A SIPP is a type of personal pension scheme. The SIPP itself is
a pension “wrapper” that holds investments until
retirement and the investor starts to draw a pension income. Most
SIPPs allow investment in a range of assets including commercial
property not just in an insurance backed fund provided by an
insurer. SIPPs are designed for people who want to manage their own
fund by dealing with, and switching, their investments when they
choose. They may have higher charges than other personal pensions
or stakeholder pensions. As with any pension fund, the investor
cannot take money from the fund until age 50 (rising to age 55 by
2010).
SIPPs often fall to be treated as insurance products, as
they normally carry an element of contingency insurance within a
package, which also makes provision for funds to buy an annuity to
provide a pension payment to sustain the pensioner after
retirement. Charges made by IFAs, brokers and other intermediaries,
normally collected as commission from the premium (contributions)
will be exempt under VATA 1994 Schedule 9, Group 2, Item 4 if they
relate to an intermediary service in connection with the provision
of the SIPP.
The charges made to a SIPP customer may however, include
initial and annual charges for the management of the
customer’s investment portfolio rather than relating to a
specific supply of the pension. Therefore, these charges would
normally be taxable for VAT purposes (but see V1-07(Ch 17)
Insurance).
