If you are investigating your retirement finance options, could a Close SIPP be more than just another pension plan?

With life expectancies on the rise—13% of 66-year-old men and 20% of 66-year-old women can expect to live to 95—running out of personal financial resources is a real risk.¹

Understanding and capitalising on the investment options within a Close SIPP could be your ticket to not just surviving, but thriving in this new retirement landscape.

The EveryInvestor team diligently researches resources to provide current and accurate information in the UK’s personal pension space. 

Read on to find out if a Close SIPP could suit your financial goals.

Who Is Close?

Close Brothers Group plc is a leading UK merchant banking group, providing lending, deposit taking, wealth management services, and securities trading. Established in 1878, it combines traditional banking values with a modern approach.

They specialize in understanding unique financial needs, offering tailored solutions for individuals and businesses alike.

Close Brothers support long-term client relationships through their personal approach.

What Is a SIPP and How Does It Work?

A SIPP, or Self-Invested Personal Pension, is a type of pension fund that offers individuals more flexibility and control over their investments.

Unlike traditional pension schemes, a SIPP allows you to choose and manage your own investments, including stocks, bonds, and funds.

It is a tax-efficient way to save for retirement, as contributions are eligible for tax relief.

With a SIPP, you have the freedom to decide how your pension pot is invested, giving you the potential to grow your retirement savings at a faster rate.

However, it also means taking on more responsibility and risk, as the value of your investments can go up and down.

A unique feature of a SIPP is the wide range of investment options available.

From individual shares to commercial property, a SIPP allows you to diversify your portfolio and potentially maximize your returns.

Additionally, with a SIPP, you can consolidate multiple pension pots into one, making it easier to manage and track your retirement savings.

However, it’s important to note that the value of your investments can fluctuate and there is no guarantee of returns.

It is crucial to regularly review and adjust your investments to ensure they align with your retirement goals and risk appetite.

What Are the Benefits of a Close SIPP?

The benefits of a Close SIPP provider encompass tax efficiencies, simplified pension management, and flexible options for accessing your retirement savings.

A closer look:

• Tax advantages: There is tax relief on contributions up to certain limits, tax-free growth on investments, and a 25% tax-free lump sum available on retirement.²
• Consolidating pensions: You can transfer in your existing pensions, making it easier to manage retirement savings under one umbrella
• Flexible withdrawal options: You can tailor your retirement income stream to your personal circumstances.

Learn More: The Best SIPP Providers in the UK

What Are the Drawbacks of a Close SIPP?

The drawbacks of a Close SIPP include fees, exposure to market risks, and the absence of personalised financial advice.

More details:

• Fees and charges: Over time, these can eat into the value of your pension pot, especially if you have a smaller portfolio.
• Market forces: Your investments are subject to market volatility, potentially affecting the value of your retirement fund.
• Exceeding tax limits: If you go over the contribution allowance, you will be responsible for paying a tax charge, unless you have unused allowances from previous years to carry forward.

Who Is Eligible to Open a Close SIPP?

UK residents under the age of 75 are eligible to open a Close SIPP account. 

What to Consider Before Choosing a Close SIPP

Before choosing a Close SIPP, consider your investment strategy, risk tolerance, and whether the available investment options align with your goals. 

Evaluate the fee structure and think about your anticipated portfolio size, as this affects the ongoing fees.

Fees & Charges

The fees and charges associated with a Close SIPP can impact the value of your pension pot, so it is important to understand the implications.

These fees include:

• Set-up fees: There are no setup fees for opening an account.
• Transfer fees: While Close Brothers itself does not charge for transfers, your transferring provider may impose a fee.
• Administration fee: An annual fee of £150 plus VAT is applicable.
• Platform fee: A tiered platform fee starts at 0,25% and can taper to 0% depending on the investment amount.
• Dealing fees: Buying, selling, or switching exchange-traded investments may incur a dealing fee not exceeding £8,95.³

Read On: SIPPs Fees and Charges to be Aware of

Investment Strategy & Risk Management

In crafting an investment strategy for your SIPP, diversification is essential for risk management, but it is also crucial to understand both the available investment options and the limitations, such as the prohibition on commercial property, unquoted shares, and unregulated collective investment schemes. 

Knowing what is allowed and what is not can guide you in making informed investment choices.

What you can invest in:

• Securities: Equities and ETFs that are listed on recognised stock exchanges and managed by UK-based, Financial Conduct Authority (FCA) regulated entities.
• Investment trusts: These are listed or dealt with on a UK stock exchange.
• Units/Shares in retail investment funds: Includes funds that are authorised or recognised by the FCA, including overseas undertakings for the collective investment in transferable securities (UCITS).
• Managed portfolios of collective investments: These are arrangements provided by an FCA-regulated company that invests in permitted transferable securities or funds.
• Deposit accounts: Fixed-term deposit accounts are allowed.

Flexibility & Control

You have the flexibility to choose from various investment options and manage your SIPP through the online portal and mobile app. 

You can also choose between lump sum and regular contributions.

Tax Benefits & Implications

Understanding the tax aspects is key when planning for retirement with a Close SIPP.

These include:

• Contributions are eligible for tax relief at your marginal rate, allowing potential recovery of up to 45% of your input.
• Assets in the SIPP grow free from capital gains and income tax, enhancing retirement savings compound growth.
• Upon reaching the minimum eligible retirement age of 55, you can take 25% of the funds as a tax-free lump sum, with the remainder subject to income tax.
• After your death, remaining SIPP funds can go to nominated beneficiaries, subject to varying tax treatments depending on your age and their withdrawal methods.⁴

Withdrawal & Retirement Options

You have various withdrawal and retirement options with a SIPP from when you reach the normal minimum pension age in the UK of 55 (57 from 2028).

Your options are:

• Pension commencement lump sum (PCLS): You can usually take up to 25% of your SIPP value untaxed, using the remainder to provide income via other options.
• Flexi-access drawdown: Allows tax-free lump sum withdrawal of up to 25% and offers the flexibility to take income from the remaining 75% when needed.
• Uncrystallised funds pension lump sum (UFPLS): This allows you to take specific values from your uncrystallised pension pot, 25% of each payment being untaxed and the remaining 75% subject to income tax.
• Annuity: An insurance product that provides a predetermined income, often for the rest of your life, and can be purchased at retirement.⁵

Customer Support & Service

Customer support is UK-based and available via phone or email from 08:00 to 18:00, Monday to Friday, excluding public holidays.

What Are the Contribution Limits of a Close SIPP?

There is no minimum contribution limit for a Close SIPP, but there is an HMRC annual allowance for tax-relieved contributions of £60,000, or 100% of your earnings, whichever is the lower.⁶

Who Is a Close SIPP Suited to?

The Close SIPP is suited to people who have the expertise and time to manage their retirement investments. 

You should consider a Close SIPP if you are looking for a combination of choice, convenience, and competitive pricing. 

The platform gives you access to various investments and the flexibility to manage your portfolio yourself. 

The online portal is user-friendly, and the platform’s mobile app allows for on-the-go access. 

There are also no fees for transfers or setup, making it reasonably cost-effective.

How Does a Close SIPP Compare With Other Options?

Compared to traditional pension schemes, a Close SIPP offers more control and a wider array of investment options. 

To compare the Close SIPP with other SIPPs, focus on fees, investment options, and customer service. 

Understanding these key factors alongside your own investment goals and risk tolerance will enable you to make an informed choice for your retirement planning.

What Are Clients Saying About Close Brothers Asset Management?

Close Brothers Asset Management is part of the Close Brothers Group, which scores four out of five stars on Trustpilot.⁷

Opening a Close SIPP

Opening a Close SIPP involves a straightforward online process for UK tax residents.

What Steps Do You Need to Follow?

The steps you need to follow start with going online and filling in the application form.

Once you have provided your details, the system will take a few minutes to assess the information.

If approved, you will be directed straight to your new account; otherwise, Close Brothers will reach out for more information.

What Documents Do You Need?

To proceed, you will require your National Insurance Number, details about your job, and your UK banking information, including your bank’s address. 

Unlike some other platforms, this one also requests more granular employment information, like your job title and yearly earnings.

Read More: How to Open a SIPP

Regulatory Details

The Close SIPP is regulated by the Financial Conduct Authority (FCA), which provides a framework for compliance with financial laws and offers protection for investors. 

In cases where the SIPP provider goes out of business and is unable to reimburse you, you have the option of claiming up to £85,000 from the Financial Services Compensation Scheme.⁸

Common Questions

In Conclusion

Whether a Close SIPP is right for you depends on a variety of factors such as your investment goals, need for flexibility, and comfort with the regulatory protections in place. 

With its wide range of permitted investments, the Close SIPP appears to be compatible with multiple investment goals, including diversification. 

However, as with any financial product, it is essential to consult a qualified financial advisor to discuss your personal financial situation and objectives. 

By doing so, you can make a well-informed decision about whether the features and options of a Close SIPP align with your long-term financial planning.