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BWsmartSIPP
Tell me about BWsmartSIPP
BWsmartSIPP is a section of Barnett Waddingham Self Invested Personal Pension ('BWSIPP'). BWsmartSIPP, in conjunction with online broker Selftrade, offers access to a full range of investment funds at a time of your choosing. It is simple to arrange and puts you in control of your pension.
Can I set up a BWsmartSIPP?
You are able to set one up if you are under age 75 and a UK resident, even if you are also a member of an occupational scheme. However, please refer to the BWsmartSIPP Application Form and Terms and Conditions of Business documentation for further information.
Risks
You should be aware that the value of all investments can go down as well as up. You should only consider establishing a BWsmartSIPP if you have the confidence and ability to accept the risks of your investments changing in value, both up and down, and understand that the amount of your pension at the time you decide to take retirement benefits will depend both on the value of your investments and annuity rates at that time. If you are unsure please seek independent financial advice. This is available from our sister firm, Barnett Waddingham Investments LLP, or from any other independent financial adviser.
You should also refer to the risk warnings set out in the Terms and Conditions of Business of BWsmartSIPP and Selftrade if you are considering a BWsmartSIPP.
Can I and my employer make contributions?
Yes, the contribution limits are high. The maximum contribution that you can pay gross in any year is 100% of your relevant UK earnings, or £3,600 if higher.
Your employer may also make contributions but if the total contributions in any year, from you and your employer combined, to all pension arrangements exceed £235,000 (the 'Annual Allowance'), then the excess will be taxed on you as a P11D benefit. There is also a risk that your employer may not get Corporation Tax Relief on any employer contributions exceeding 100% of your relevant UK earnings (even if the total contributions are within the Annual Allowance).
The Annual Allowance is £235,000 for 2008/09 and it will rise annually to £255,000 in 2010/11. The Annual Allowance will be reviewed every five years thereafter but it is not known yet how it is likely to be increased (but most expect it to increase in line with price inflation).
Do I get tax relief on my contributions?
Your contributions will be allowed against income tax up to the limit of 100% of earnings, or £3,600.
Your contributions are paid net of basic rate tax. So for every £1 you pay into your BWsmartSIPP, BW SIPP LLP will reclaim 25p from the Revenue. This tax is reinvested in your BWsmartSIPP. If you are a higher rate tax payer you can claim the higher rate tax relief on your self assessment return.
Tax rules may however change in the future.
Can I transfer other pension arrangements?
Yes, you can consolidate your other pension arrangements into your BWsmartSIPP provided the transfer values do not include any 'protected rights' (these are in respect of you giving up part of your entitlement to the State pension scheme).
Transfers will normally be accepted on an 'execution only' basis. This means that no advice will be given by BW SIPP LLP and that it is solely your responsibility to check that any transfer of funds into BWsmartSIPP will lead to comparable benefits to the ones being forgone. If you are unsure you should seek independent financial advice. This is available from our sister firm, Barnett Waddingham Investments LLP, or from any other independent financial adviser.
What investment funds are available?
Within the Selftrade SIPP Dealing account, you will have direct access to a broad range of investments through Selftrade's trading platform. The BWsmartSIPP has been designed primarily for investment in a wide range of Collective Investments which comprise:
- Insurance company funds
- Investment trusts
- Unit trusts/OEICs
Apart from these choices, you will also be able to invest in a range of other assets such as quoted shares and bonds. Please note that no contingent liability investments will be accessible through this service. Please also refer to the 'What are the costs?' section below.
Details of the Selftrade SIPP Dealing Account can be found at www.selftrade.co.uk
Who are Selftrade?
Selftrade is one of the UK's largest execution-only stockbrokers. Selftrade is a trading name of Talos Securities Ltd, a wholly owned subsidiary of Boursorama, one of Europe's leading online stockbrokers.
Selftrade operate an electronic trading platform allowing BWsmartSIPP members access to a wide range of investment options, dealing over the internet or phone through their self select service. There is no annual account charge. The dealing fee is £12.50 per transaction.
How will it operate?
BW SIPP LLP, as scheme administrator, will pay your contributions and/or transfer payments into the BWsmartSIPP bank account. No interest is payable from this account. It will then arrange for a SIPP Dealing Account to be set up for you with Selftrade and it will delegate dealing authority to you, allowing you to manage your Selftrade account. It will pay funds over to Selftrade twice a month, once they have been cleared through the BWsmartSIPP bank account and after any Barnett Waddingham fees have been deducted. Funds will normally be transferred on the 4th and 18th of each month.
Selftrade will send you a pack with your account number and other information about using the SIPP Dealing service. Selftrade will also send you, separately, your Personal Identification Number (PIN). On receipt of your PIN you will be able to buy and sell the various investments; however, only Barnett Waddingham LLP will be able to add or remove money from the dealing account.
Can you help me choose my investments?
BW SIPP LLP is not able to provide you with investment advice but there is information which you can look at on the Selftrade website. The information provided is to help you make an informed decision and not give advice. If you are unsure of the suitability of an investment you should take expert independent financial advice, either from our sister firm
Barnett Waddingham Investments LLP or from another independent financial adviser.
What are the costs?
BW SIPP LLP will receive a share of the commission income that Selftrade will receive from the Collective Investments they offer. On an ongoing basis, the costs incurred by BW SIPP LLP, for setting up and administering BWsmartSIPP, will normally be met from their share of this income.
If your initial investment is less than £50,000 we will charge a set up fee of £290 plus VAT.
If the value of your investment in Selftrade's
Collective Investments drops below £50,000 at
any point in a relevant year, we reserve the right to charge a fee for the following year, currently £290 plus VAT. This is in addition to any income paid by Selftrade to BW SIPP LLP.
Please refer to the Selftrade Terms & Conditions of Business for specific details of the charges that will be applied by Selftrade to the funds via BWsmartSIPP.
Can I switch investments?
Yes, you can switch investment funds under the Selftrade platform at any time, subject to the Selftrade dealing fee.
Can I have cash as an investment of my BWsmartSIPP?
Yes, all funds transferred to Selftrade will be held in your dealing account, earning interest, until you choose to commence dealing.
Can I invest in assets other than Selftrade?
Yes, you can invest in the full range of investments available to a SIPP. If you choose to do this, you will transfer out of BWsmartSIPP section and into the main part of BWSIPP where you will become subject to that section's terms and conditions. You can continue to hold some or all of your Selftrade investment.
When can I take retirement benefits?
You can take retirement benefits any time from age 50 (55 from 2010) but you have to starting taking them by age 75.
Do I have to stop working in order to draw retirement benefits?
No, this is not necessary. You can start to take your retirement benefits whether or not you are still earning (but subject to the age requirements mentioned above).
Do I have to take all my benefits from BWsmartSIPP at the one time?
No, you can phase in benefits gradually be electing to use just a portion of the fund. Remaining funds can provide further benefits at later dates.
Will there be a fee when I start to take retirements benefits?
This will depend on whether you phase in your benefits, draw income from your fund or buy an insured annuity. If you draw income from the fund, you will transfer out of the BWsmartSIPP section and into the main part of BWSIPP where you will become subject to that section's terms and conditions. Your investment however, can continue to be held within Selftrade, subject of course to there being sufficient funds held in cash to pay your income.
What is the Lifetime Allowance?
The Lifetime Allowance is an overall ceiling on the value of pension benefits that any one individual can draw. The exact figure will be whatever the 'standard lifetime allowance' for the tax year concerned is.
It is £1.65 million for 2008/09 and it will rise annually to £1.8 million in 2010/11. The Lifetime Allowance will be reviewed every five years thereafter but it is not known yet how it is likely to be increased (but most expect it to increase in line with price inflation).
What happens if the value of my pension benefits exceeds the Lifetime Allowance?
If at retirement the value exceeds the Lifetime Allowance (£1.65 million for 2008/09) then 'Recovery Tax' of 25% of the excess will have to be paid. This tax charge is in addition to the income tax paid by you on receipt of pension.
Example
If you are retiring in the year 2008/09 and the total value of your pension benefits is £1.75 million in that year, then you would have exceeded the Lifetime Allowance by £100,000. There would be tax of 25% of this excess, namely £25,000.
Will there be any exemptions from the Recovery Tax?
There will be some. If on 6 April 2006 you already had existing pension rights, it is possible for you to register for protection which can help mitigate this tax charge. You must register before 6 April 2009. There are two types of protection:
Primary Protection:
It is available to you if your pension benefits at 6 April 2006 were valued at or above £1.5 million. The actual value is certified to create your own personal Lifetime Allowance. This personal Lifetime Allowance will then be increased at the same rate as increases in the standard Lifetime Allowance. When benefits are taken, they will be checked against your personal Lifetime Allowance and only benefits above this uplifted allowance will be subject to the Recovery Tax charge.
Future contributions are permitted after 6 April 2006 under Primary Protection.
Enhanced Protection:
If you had pension benefits at 6 April 2006 valued in excess of £1.5 million, or you expect the value to exceed the Lifetime Allowance when benefits are taken (due to good investment return), you may elect for Enhance Protection. This means that provided you promise not to make any contributions to any pension arrangement after 6 April 2006, the Lifetime Allowance will not apply and therefore there will be no Recovery Tax due.
Can I take part of my retirement benefits as a tax-free lump sum?
Yes. The tax-free lump sum at retirement will normally be 25% of the value of your pension benefits up to the Lifetime Allowance.
Example
If your fund is £500,000, you could expect the tax-free lump sum to be £125,000.
A higher tax-free lump sum may be payable if you have previously sought 'protection'.
What about my pension?
The remainder of your BWsmartSIPP after having taken your tax-free lump sum will be used to secure a pension income which will depend on the size of your fund and the arrangements made when the benefits are secured.
What risks will apply to my benefits?
You should be aware that the value of all investments can go down as well as up. You should only consider establishing a BWsmartSIPP if you have the confidence and ability to accept the risks of your investments changing in value, both up and down, and understand that the amount of your pension and tax-free lump sum at the time you decide to take retirement benefits will each depend on the value of your investments at the time.
Your pension will also depend on the return on annuities. If you are unsure please seek independent financial advice.
What benefits will be payable from BWsmartSIPP on my death?
This will depend on the circumstances. In the event of death before drawing any benefits, the BWsmartSIPP fund could be used to provide a partner's or dependent's pension or, it could be payable as a lump sum.
If a lump sum is to be paid it would normally be free of income tax and free of inheritance tax. Any pension payable to partners or dependents will be subject to income tax in the normal way.
If you had retired and were in receipt of an insured annuity, any benefit payable would be dependent on the type of annuity that had been purchased.
Please see BWSIPP for details of the benefits payable on death for a member drawing a pension from the fund.
Who else is involved?
BW SIPP LLP acts as scheme administrator to BW SIPP, of which BWsmartSIPP is the section that offers investment via Selftrade. BWSIPP Trustees Limited, a non trading company owned by Barnett Waddingham LLP, acts as trustee.
What do I need to do to set up a BWsmartSIPP?You need to understand the BWsmartSIPP and Selftrade Terms and Conditions of Business and then complete the BWsmartSIPP Application Form. You will also have to provide sight of certain documents.
For more information on BWsmartSIPP please contact:
glasgow.sipp@barnett-waddingham.co.uk BWsmartSIPP, Barnett Waddingham, 163 West George Street, Glasgow G2 2JJ
Click on one of the links below for the BWsmartSIPP Terms & Conditions of Business, BWsmartSIPP Key Features Document and BWsmartSIPP Application Form or here for the Selftrade Terms & Conditions of Business.
Click here for information on Barnett Waddingham's other SIPP - BWSIPP.
Related DocumentsBWsmartSIPP Application Form (118.80 KB, .pdf)BWsmartSIPP Key Feature Document (194.88 KB, .pdf)BWsmartSIPP Terms & Conditions (519.83 KB, .pdf)