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Cash Options for the Pension Pot

Article Date : Thursday, March 24, 2005       Bookmark on Facebook   Bookmark on Del   Bookmark on Digg   Bookmark on Facebook   Bookmark on Reddit   Bookmark on Spurl   Bookmark on Furl   Bookmark on Yahoo   Bookmark on Magnolia   Bookmark on StumbleUpon   Bookmark on BlinkList

There are probably quite a few people who are unaware of the changes planned for Self Invested Personal Pensions (SIPPs) as part of the Pension Simplification changes from April 2006. Just about any asset, including wine, art, stamp collections and classic cars can become a vehicle for pension savings. Furthermore the current restrictions on connection persons transactions will all disappear meaning that assets that are currently owned personally or which are business assets, will be able to be sold to a SIPP established for the investor, or his or her dependents. Already those the UK have seen much written about the likely impact for the residential property market and correspondence about the new tax planning opportunities linked to the new regime for commercial property which will include; Buy to let properties along with both holiday homes, including overseas property and primary residences. There were previously outlawed in particular holiday accommodation and land used for recreational or leisure purposes will be allowed along with the land adjacent to personally owned property. Clearly there are lots of factors to take into account, but a major one is the loss of control and lack of access to the property before age 50/55 from 2010. The new and more restrictive rules are also a potential hindrance and one should not overlook the tax borrowing implications when investments are eventually converted into pension income. There is also a raft of other tax related issues, particularly when a property is used for personal enjoyment or is let on non-commercial terms for example to family or friends. This new application of benefit in kind rules is likely to provide accountants with a brand new income stream and cause SIPP Administrators some unwanted headaches. Another major advantage of SIPPs is that the pension fund can be paid to your estate without being charged to Inheritance Tax. If you die before aged 75 without having bought an Annuity, a 35% tax deduction is made instead. A SIPP is really a tax-free investment vehicle into which you can place a wide range of investments as previously state. If you have currently ‘paid-up” pensions i.e. Personal Pensions 226, Retirement Annuity Plans or even Occupation Schemes in the UK and you are currently living in Spain, be aware that you can utilise these in a much more tax efficient manner.
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