or deferred until a later stage (maximum age 75).

*This can depend on when and where the plan has been funded, however generally this is the case under Isle of Man rules. Edgewater Associates will advise on this on a case by case basis.

Why take out a SIPP?

There are a number of benefits to taking out an Isle of Man SIPP, the first and most important to many people is the protection of their assets for their beneficiaries should they die after retirement. Thanks to the different drawdown options available from a SIPP, you are not required to purchase an annuity for your income and your funds can remain invested and continue to grow, which helps preserve the value of the capital for your beneficiaries who receive 100% (minus a small tax charge of 7.5% in the Isle of Man) of your funds returned to them upon your death.

SIPPs also benefit from a range of flexible retirement and investment options that cannot be accessed through traditional personal pension plans held with insurance companies.

What is the risk?

Although on the face of it SIPPs may seem like a more complex option, they are not necessarily riskier; in fact they can offer more security to clients.

At Edgewater Associates, we assess our client’s personal attitude towards risk, including their capacity for loss, in order to define the appropriate risk category for the onward investment of funds.

Main Benefits of an Isle of Man SIPP:

  • A tax-free lump sum of up to 30% of the full fund value can be taken from age 50
  • Regardless of whether a tax-free lump sum is paid, a pension can start to be paid immediately or can be deferred (until age 75 at the latest)
  • Flexible pension income payments of between 0% and 120% of the recommended drawdown rate can be chosen
  • On death any remaining fund can be passed to nominated beneficiaries or to the member’s estate (there is no tax charge if death is before benefits are drawn, however after drawdown this would incur a tax charge of 7.5% in the Isle of Man compared to a minimum of 55% in the UK)
  • There are wide investment choices and flexibility of investment providers

In more detail:

  • Individual members may be co-trustees of a Scheme, so retaining considerable control over the investment strategy of SIPP monies
  • The extensive range of permissible investment assets includes equities, unit trusts, investment trusts, managed and unit-linked funds and cash deposits
  • Commercial and residential premises may also be purchased
  • SIPPS may have more than one member – this is particularly useful for couples or in partnerships where individual funds can be pooled to undertake larger investments, it can also minimise costs
  • It is generally possible for a SIPP to borrow within limits
  • Members qualify for tax relief on contributions they make
  • Unlike the UK there are no limits or caps on the level of pension or pension fund value
  • SIPPs can be registered as a Qualifying Recognised Overseas Pension Scheme (QROPS) with the UK HM Revenue & Customs (HMRC) to allow the transfer of benefits in from the UK
  • Members can now have concurrent IOM membership of both personal and occupational pension schemes

Edgewater Associates work with a number of different industry specialists, and together we would be pleased to help you consider whether a SIPP is appropriate to your needs.