| Frequent
questions about SIPPs (Self Invested Personal Pensions)
SIPPs, what are they?
A self invested personal pension is a trust regulated
scheme enabling individuals to manage their own pension
funds.
A change in UK pension rules at the start of the 2006/2006
tax year allows anyone who sets up such a scheme to
invest in UK or overseas property
What are the benefits?
The major benefit is tax relief.
All pensions contributions in the UK attract tax relief,
so for every 78 pence paid into a pension fund, the
government effectively pays at least 22 pence (40 pence
for higher rate tax payers).
Are there any special regulations?
The main stipulation is that any property bought by
these means are owned by the SIPP, not the investor,
although the investor can of course be its beneficiary
once he age of 50 is reached (55 from the year 2010).
Who will benefit the most from this?
Individuals earning in excess of £32,400, thus
falling into the 40% tax bracket will benefit most.
However, anyone with a SIPP scheme gains tax relief
of at least 22%, so a property purchased for £100,000
will effectively only cost them £78,000 in real
terms.
Am I able to use a property owned by my pension fund?
In a word; yes.
Forthcoming legislation is quite clear on this matter.
The owner may freely use the property, provided he/she
pays commercial rent, in the same way anyone else using
it would.
Currently, properties in the Larnaca region would provide
the best investment/rental ratios.
We can advise you further on this matter.
What other conditions are there?
Should the real estate be sold, the investor may not
access the proceeds of the sale until they reach
the age of 50 (55 from the year 2010).
At this point, the investor may draw a tax free lump
sum of 25% of the fund’s value, leaving the rest
to produce a taxable income.
What about capital gains tax?
Self Invested Personal Pension schemes are exempt from
UK capital gains tax (CGT), of course the investor
is still liable for CGT in the country of their property’s
location.
It is worth mentioning that Cyprus legislation gives
substantial CGT breaks when compared to other Mediterranean
countries.
Click here for more information on CGT in Cyprus.
Is a SIPP scheme able to borrow money?
SIPPs may borrow up to 50% of their fund’s value,
subject to status.
Click to see our example
What is the maximum I can contribute?
The maximum annual contribution is £215,000.
The maximum contribution during your lifetime is £1,500,000.
It is worth noting that you are able to start contributions
now, ahead of the new tax year.
How is the scheme administered?
SIPPs are regulated by managers (effectively the pension’s
trustees).
They are legally bound by duty of care to ensure that
the SIPP (the property) is administered properly.
Am I able to transfer my current pension to this new
scheme?
Yes, you are able to transfer your existing pension.
Your provider can administer this transfer for you,
or you can oversee it yourself.
Just how much is this likely to cost me in fees?
By and large, this can vary, so it pays to do a little
research in the matter, but providers generally charge
between 0.5% and 1.5% of the fund’s value plus
varying annual administration fees.
I already own a Cyprus property. Can I transfer this
to a SIPPs?
Yes, providing the SIPP buys it direct from you.
This however, is likely to have CGT implications, so
be careful it doesn’t end up costing extra.
When a transaction such as this is undertaken, it is
wise to seek independent legal and financial advice.
It is also worth bearing in mind that your fund will
be liable for transfer taxes and stamp duties, so a ‘competitive
sale price’ could go a long way towards alleviating
unwanted expenses.
What are the rules regarding off-plan properties in
Cyprus?
Any off-plan purchase made now may be transferred (sold)
to a Self Invested Personal Pension scheme after the
start of the 2006/2007 tax year.
We have a wide selection of opportunities and specially
negotiated investment deals available in all regions
of Cyprus and will be happy to advise you further on
this matter.
Please click
here to return to the main SIPPs page. Please click below for information on:
Although every care has been taken to ensure the accuracy
of this information, Aphrodite Property Sales can take
no responsibility for actions taken based on the content
of this page.
E&OE
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