What is a SIPP?

A Self Invested Personal Pension (SIPP) is a UK-based pension scheme that can invest in the full range of Her Majesty’s Revenue and Customs (HMRC) approved investments. This allows a greater range of investments choices than would be available under a personal pension scheme.

How is a SIPP funded?
It can be funded by a transfer from another pension scheme or directly by the scheme member.

Are there restrictions on the scheme member’s residence?
A SIPP is available to both UK and non-UK residents. Some SIPP providers may have restrictions for making regular contributions for non-UK residents.

What if the scheme member holds a SIPP and moves to the UK?
Nothing changes.

When can benefits be taken?
The scheme member can start taking benefits from the age of 55 (this is due to change to age 57 from 2028).

Is it subject to UK IHT?
No. Funds held within the SIPP are treated as being outside of the estate for IHT.

What is the maximum Pension Commencement Lump Sum (PCLS) that can be taken?
The maximum PCLS (or tax-free cash) that can be taken is 25% of the value of the scheme. Depending upon the scheme member’s country of residence, this could be tax free.

Is it subject to UK income tax if the scheme member is UK resident?
Following the introduction of Pension Freedoms in 2015, there are various options as to how benefits can be taxed. Ordinarily a regular income from the scheme will be arising income for UK income tax, however, if a PCLS is not taken then 25% of each regular payment could be taken tax free

What is the tax treatment of benefits if the member is not UK resident?
This will depend on the scheme member’s country of residence, any Double Taxation Agreement (DTA) in place between the UK and that country, and which country is granted taxing rights in respect of pension income/benefits under the DTA.

The ‘pension freedoms’ legislation introduced on the 6 April 2015 by the UK Government meant that if you have a ‘defined contribution’ pension and reached the Normal Pension Age of 55 (this is set to increase to age 57 from 2028 in line with the state pension age increases) it is now possible to access as much of your pension as you wish. 

There are 3 main options to access your pension savings. You can also choose any combination of these options:

  1. Lifetime annuity
  2. Flexi-access drawdown
  3. Lump sum payment

Lifetime annuity

You are able to use some or all of your funds to buy an annuity from an insurance company that gives you regular payments for at least the rest of your life.

The amount of income you receive will depend on you age, pension pot, current interest rates and sometimes your health. 

Upon your death (depending on the terms of your annuity i.e. if death benefits had been purchased) a nominated beneficiary could receive the payments tax-free if you pass away before age 75, if you die after your 75th birthday then any beneficiary could receive payment or a lump sum taxed at their marginal rate. 

When purchasing an annuity, you also have the option to take a tax free lump sum of up to 25% of your pension fund at the same time.

Flex-access drawdown 

Under flexi-access drawdown you can take as much or as little as you want each year.
Subject to your pension’s scheme rules, you may be able to take 25% of your pension as a tax-free lump sum (subject to available lifetime allowance) at the time of drawdown. 

If flexi-access is not available under your current scheme, you may be allowed to transfer to an alternative provider that offers it. 

Lump sum payment 

You may be able to access your savings without designating the funds to drawdown. 

You can take money direct from your pension fund without having to buy an annuity or going into drawdown. If you have not previously taken (‘crystallised’) any of your benefits, you have the option to take an Uncrystallised Funds Pension Lump Sum (UFPLS). Of this, 25% is paid tax free, with the remaining 75% being taxed as income at the client’s marginal rate. Where this option is exercised, the scheme will deduct and account for income tax under the requirements of the PAYE regulations.


The great advantage of holding a SIPP is the wide freedom and flexibility you will have in your choice of investments. You are able to invest in:

• Collective Investment Funds – Unit Trusts, Investment Trusts, Open Ended Investment | Companies (OEICs), Insurance Company Managed Funds.
• Stocks and Shares – Equities, UK Gilts, Bonds and other fixed interest securities, Futures and Options, Permanent interest bearing shares.
• Cash and Deposit
• Traded Endowment Plans
Structured Notes
• Loans

In addition to the above, with a SIPP you are able to invest in commercial property which you can either lease or keep on for your own use. The purchase you make must be paid on open market terms and the maximum you can borrow is 50% of your existing SIPP fund value. The property you purchase will become an asset of the pension fund so therefore the value of it will be used to provide you with your retirement benefits.

SIPPs can also give you the freedom to switch out of poorly performing investments, therefore allowing the potential for better returns.This can allow investors to adopt a more aggressive investment strategy than with other pension funds while receiving the same tax relief.

What else do I need to know about SIPPs?
Can be transferred to an overseas scheme at a later date where it may be more appropriate for the scheme member.
Taxable events must be reported to HMRC irrespective of where the scheme member is resident.
Information above has been taken from


If you are an experienced investor or just starting out for the first time determined that you will have a comfortable retirement, investing in a SIPP can be a daunting process to begin with. The SIPP fund can be complex to set up and it will need trustees.

I also specialise in retirement planning for individual circumstances.

If you would like to speak with a professional financial consultant regarding your pension, get in touch.

Sign up for the latest market updates, financial insights and advice.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2022 Benjamin Sharvell