SIPPs - Frequently Asked Questions

To be eligible to join the Hartley Pensions SIPP a person must be one of the following

• A Resident in the UK; or
• A crown Servant, or the spouse of a Crown servant, serving overseas.

To set a SIPP up you will need to complete an online application or download and complete a paper application form. You will need an IFA to assist you in ensuring that the product is right for you prior to an application being made.

Hartley Pensions will set up the SIPP within 24 hours of receiving the client’s application online. Hartley Pensions office hours are Monday to Friday 09:00 to 17:00. If applications are made for a Hartley Pensions SIPP on non working days it will be processed on the first working day.

Hartley Pensions will send out a welcome pack to new clients. The welcome pack is a regulatory requirement to be sent to all clients. This will include details of the policy number, SIPP Bank account, Cancelation Notice, key features Document and a selection of forms to start contributing or Transfer In their existing pensions from other providers.

A Key Features Illustration is part of the application process that the client will proceed through. The client will enter details into illustration software based on their contribution levels and pension transfer amounts. The KFI will display fund values at their selected retirement age. These figures will be based on assumptions dictated by the Financial Conduct Authority. This will included all fees.

All Hartley Pensions SIPP clients will have an individual RBS SIPP bank account. Under pension regulation all SIPPs must have a bank account. This is used to receive Transfer In cash funds and contributions. Once funds have cleared and have passed Money Laundering procedures funds are ready for investments within 24 hours.

As of February 2019 the interest rate for cash held in the RBS bank account is 0.25%

A Hartley Pensions Transfer In form must accompany every pension transfer request. The form must be fully completed. A transfer can not be requested without all information. This includes the existing provider details, the type of pension, if it is a cash transfer or in specie and if benefits have been previously taken. The form must be signed and dated. If the form is not fully completed a transfer can not be requested.

Once Hartley Pensions have received the cash fund from the ceding provider it is required under money laundering rules to wait until the ceding provider has confirmed that the funds we have received was sent by them. They will also send confirmation of any crystallised funds within the pension. This must be done via written confirmation from the ceding scheme. On receipt of the confirmation the funds will be ready for investment.

Most transfers will contain just cash assets. An in-specie transfer will allow the client to transfer their existing pension assets into the Hartley Pensions SIPP without having to disinvest back into cash. This will save the client the potential loss of dealing costs and time disinvested.

All Defined Benefit schemes will require the client obtaining Financial Advice from a qualified Independent Financial Adviser with appropriate qualifications (Pension Transfer Specialist). Defined Benefit schemes will have extremely good pension benefits attached to them which the FCA state would not be better off by transferring to a new scheme. For a Final Salary Pension to be accepted the client and adviser must sign the Adviser Declaration and Client declaration. The transfer will not be accepted without these two complete forms and supporting documentation. The Defined Benefit transfer guidance can be sent to the client.

All pensions that have safeguarded benefits will follow the same rules as Final Salary pension transfers. To be accepted the client and adviser must sign the Adviser Declaration and Client declaration. The transfer will not be accepted without these two complete forms and supporting documentation.

The amount an individual can contribute to the Hartley Pensions SIPP is unlimited. However there are limits on the amount that is eligible for tax relief.

If an individual is to receive tax relief on personal contributions they must be a relevant UK Individual and have enough Gross relevant UK Earnings to cover the Gross contribution.

Hartley Pensions complies with the HMRC relief at source tax reclaim model. This means that we will reclaim basic rate tax (20%) on Net Contributions.

Hartley Pensions can only reclaim basic rate tax. The client will have to claim any further relief due on their Self Assessment form. If they have any questions regarding eligibility for further relief or completing their Self Assessment form the client needs to contact HMRC on 0300 200 3310.

A client earns a Gross Salary of £20,000. The maximum Net contribution that will receive tax relief on is £16,000. Tax Relief of £4,000 will be claimed. This can be calculated by £20,000 x 80% = £16,000.

The contribution will be spilt between a Net Contribution and Gross Contribution. For example Client earns a Gross Salary of £20,000 and wants to make a £30,000 contribution. The maximum amount that will receive tax relief is £16,000. This will be recorded as: £16,000 Net Contribution (Tax relief claimed £4,000) £14,000 Gross Contribution

Part of HMRC conditions for claiming tax relief on Net Contributions is that we receive a declaration from the member that we reclaim basic rate tax on their behalf. Without a fully completed contribution form Hartley Pensions can not claim tax from HMRC.

Inspecie contributions are temporarily suspended due to uncertainty on HMRC guidelines.

No. Tax relief has to be claimed from HMRC under relief at source rules.

Clients must complete a contribution form for all contributions. Insufficient information on these forms will delay the claim. HMRC legislation dictates that a claim for tax relief can not be made without the correct client declarations and information provided to the scheme administrators.

SIPP members can make Single or regular payments into the pension. Contributions can also be made by employers or other third parties into the SIPP. Any contribution must be accompanied with a contribution form.

Direct debit payments can be set up by the client to pay for regular contributions. The direct Debit is set up for the 1st of the month. A Direct Debit form needs to be completed and received 10 business days prior to the 1st of the month.

No, direct debit payment will be collected on the 1st of every month.

Hartley Pensions can receive contributions being made by Direct Debit, Cheque or direct payment into the SIPP Bank Account by BACS. All new contributions must be accompanied by a contribution form.

Yes. Any changes to the contribution will require a new contribution form. We have to be able to prove to HMRC that we are claiming the correct tax so a new form is required.

Contributions can be made into the members SIPP by their employer. Employer contributions are not restricted by the employee’s relevant UK earnings. Employer contributions are paid gross and corporation tax relief is granted via the company accounts. Hartley Pensions have to complete due diligence on the company making the contribution every 12 months on the employer to comply with Money Laundering Regulations. A contribution form must be completed with the employer details before the contribution can be accepted.

The payment of contributions is not limited to the member or employer; other people can also make contributions on the individual’s behalf. These contributions are treated as if they are paid by the individual (SIPP Member) with the limits that apply to individual contributions. So tax relief is restricted to the higher of £3,600 or 100% of the member’s relevant UK earnings. Hartley Pensions have to complete due diligence on the person paying the contribution to comply with Money Laundering Regulations.

An annual allowance for pension savings applies each year and is based on an input period. The input period mirrors the tax year. The current Annual Allowance is £40,000 for the 2017/2018 tax year. Anything over the annual allowance will attract a tax charge at the client’s marginal rate. Individual, employer and third party contributions all count towards the annual allowance. It may be possible to pay more than the annual allowance in a tax year without an annual allowance charge becoming due by carrying forward unused annual allowance from previous years.

On 6th April 2015 the Money Purchase Annual Allowance (MPAA) was introduced under the Taxation of Pensions Bill. The money purchase annual allowance restricts the pension contributions that you can save into any Money Purchase Pension Scheme.  The MPAA should is £4,000. Any excess contributions above the MPAA will be subject to an annual allowance charge.

The MPAA is triggered through the following events

• you have drawdown funds from a flexi-access drawdown fund,
• you have received an uncrystallised funds pension lump sum (UFPLS);
• you have notified us that you wish to convert your pre-6 April 2015 drawdown pension fund to a flexi-access drawdown fund and you subsequently take a drawdown pension from that fund;
• you have taken more than the permitted maximum for capped drawdown from a pre-6 April 2015 drawdown pension fund;
• you have received a stand-alone lump sum and you are entitled to primary protection with a greater than £375k protected tax free lump sum right;

Clients must inform all other money purchase pension schemes that they have Triggered the MPAA and the date this is effective from. This must be completed within 91 days of the MPAA being triggered. Failure to complete this will lead to fines imposed by HMRC.

From 6th April 2016 the annual allowance for tax relieved pension savings will be reduced for those with ‘adjusted incomes’ of over £150,000. Their annual allowance will be reduced by £1 for every £2 of income they have over £150,000. The annual allowance will not fall below £10,000.

To avoid the Annual Allowance charge clients are able to take advantage of the Carry Forward Rules. If a client has triggered the Money Purchase Annual Allowance then carry forward is not an option.

• Clients who have not used up their annual allowances from the previous 3 tax years
• Unused allowances are brought forward to allow tax relief on contribution above £40,000.

No.

Normally the individual will pay their annual allowance charge liability and account for the payment by completing a Self Assessment tax return. From 11 August 2011 an individual may have the right to elect to require the pensions provider to pay some or all of their annual allowance charge liability out of the client’s pension fund.

There is potentially a tax charge that HMRC will levy on the client personally. It is possible for the client to use Carry Forward provision to mitigate any tax charge. This is a client led procedure. Hartley Pensions recommends the client takes advice from a suitably qualified adviser.

The client must be aged 55 or over. There is no upper age limit that the client has to take benefits by.

Clients that are aged over 55 can take a maximum of 25% of their SIPP’s overall value tax free. This is up to a maximum of the Lifetime Allowance (25% of £1,055,000. Clients can only take this option once. The remaining fund can be used to produce income.

No, clients can postpone pension payments until they are ready. The maximum amount of income will be calculated by the client is in control on when they receive the income.

Clients can specify a lower tax free cash amount if they wish. Hartley Pensions will crystallise only the amount required to generate the tax free cash they have requested. For example Client has a £200,000. Max Tax Free Cash available is £50,000 (£200,000 x 25% = £50,000). Client wishes to receive £25,000 as a tax free cash lump sum. Hartley Pensions will crystallise only £100,000 to generate £25,000 Tax Free Cash lump sum (£100,000 x 25% = £25,000). This will leave a crystallised fund of £75,000 and an uncrystallised fund of £100,000. Further tax free cash can be taken from the uncrystallised fund in the future.

When a client takes benefits from their pension it is known as a Benefit Crystallisation Event. The Crystallised fund is the pension fund value that is used to provide the pension benefits.

From the 6th April 2015 clients moving into drawdown for first time will move into Flexi-Access Drawdown. Existing clients in Capped Drawdown can stay in capped drawdown. Clients in phased capped drawdown can select to crystallise further funds into capped drawdown.

All new clients crystallising their funds after the 6th April 2015 will do this under Flexi-Access Drawdown. Flexi Access drawdown allows client to take 25% tax free cash and then access their remaining fund flexibly. There are no limits on the amount of funds they take from their fund. They can take their entire pot or keep it invested. All income taken either as a lump sum or income will be paid via payroll (14th or 28th of the month) and taxed under PAYE.

Capped drawdown is a form of ‘income withdrawal’ where your pension is paid direct from the funds in your pension scheme. Within certain limits you can choose how much pension you can get each year. You can change the amount you receive each year.

This allows clients to take lump sum payments from their pension fund without crystallising their funds. For example

• Client has £500,000 pension fund
• Clients wishes to take £100,000 lump sum through an UFPLS
• Of the £100,000 the lump sum will be spilt between tax free cash and income
  • £25,000 PCLS
  • £75,000 taxed as Income

By taking an UFPLS the client will trigger their Money Purchase Annual Allowance (MPAA).

Once the maximum tax free cash payment has been paid all remaining funds withdrawn will be taxed at the clients marginal rate. This can be paid as regular income or ad-hoc lump sums. By taking an income or lump sum the client will trigger their Money Purchase Annual Allowance (MPAA).

A client is required to complete the transfer to Flexi Access form and provide to Hartley Pensions.

The maximum income that a client can take is calculated from the remaining crystallised funds held within the pension. A prescribed formula by HMRC states the maximum amount the client can take.

No. Clients can select to receive any income amount they like as long as it does not exceed the maximum income level.

GAD is the term used for the calculation that produces the maximum income. GAD stands for the Government Actuary Department.

The formula used to calculate the income produces a base income figure. The client can then choose to take between 0% and 150% of this amount as their income amount. The base figure should be an equivalent income value to an annuity.

A pension year is the 12 month period that the maximum income amount can be provided. The client can receive up to their maximum income amount during the 12 month period. The income amount then resets at the beginning of the new pension year.

Previously the client would be have been charge an unauthorised tax charge. From 6th April 2015 the client will automatically be moved to Flexi Access Drawdown and trigger the MPAA.

Pension payments are paid on either the 14th or 28th of each month. They can be set up so that the clients receives payments on a monthly basis, quarterly, 6 monthly or an annual payment.

Pension payments are run through PAYE. This means that pension payments are potentially liable to tax. On setup of pension payments a HMRC Tax Code is required to ensure the correct level of tax is applied. On setup of pension payments Hartley Pensions require either the clients latest P45 or a HMRC New Starter Checklist to be completed.

The income figure is guaranteed for 3 years (for under 75) and 1 year (for over 75’s). The maximum income is then recalculated.

Clients are charged an additional £150pa plus Vat for receiving income while in Capped Drawdown. If the client is in Flexi-Access the income payment is paid under the Flexi-Access Annual administration fee.

To make sure that the income drawdown fund continues to provide an income and isn’t depleted, the maximum income that can be taken is reviewed. For members under age 75 this is done on the following basis:

• at least every three years
• as a result of certain events (Divorce, partial transfer of funds to purchase an annuity)
• when the member requests an additional review.

No, all income payments and tax free cash payments must be made to the SIPP Members bank account. Joint accounts can be accepted as long as the SIPP member is one of the account holders. A bank statement, not more than 6 months must be provided to prove the existence of the account.

The Lifetime Allowance creates a ceiling on the benefits value that can be built up by members of registered pension schemes whilst continuing to benefit from tax relief. The current Lifetime Allowance is £1,055,000. If the benefits value when they are taken exceeds the Lifetime Allowance the difference between the two is subject to the Lifetime Allowance Charge.

The Lifetime Allowance Charge can be applied in either of two ways or a combination of both depending on how the excess benefits value above Lifetime Allowance. The charge is:

• 55% if taken as a lump sum, or
• 25% if taken as income.

Flexible Drawdown has been replaced from 6th April 2015. Any clients that were in Flexible Drawdown will move automatically to Flexi access-Drawdown.

Triviality has been replaced for Money Purchase Schemes (SIPPs) by Uncrystallised Funds Pension Lumps. This allows clients to take all of their funds if they meet the set retirement criteria i.e. age.

25% of the fund can be taken tax free. The remaining 75% of the fund value is taxable based on your marginal rate of income tax. A P45 or a ‘New Starter Form’ will be required to be completed to calculate income tax payable through PAYE.

A client can change there mind after the SIPP is set up. Part of the Welcome Pack will includes a Cancellation form. This cancellation notice must be fully completed and returned within 30 days. The 30 days starts from when the client receives the document. The Key features Document that the client receives states that they maybe charged for the time spent on setting up the SIPP.

In theory a client can request a refund of contributions if they have been made in error or if they do not have enough net relevant earnings to claim full tax relief. Money Laundering Checks will need to be made before any money is returned to the client. Any contributions returned must be to the same account the contribution was made from. There is a risk to the client that if they have invested the contribution they will not receive the full contribution back.

Yes. A client can request to cancel a transfer. There is a Risk that if the funds have been received by Hartley Pensions and the ceding provider will not accept the funds back. This is covered in our Key Features Document (KFD)

The very first annual administration charge is taken at outset by Hartley Pensions as part of the account opening process. When cash funds enter the RBS SIPP Bank Account any transfer fees will be taken before sending the money to Hartley Pensions. Future Annual Administration charges are deducted from funds held within your SIPP. Adhoc administration like Pension reviews, Flexi-Access Drawdown etc will be billed at the time of work completed. Hartley Pensions will disinvest the correct fees and return to the clients RBS SIPP Bank account so the fees can be paid.

Any individual can inherit unused drawdown funds or uncrystallised pension funds on the death of the member to provide a drawdown pension or pay a lump sum death benefit. If the SIPP holder dies before age 75 the lump sum or pension payments can be paid without any tax charge if paid within 2 years of date of death. If the client dies after the age of 75 the lump sum death benefit will be paid with the reduction of emergency rate tax or if a pension is provided any income payments will be at the beneficiaries’ marginal rate.

The SIPP member can nominate who will receive the death benefits by completing an Expression of Wish Nomination form. Unless it is disputed, we will use our discretion to comply with the members wishes. If we hold more than one nomination on file we will use the latest received.

If a member dies without completing a valid beneficiary nomination form we will be required to request a copy of the Will. In this scenario we would expect to be contacted by the deceased member’s solicitor or Executors of the Estate to obtain instructions on how to proceed. Proceeds can not be paid as a nominee pension if there is the dependants of the deceased.

The client can invest in any investment that has been signed off as an accept able investment for a Hartley Pensions SIPP.

Hartley Pensions operating times are weekdays 9am till 5pm (excluding bank holidays).

The client is required to complete a transfer out form. This will provide key instructions on which pension provider to transfer the pension to and if it will be an in specie transfer of assets or if it will be transferred fully in cash.

Yes. Clients can complete partial transfers to another provider. If a client is in capped drawdown or Flexi Access it is only possible to transfer part of the fund if it is to purchase an annuity or under a pension sharing order (divorce).

Hartley Pensions must receive a fully completed transfer out form. This will be accompanied by the new pension provider re-registration details. Hartley Pensions will complete its regulatory responsibilities and send the information to the Hartley Pensions Transfers Team to complete the re-registration. Once the process is complete Hartley Pensions must be informed of the final value of assets that have been transferred. Hartley Pensions must send a transfer confirmation statement to the new provider.