What is a SIPP?
A SIPP – Self Invested Personal Pension – is a form of pension plan where you choose where your money is invested, rather than the more conventional type where a fund manager invests it for you. You have total control. You can invest a lump sum, a regular sum or transfer some or all of your existing plan(s), or a combination of some or all the above – the choice is yours. The amount of pension that is paid out to the individual on retirement is dependent on the total value of money that has accrued from contributions paid, whether by the individual or their employer, plus any return gained from the investments made with the contributions received.
As with all pensions, you get income tax relief at your highest rate for all contributions, so that a higher rate taxpayer could invest £10,000 and get tax relief of £4,000 meaning that the investment of £10,000 in real terms has only cost them £6,000. Not only are the contributions net of tax; all income and capital gains earned by the fund are free of all taxes, although dividends on company shareholdings (not appropriate to this investment) are paid net of 10% tax. And when you come to retire, aged 50 or more (55 from 2010 onwards), you can take out 25% of your fund as a tax-free lump sum.”
Emerald Knight’s agricultural investment products comply with the laws relating to UK personal pensions, so it may be placed in a SIPP (Self Invested Personal Pension) or a SSAS (Small Self-Administered Scheme). Also the arrangements for ownership overcome the legal and practical problems relating to the holding of overseas property in a pension.
Tax Exemptions and Reclaims
The advantages of investment through a SIPP arise from its tax exemptions and rebates. The Returns are exempt from UK Income Tax and Capital Gains Tax. Also Income Tax can be reclaimed on the money invested through a SIPP: the SIPP Provider reclaims the standard rate, while Investors on the higher rate reclaim this directly in their tax return – so in effect a £10,000 investment costs only £6,000.
The majority of SIPP investments are financed by transfer from existing managed pensions, many of which perform poorly. An IFA advises on transfer values, and the SIPP Provider administers the transfers.
An IFA is generally needed to help complete the very complex SIPP application forms, as well as advise on transfers. If an Investor wishes to invest in GFI through a SIPP, but does not have a suitable IFA, we can recommended you to one of on our panel.
While investment through a SIPP is very attractive, there are fees, albeit quite modest, payable to the SIPP Provider administering the SIPP and to the IFA.
Why does Farmland suit a SIPP?
The investment product allows individuals, through their SIPP, to own the beneficial rights to a piece of Farmland, which is managed on your behalf and the net proceeds from the sale of the farmed crops will be paid as an annual income, into your SIPP. Once the farmland will be sold the net proceeds from the sale of your farmland will be returned to your SIPP.