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How to set up a SIPP pension

March 15, 2016

Ever since the government launched a consultation on pension saving last year, many have feared George Osborne’s next budget bombshell would involve taking away the current system of tax relief available to pension contributions, in particular by slashing the relief available to higher rate taxpayers. Happily, we recently learned that it had abandoned plans to tinker with the system, with a Treasury official reportedly saying now was “not the right time”.

But with the cuts to mortgage interest relief on buy to let property looming next year, now might very well be just “the right time” for you to start channelling your property funds into pensions, which offer a tax-efficient way of investing in the property market.

I have previously written about the fact that HMRC will give you tax relief if you invest in a pension which invests in commercial properties. You can contribute 100% of your annual earnings before tax up to a maximum of £40,000 for 2015/16.

I have also written a few blogs about how the budget announcement tax changes will affect higher rate taxpayers who invest in property. But even if you’re convinced investing in property via a pension is worthwhile, you’ll still need to do some work to get started.

Get professional help

One reason my clients give for not setting up a pension is that it is expensive. It’s true that independent financial advisers (IFAs) may charge you between 1% and 1.5% of the amount of money that you invest, but my view is that this is not a lot of money as they take away the stress and heartache of the administration process.

But most IFAs that I speak with will only work with people that have a minimum of £100,000 to invest in their pension. This is a lot of money for people just starting out. Does this mean that SIPP pension investments are not open to you if you don’t meet that requirement?

Of course not…

Go the DIY route

The good news is that you can do it yourself, and there are plenty of good online guides to help you do this, for example, this fantastic article on the MoneySavingExpert.com site.

The main costs associated with a do it yourself (DIY) SIPP pension are:

  1. Set-up costs of £500 – £1,000
  2. Annual costs varying from £0 – £1,000
  3. Share dealing costs of up to £12.50 per trade

Now start to take a look yourself

To start your SIPP pension investment journey please see AJ Bell Limited

Please ensure that you check out the charges by reading the terms and conditions in full before embarking on any investments.

If you want to understand how to implement this strategy or to discuss other finance/tax questions then please book some time with us using the below calendar:

If you are looking for a new accountant then please book some time with us using the below calendar. Please note that this booking is to describe our services and will not be used to discuss your personal tax affairs.



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Telephone: 0115 939 4606
Email: simon@optimiseaccountants.co.uk