Wealthtime SIPP. Questions and Answers.

SIPP.

What is a SIPP?

A SIPP is a form of pension arrangement which allows you to make your own investment decisions about how your SIPP funds are invested, or to formulate your investment strategy in conjunction with your Financial Adviser or Investment Manager. If you appoint an Investment Manager or Financial Adviser they must be suitably authorised by the Financial Conduct Authority (FCA). You, or someone on your behalf, including your employer if you have one, can pay contributions regularly into a SIPP each month or year and/or pay single contributions as you choose subject to your income level and the Annual Allowance (see later). You may also be able to transfer funds from other types of pension arrangements into your SIPP.

Please note that the Wealthtime ITP may only accept transfers from other registered pension schemes already in income payment and under the regulations governing this type of scheme cannot accept any contributions.

What are the Aims of the SIPP?

The Wealthtime SIPP is designed to provide you with:

  • A means to save for your retirement.
  • The option to take a pension commencement lump sum from age 55 in exchange for part of your pension with the further option of deferring taking part or all of your pension entitlement.
  • The opportunity to take your benefits in stages and phase in your retirement if you wish.
  • The option to take income payments from your SIPP as an alternative to buying an annuity.
  • From April 2015 the option to take all or part of your pension fund subject to tax at your marginal rate. Wealthtime offers Flexi-access Drawdown which is one of two alternatives under this option. An independent Guidance Service which is free known as Pension Wise will be available to help you understand your options. (Please see later for details.)

The Wealthtime ITP has been specifically designed for the purpose of accepting transfer values from existing registered pension scheme income withdrawal arrangements to provide you with:

  • A means to continue providing for your retirement.
  • The opportunity to continue taking income and phase the purchase of annuities from your fund over a period of time.
  • Flexi-access Drawdown

Both the Wealthtime SIPP and Wealthtime ITP aim to provide you with:

  • The ability to make your own investment decisions in conjunction with your Investment Manager or your Financial Adviser.
  • The opportunity to invest in a broad range of investments.
  • Flexibility to time the purchase of an annuity.
  • Flexibility in providing for a spouse/civil partner/dependant in the event of your death.
  • The ability to continue to invest your pension fund whilst withdrawing income.
  • The benefit of the tax incentives granted by the HM Revenue & Customs to registered pension schemes. Your fund is usually free from capital gains and income tax, unless your investment is regarded as taxable property by HM Revenue & Customs. There are complex rules governing what is taxable property. Wealthtime will not permit a member of its scheme to invest in this type of property.

What is your Commitment?

  • You can establish the Wealthtime SIPP for the purpose of receiving previously accumulated pension rights from other pension arrangements and you can also contribute into the Wealthtime SIPP at any time.
  • There is no commitment on your part to continue making contributions and no penalty for ceasing or reducing contributions to a SIPP.
  • It is a HM Revenue & Customs requirement that you cannot take your benefits until age 55 unless you retire early due to ill health or have a protected early retirement age as defined by the legislation.

What are the Risk Factors?

  • Benefits may be lower than you expect if investment growth and interest rates are lower than those illustrated.
  • If you take benefits earlier than shown on your illustration or stop paying regular contributions your benefits may be lower than illustrated.
  • Some investments may take longer to sell than other forms of investment and lack of liquidity may affect our ability to pay benefits.
  • High income withdrawals compared to the value of your fund are unlikely to be sustainable if investment returns are low during the withdrawals period. They might also reduce any potential annuity.
  • The higher the level of income taken, the less you will have available to provide for dependants, or to buy an annuity in the future.
  • The investment growth can be less than assumed in the illustration and value of investments can fall as well as rise.
  • Annuity rates can change substantially over short periods of time, both up and down depending partly on the level of interest rates. They could be worse when you buy an annuity than they are now.
  • The longer you wait before buying an annuity, the greater risk you take that your income may be lower than you need if you live longer than expected.
  • Our fees may change in the future, but we will always notify you in advance. It is not anticipated that these increases will exceed RPI and there are no automatic annual increases, or hidden charges, nor do we receive any payments from the bank in respect of your Product Bank Account in which your cash is held.
  • If you take all or a substantial part of your fund from April 2015 under Flexi-access Drawdown there is a risk that you may not have sufficient funds to provide for the whole of your retirement.

What are the tax advantages?

Under current legislation if you are a UK resident your contributions qualify for tax relief at the highest marginal rate you pay. If you contribute more than the annual allowance you will have to pay tax on the excess which effectively removes any tax relief. Death benefits are normally paid free of inheritance tax but may be subject to other tax charges.

The funds invested are normally free from UK income and capital gains taxes, unless your investment is regarded as taxable property by HM Revenue & Customs which could trigger penal “unauthorised payment” charges. Tax reliefs may change in the future which could affect the value of your fund and the amount of benefits you receive.

Can the Wealthtime SIPP be used for auto-enrolment?

No. The Wealthtime SIPP is not a qualifying scheme for auto-enrolment and cannot be used for administering group schemes.

Who can contribute to the Wealthtime SIPP?

Anyone may join and contribute to the Wealthtime SIPP and provided they are under 75 they will normally obtain tax relief on such contributions.

There are three categories of membership and the one that applies to you will determine how much tax relief you will be able to receive on your contributions.

  • UK resident individual or have relevant UK earnings subject to UK tax
  • Non UK resident individual, who was a UK resident individual when the SIPP was set up, and at some time in the last five tax years had been resident in the UK
  • Non UK resident individual.

IMPORTANT: If you have Enhanced Protection or Fixed Protection any contribution made to this SIPP means you will lose this Protection. You should speak to your Financial Adviser.

What if I am a UK resident individual or have relevant UK earnings subject to UK Tax?

If you are a UK resident or have relevant UK earnings subject to UK tax you will be entitled to tax relief on the higher of:

  • £3,600 gross, or
  • 100% of relevant UK earnings (up to the Annual Allowance).

This means if you do not have any earnings you can contribute £2,880 net and receive basic rate tax relief on this amount.

What if I am a non UK resident individual, who was a UK resident individual when the SIPP was set up, and at some time in the last five tax years had been a resident in the UK?

If this category applies, you will receive:

  • tax relief on your contributions up to £3,600 gross.

However if you contribute over £2,880 net (£3,600 gross) you will not receive any tax relief on the contribution in excess of this amount.

What if I am a non UK resident individual?

You can contribute any amount but you will not be entitled to receive any tax relief on your contributions. Wealthtime will only accept new SIPPs from UK resident individuals.

How much can I contribute to the Wealthtime SIPP?

HM Revenue & Customs only allows tax relievable contributions up to a certain level each tax year. This is known as the annual allowance.

The annual allowance for recent tax years is:
2017/18 £40,000
2016/17 £40,000
2015/16 £40,000
2014/15 £40,000

which will be subject to tax relief at your highest marginal rate. In addition, from April 2011, any unused allowance in one year can be carried forward for up to 3 consecutive years before entitlement to relief for that year is lost up to a limit of £40,000 each year, provided that you were a member of a pension scheme during the year used for carry forward. A Tapered Annual Allowance may apply if your income exceeds £150,000 p.a.

If you make a contribution which exceeds the annual allowance a tax charge (the Annual Allowance Charge) will be levied on you by HM Revenue & Customs on the excess which is added to any other taxable income you may have to determine the rate of tax you will have to pay.

There is one circumstance when this annual allowance limit does not apply - no tax charge will be levied in the year you die. If this applies full tax relief can be obtained on contributions subject to the normal limit of 100% of relevant UK earnings.

Wealthtime will in accordance with HM Revenue & Customs requirements issue you with a Pension Savings Statement showing your contributions during the year if you have exceeded the Annual Allowance and you will need to declare this on your self-assessment tax return.

From April 2015 if you are:
(a) not drawing benefits, the Annual Allowance continues at £40,000 p.a.
(b) in Capped Drawdown, the Annual Allowance continues at £40,000 p.a.
(c) in Flexi-access Drawdown, you will be able to continue to make contributions but the amount will be reduced to the Money Purchase Annual Allowance (MPAA) from the time the Flexi-access Drawdown commences. Complex rules apply to contributions made in the same tax year as the MPAA is triggered. Above that figure the Annual Allowance Charge will apply. However, if you only take your Pension Commencement Lump Sum and not any accompanying pension the MPAA is not triggered.

The MPAA only applies to contributions to money purchase schemes. You will still be entitled to contribute up to the balance of £40,000 into a defined benefit ("final salary") scheme of which you are a member. Carry forward is available on such contributions but not on the MPAA.

Can I be a member of my employer’s pension scheme and also open a SIPP?

If you are a member of your employer’s pension scheme you can also have a SIPP and there are no restrictions on contributing to both pension schemes at the same time, but you only have one annual allowance covering all your pension schemes.

Which contributions count towards the annual allowance?

Your own or your employer contributions to money purchase arrangements count, and if you are a member of a defined benefits scheme the amount of any increase in the value of your rights under that scheme, whether arising from a contribution or not, will count towards your annual allowance. You can obtain this information from the administrator of that scheme.

Transfer values and pension credits and debits from a divorce settlement do not count as contributions.

Do you need evidence of earnings?

Wealthtime does not need to collect evidence of your earnings to support any contribution you make.

Can I carry forward unused relief?

Yes, for up to 3 years provided you are a member of a pension scheme during each of those years you use for carry forward. The carry forward provisions are complex and you should consult your financial advisor but basically you can carry forward up to £40,000 from each of the previous three years less any contributions you have made during those years, starting with the earliest year, providing you have been a member of a pension scheme during those three years. We are required to inform you if we believe you have contributed in excess of this amount and if so, you and your SIPP will be liable for a tax on the excess known as an Annual Allowance Charge which is currently levied at your marginal rate of tax on the excess. As previously explained, there is no carry forward facility in respect of the MPAA. A Tapered Annual Allowance may apply if your income exceeds £150,000 p.a.

What frequency of contributions can I make?

Contributions may be made in the following ways:

  • Single contributions which may be paid at any time
  • Regular contributions which may be paid annually, half yearly, quarterly or monthly.

What happens if I make excessive contributions?

You are responsible for notifying HM Revenue & Customs of the amount of contributions you have paid to your pension schemes through your self-assessment tax return. HM Revenue & Customs will then notify Wealthtime if you have paid a contribution in excess of £3,600 or 100% of your relevant UK earnings, (subject to a maximum of the Annual Allowance), whichever is higher, on which we will have reclaimed basic rate income tax relief.

Any excess contributions can be repaid to you from the SIPP once the tax relief on the excess contributions has been recovered from the SIPP and repaid to HM Revenue & Customs by Wealthtime.

You can request that any excess contribution remains within the SIPP, but Wealthtime may maintain a separate record showing that the excess contribution is not entitled to receive tax relief.

Can my employer make contributions?

Your employer may contribute to your Plan and may do so even if you are making no contributions yourself. Any employer contributions to the SIPP will normally be paid gross. Any regular employer contribution must be a fixed monetary amount NOT a percentage of salary.

For annual allowance purposes, any contributions paid by your employer will be added to your own when determining if the annual allowance has been exceeded.

What is the tax relief on contributions?

Basic rate relief on contributions - If you are eligible to make your own contributions to the SIPP these are treated as having been paid net of basic rate tax; for example, you wish to pay a gross contribution of £1000, you will actually pay only £800 (assuming a basic rate of tax at 20%). Wealthtime will reclaim an amount equivalent to basic rate tax from HM Revenue & Customs on your behalf and apply it to your fund.

The tax reclaim will normally take between 7-11 weeks. Please note that the value of the reclaim can only be invested once it has been paid into your Designated SIPP Bank Account and it has cleared.

Higher rate relief on contributions - If you pay higher rate tax you will be eligible to claim higher rate tax relief, which can be claimed via your annual self assessment tax return. This amount is paid to you and is not added to your fund.

If your employer makes contributions, they will normally pay them gross. There is no tax relief on transfers from other pension funds into your Plan. Remember that the rules on tax relief depend on individual circumstances and may change in the future without prior warning.

What is the Pension Input Period?

The Pension Input Period runs from the date the first contribution is paid. The Pension Input Period end date is 5th April in the tax year the first contribution is paid. Subsequently the Pension Input Period is the tax year.

What happens if I have a Wealthtime SIPP and I die?

How benefits may be paid in the event of your death is dependent on a number of factors.

For example:

  • If you are taking benefits from your SIPP.
  • The type of benefits you are taking from your SIPP.
  • If you have a surviving spouse and/or dependants.

From April 2015 this will principally depend on whether you die before or after age 75.

For more information on the options please refer to the Death Benefits questions in the SIPP Benefits Question & Answer.

Can I transfer out?

Yes. You can transfer to another registered pension scheme at any time, but funds in income payment may only be transferred to registered pension scheme arrangements which have been set up for the purpose of receiving transfers from arrangements in income payment.

What fees can I expect?

The fees that take place in respect of your SIPP are described in the SIPP Fees Schedule. Please refer to the latest schedule for further information.

Are there any additional charges?

Additional charges which may be incurred will typically include:

Bank Charges:

  • There are currently no Barclays Bank charges for operating the Designated Product Bank Account other than CHAPS or Foreign Payment charges.

Financial Adviser:

  • Adviser Charges.

Stockbroker/Investment Manager Charges:

  • Your appointed Investment Manager’s own fees.
  • Stockbroker Commissions.
  • Fund Manager charges.

Please note that if in the future, additional services are offered, or additional forms of investment are permitted, the relevant fees may not be reflected in the SIPP Fees Schedule applicable when opening your SIPP. Please always refer to the latest SIPP Fees Schedule for up to date information.

Where are the fees deducted from?

All fees will normally be payable from your Designated SIPP Bank Account. It is therefore necessary to ensure that sufficient cleared funds are available in your account to meet any prospective fees. Wealthtime reserves the right to sell investments held within your SIPP to pay outstanding fees if insufficient funds are available.

How do fees and charges affect my SIPP?

There is an annual transaction fee for administering your Wealthtime Private Client Service. There will also be an amount to cover the Adviser Charge that you have agreed with your Financial Adviser. These fees and expenses will be taken from your SIPP.

Please refer to the SIPP Fees Schedule for more information.

Can I change my mind?

SIPPs have cancellation rights. We will send you a cancellation notice as soon as we have opened your SIPP. You will have 30 calendar days during which you have the right to change your mind by sending the cancellation notice back to Wealthtime. Your SIPP will then be cancelled. If you cancel a contribution payment we will give you your money back less any fall in the investment value and if you are cancelling a transfer payment we will try and return the monies back to the original pension scheme less any fall in investment value.

PLEASE NOTE: It may not always be possible to return a transfer payment to the original pension scheme if you cancel the SIPP, or a particular transfer payment, within the cancellation period, after the transfer has been received by Wealthtime. In this circumstance, you will need to arrange for another pension scheme to accept the transfer value.

Can I change my mind when electing to take benefits?

If you elect to take benefits from your SIPP we will send you a cancellation notice. You will have 30 calendar days during which you have the right to change your mind and send the cancellation notice, along with any pension commencement lump sum and income you have received, back to Wealthtime. Your election to take benefits will then be cancelled. You can also stop taking income at any time. If we are instructed to re-invest the returned pension commencement lump sum and/or income in the same investments from where the money originally came, you may receive less units/shares because of transaction costs or upward movements in prices. If you choose to cancel your election to take benefits this will not affect any instructions you send us to take benefits in the future. Your right to cancel will remain unaffected if any event beyond your control makes it impracticable for you to communicate the wish to cancel before the 30 day period expires, but you will suffer any loss on investments made before you cancel.

How will I know what my SIPP is worth?

After we accept your application we will issue an acknowledgement. At least once a year on the anniversary of the establishment of your SIPP we will issue a statement showing the value of your SIPP. A current valuation and transaction history can also be accessed anytime through Wealthtime online.

Are there any possible tax charges?

Contributions in excess of the Annual Allowance will be subject to a tax charge by HM Revenue & Customs on the excess amount unless this contribution is made in the year of your death. Investments within the SIPP are free from UK tax on income and capital gains. However, if an investment is regarded as taxable property by HM Revenue & Customs, it will be subject to tax, which will normally be at least 40% of its value and could be up to 55%.

In the absence of Enhanced Protection, funds paid out which are in excess of your Lifetime Allowance will be subject to a tax charge, known as a ‘Lifetime Allowance Charge’. The tax charge will be 25% on the excess if it is paid as an income (in addition to income tax on the income payments), or if it is paid as a lump sum there will be a tax charge of 55% on the excess. Any income paid from your fund will be taxed under the PAYE system.

If at any time you receive benefits which are not in accordance with current pension rules these will be regarded by HM Revenue & Customs as unauthorised payments and will be subject to an unauthorised payment charge, which is normally 55% of the value of the payment.

What if I have a complaint?

If you have a complaint about the service you have received in respect of the administration of your SIPP, please write to Mr Colin McCarthy at Wealthtime Limited, The Oak House, Barford Lane, Downton, Salisbury, Wiltshire. SP5 3QA. You may also make a complaint to the Financial Ombudsman Service, Exchange Tower, London, E14 9SR. Telephone: 0800 023 4 567. Details can be supplied on request. Any complaint regarding the advice given to you by your Financial Adviser should be referred to them for review under their own complaints process, details of which should already have been provided by them. If you have a complaint regarding an individual investment, this should be directed to the individual fund manager concerned and again, details should be provided by your Financial Adviser.

Making a complaint will not affect your legal rights. For more information, you will find our Complaints Leaflet in the Literature Library.

Can I claim compensation?

If you make a valid claim against us in respect of your investments and we are unable to meet our liabilities in full, you may be entitled to redress from the Financial Services Compensation Scheme (FSCS) by which we are covered and which enables an individual and small business to claim for 100% of any loss up to £50,000. We will send you details of the cover provided by the Scheme on request.

The individual Product Providers for your underlying investments may themselves offer protection under the FSCS in respect of their products held within your individual Products. Please enquire of your Financial Adviser or the product providers for further information.

In respect of the Bank Account(s) these are held with Barclays which is covered separately by the FSCS. The FSCS can pay compensation to depositors if a bank is unable to meet its financial obligations. Most depositors including individuals and small businesses are covered by the scheme and an eligible depositor is entitled to claim up to £85,000, from 30th January 2017. The £85,000 limit relates to the combined amount in all the eligible depositor’s accounts with Barclays including their share of any joint account and not to each separate account. For further information about the scheme including the amounts covered and eligibility to claim please refer to the FSCS website at www.fscs.org.uk.

Where can I see your Terms and Conditions?

Your rights as the holder of a Wealthtime SIPP (SIPP) and Wealthtime ITP (ITP) are set out in the Terms and Conditions which you can find in the Literature Library. They may be subject to change in the future.

The Wealthtime Private Client Service is administered by Wealthtime Limited, which is authorised and regulated by the Financial Conduct Authority.
Wealthtime recommends that before making a decision regarding this service and the investments you should contact your Financial Adviser.

Wealthtime Limited, The Oak House, Barford Lane, Downton, Salisbury, Wiltshire SP5 3QA T: 01725 512925 E: admin@wealthtime.co.uk

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