Posted August 23rd, 2010
In my last blog entitled “Self Invested Personal Pensions – What are the risks?” I set out the wide range of investments into which a SIPP can invest.
With some divorces taking years to conclude it is important to consider what risks are being taken within the SIPPs.
One of the highest risk investments that could be encountered is private equity or unquoted shares. This is an investment into a private business often one which the SIPP member has a stake in privately or an interest in.
The key here is that this is usually a small business with a closed shareholding which are not quoted on a recognised stock exchange.
Unquoted shares
The attraction of holding unquoted shares in a SIPP is that any profits (which can be high given the high risk being taken) are free from capital gains tax. However, the risk of failure is very high and so for many SIPP providers this is an investment which is to risky for them to allow.
The main issue for the providers is the lack of liquidity and the difficulty of obtaining a valuation. Just like business valuations such investments need to be handled with care and the use of an accountant who specialises in business valuations is highly recommended.
If you would like an impartial review of the SIPP involved in your divorce, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk
Tags: Business valuations, Divorce, Divorces, highest risk, Investments, Pensions, Pensions & divorce, Private Equity, Risks, Self Invested Personal Pension, SIPP, Small business, Unquoted shares | Posted in Self Invested Personal Pensions |
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Posted August 20th, 2010
Self Invested Personal Pensions (SIPPs) are designed to allow individuals to control their pension, using a wide range of investments. Their popularity has soared in recent years and they are becoming more and more common when dealing with pensions on divorce.
However, they have only recently (April 2007) become regulated and there are risks associated with SIPPs which are worth knowing. This is especially so if you know that the financial aspects of your divorce will take time to be agreed.
The list below illustrates the broad range of investments available.
• UK and overseas shares
• Gilts and overseas securities
• OEICs and unit trusts
• Exchange Traded Funds
• Investment Trusts
• Insurance Company Funds
• Unquoted shares
• Warrants
• Hedge funds
• Deposit accounts
• Commercial Property
With such a wide range of investments available and the potential for these to fall in value over time, it would be prudent to understand what lies beneath. I will expand on this issue in future blogs so watch this space.
If you would like an impartial review of the SIPP involved in your divorce, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk
Tags: Commercial property, Deposit accounts, Divorce, Exchange Traded Funds, Financial aspects, Gilts, Hedge funds, Insurance Company Funds, Investment Trust, Investments, OEICs, Overseas securities, Overseas shares, Pension, Pensions & divorce, Pensions on divorce, Personal Pensions, Self Invested Personal Pension, SIPPs, UK shares, Unit trusts, Unquoted shares, Warrants | Posted in Self Invested Personal Pensions |
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Posted August 9th, 2010
An issue to be aware of when considering ill health in divorce matters, is its potential impact on pension asset values.
It can reasonably be argued that based on longevity a pension asset in the hands of someone with a shorter life expectancy has less value than it would in the possession of someone with an average life expectancy. It is anticipated that the pension income will be paid out for a shorter period of time.
In a divorce, it would seem an appropriate approach to look at pension sharing and perhaps consider a greater proportion of the pension be shared with the spouse who is in good health. This may enable the spouse in poor health to retain more non pension asset (which could die with them) and pass this wealth down through their family. For completeness, a review of the death benefits available should also be undertaken.
For more information on this and how life expectancy affects pension valuations and other aspects of your finances on divorce, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk
Tags: Death benefits, Divorce, Ill Health, Life expectancy, Longevity, Pension, Pension asset values, Pension Sharing, Pension valuations, Pensions, Pensions & divorce, Pensions and Divorce, Poor health, Spouse | Posted in Ill Health |
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Posted August 2nd, 2010
Thankfully, HMRC has retreated from its stance on drawdown to drawdown transfers between age 50 and 55. The alternative name for drawdown is unsecured pension (USP)
Previously, an unauthorised payment charge was applied on the income drawn where an individual over 50 but under age 55 transfers their pension in payment to another provider. The charge was 55%.
This mainly caught those who tried to transfer to another pension provider before the minimum pension age increased from 50 to 55 on 6 April 2010.
It pleasing that HMRC has moved to remove this wrinkle from the pension landscape. Hopefully, (although I doubt it) this is the first of many changes from the coalition government.
If this affects you or you require any further assistance, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk
Tags: 55, 55% charge, 6 April 2010, Coalition Government, Drawdown Transfer, Drawdown Transfers, Minimum Pension Age, Pension Provider, Pensions & divorce, Unauthorised Payment Charge, Unsecured Pension, USP | Posted in Drawdown |
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Posted July 30th, 2010
From 2011/2012 the Government announced in its budget their intention to remove the compulsory need to purchase an annuity from age 75.
As an interim measure, legislation will be written into the Finance Bill 2010 to increase the purchase age to 77. This increase in the age to 77 by which time the member must secure an income has effect on or after 22 June 2010. The change applies equally for Inheritance Tax purposes to members who die on or after that date.
Since April 2006, it has not been compulsory to purchase an annuity at age 75 (although some individual schemes insist on it) when an alternatively secured pension (asp) became an option. ASP has not been universally popular due to the poor income rates and punitive tax charges (up to 82% on death!).
The Government intends to consult shortly on the finer detail of what is planned. Watch this space on developments which in my opinion, will have far reaching implications for divorce, annuities, annuity rates and retirement planning.
If you require any further assistance, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk
Tags: 82%, Age 75, Age 77, Alternatively Secured Pension, Annuities, Annuity, Annuity rates, April 2006, ASP, Compulsory annuitisation, Divorce, Pensions & divorce, Retirement Planning, Tax | Posted in Annuity |
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