VATFIN5700 - Management of investments, portfolios, funds, ‘wrapper’ products and related services: self-invested personal pensions (SIPPs)

What is a SIPP?

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 the age of 55. 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 the VAT Act 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.