Guide to SIPPs. Investment Helpdesk:

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1 Investment Helpdesk:

2 SIPP stands for Self Invested Personal Pension. SIPPs are a flexible type of personal pension. Like most, they are designed to provide a retirement pot from which you can draw a lump sum, generally paid tax free, and a taxable income when you retire. SIPPs were introduced in 1989 to offer people saving for retirement more flexibility and control over their financial future. Pensions such as Stakeholder and Personal Pensions (typically run by life assurance companies), restrict your investment choice to a range of funds run by the pension providers own fund managers. With a SIPP you can invest in the same wide range of investments that you may already be choosing for your Stocks and Shares ISA and other investment accounts. At retirement, SIPPs may also offer greater flexibility than many personal and occupational, with a wider range of options to suit your individual needs. Is a SIPP right for me? A SIPP might be appropriate if you re comfortable making your own investment decisions, as it is up to you to monitor and manage your SIPP s investments. As with most personal there will be risk to your capital. How much risk will depend on the type and variety of the investments you choose. SIPP costs Pension costs can be an important factor in determining the size of your retirement fund. The higher your pension charges, the less money you have available to invest. Competition has driven the cost of SIPPs down and we believe that our Charles SIPP is among the best value around. You pay a custody charge of no more than 0.25% p.a. plus VAT based on the value of the funds held and, in some cases, also individual shares. Other fees apply and we will detail these in full later in this guide.

3 Registered are one of the most tax efficient ways to save for your retirement and SIPPs have the same generous tax benefits as other, including: Basic rate tax relief added at source If applicable, you can reclaim higher and additional rate tax relief from HMRC Your investments grow free from UK income and capital gains taxes You can typically take 25% of your pension fund as a tax-free lump sum Tax relief Most UK residents under the age of 75, including children and some non-tax payers, qualify for tax relief on contributions to their. Individuals may contribute the greater of 2,880 (boosted to 3,600 with basic rate tax relief) or 100% of their relevant UK earnings before tax subject to the annual allowance rules outlined in the Pension Contributions section. For every 80p you pay into your SIPP, the government adds 20p in basic rate tax relief, boosting it to 1. The SIPP operator claims this basic rate tax relief on your behalf and adds it to your pension when they receive it from HMRC this typically takes between 7 and 12 weeks. Higher and Additional rate tax payers enjoy even greater tax relief as they can claim back further tax through their tax return or their local tax office. The table below shows you how tax relief works Basic rate taxpayer (20%) Higher rate taxpayer (40%) Additional rate taxpayer (45%) Your contribution (80%) 8,000 8,000 8,000 Government contribution (20%) 2,000 2,000 2,000 Total gross payment to your pension Extra tax relief you can reclaim via your tax return 10,000 10,000 10, ,000 (20%) 2,500 (25%) Total tax relief 2,000 (20%) 4,000 (40%) 4,500 (45%) Total cost to the investor of the 10,000 SIPP contribution 8,000 6,000 5,500 If your employer makes a contribution this is paid gross. Your employer can claim corporation tax relief if the contribution is deemed a valid business expense. Any contribution your employer pays on your behalf shouldn t count as a taxable benefit and should not generally be liable to income tax or National Insurance. The tax treatment of depends on individual circumstances and may be subject to change in future.

4 If you already have two or more pension pots, you can consolidate them all into a SIPP so that you can manage them in one place. The benefits of consolidating into a SIPP include: Seeing the full picture you can view more of your retirement provision in one place Eeasier to manage and to apply a consistent investment strategy Less administration and less paperwork too It might not be appropriate for you to consolidate all your into a SIPP. For example, if you re a member of a final salary pension scheme or another type of pension scheme with a promised benefit or that your employer pays into. If you re not sure if transferring a pension is right for you, please speak to a professional financial adviser. If you don t have an adviser please contact our helpdesk who will be more than happy to arrange a meeting with a Charles Stanley financial adviser.

5 The lifetime allowance is the maximum value of benefits that you can take from all your pension plans without paying a lifetime allowance charge. The standard lifetime allowance is currently 1.25 million. If the total value of your UK pension benefits, when you take them or when you reach age 75, exceeds your remaining lifetime allowance you could have to pay a lifetime allowance tax charge of 25% or 55% on the excess.

6 One of the key benefits of a SIPP is the wide investment choice that it offers. With the Charles SIPP you may invest in: UK listed equities Investment Trusts, including Real Estate Investment Trusts (REITs) Funds - Unit Trusts and Open Ended Investment Companies (OEICs) Exchange Traded Funds (ETFs) and Commodities (ETCs) Gilts and Bonds Warrants Certain overseas shares listed on the main European, US, Canadian and Far Eastern markets Help with investing from Charles If you would like some guidance, we have a wealth of research and commentary in the News, Features and Research section of our website. We also produce a list of our preferred funds The Foundation Fundlist. This is created by our experienced research team and is monitored and updated to reflect our preferred funds in popular sectors. From the investments on the Foundation Fundlist we have created Foundation Portfolios which feature a range of funds blended together for different investment objectives. Please note that the inclusion of a fund in the Foundation Fundlist or in a Foundation Portfolio does not imply a recommendation, but it could highlight an option worthy of your attention. If you are unsure where to invest, please seek professional financial advice.

7 You may take the retirement benefits from your SIPP from age 55. If you wish to, you may continue to contribute to your pension up to the age of 75. Once you decide to take your retirement benefits you are normally permitted to take 25% of your pension fund as a lump sum free from tax. You must then use the remainder of your fund to provide a taxable income. There are several ways this income can be paid; Lifetime Annuity Impaired Life/Enhanced Annuity Capped Drawdown Flexible Drawdown Phased Retirement A combination of these options Income Drawdown Income drawdown lets you take an income from your SIPP without the need to buy a lifetime annuity. Subject to certain limits income drawdown gives you control over how much income you can take and how often you take it. You can maintain control of your SIPP s investment strategy while taking benefits. Because your pension fund remains invested there are higher risks associated with income drawdown than, for example, a lifetime annuity.

8 There are two types of drawdown: Capped Drawdown puts a limit on the maximum amount of income you can draw from your pension fund each year. Before your 75th birthday, the limit applies for a three year period before it is recalculated for the following three year period. From the first review anniversary after age 75 the limit is recalculated, then recalculated each year thereafter. There is no minimum amount of income that must be drawn, so you don t have to draw a pension if you don t wish to. The maximum permitted annual income is 150% of the relevant single-life annuity rate, from the tables known as the basis rate. The basis rate determines how much income per 1000 of crystallised fund you may withdraw from you fund. Flexible Drawdown lets you take any amount of income from your pension fund, (subject to income tax) but has three requirements: You must meet the Minimum Income Requirement (MIR). This means you must receive relevant income in payment of at least 12,000 in the tax year in which you make the Flexible Drawdown declaration. Relevant income includes, but isn t limited to income from your state pension, lifetime annuities and certain secured from company pension schemes. You must already be receiving relevant income from each source at the time of signing the declaration. You must have stopped contributing to including being an active member of a final salary scheme in the tax year preceding the date of the declaration.

9 Lifetime Annuity A lifetime annuity is regular income for life, which you can buy from an insurance company using all or part of your pension fund, typically when you retire. If you decide to take a tax- free lump sum the remainder of your fund can then be used to purchase a lifetime annuity, which will pay you a taxable income for the rest of your life. Many people take the lifetime annuity offered by their existing pension provider. However you re free to buy a lifetime annuity from any insurance company in the market, and shopping around could help you secure a higher income. Impaired Life/Enhanced Annuity If you take prescribed medication, are in poor health or have suffered from a serious medical condition (such as cancer, heart attack, stroke, diabetes, high cholesterol) or you are, or have been, a smoker, you may be eligible for a lifetime annuity that pays a higher level of income. These types of lifetime annuities are widely available and it s usually worth shopping around to find the best deals. Phased Retirement This lets you use part of your pension fund to secure a retirement income by purchasing a lifetime annuity or by an alternative method such as income drawdown. The rest remains invested until you decide that further retirement benefits are required.

10 When you take out a SIPP you are asked to nominate a beneficiary or beneficiaries in the event of your death. When you die, death benefits will be paid to your dependants or nominated beneficiaries at the discretion of the trustee. If you die before age 75 and before taking the benefits from your SIPP, the Scheme Trustee might: Pay the full value of your SIPP fund (subject to having sufficient remaining lifetime allowance) as one or more tax-free lump sums to your nominated beneficiaries Purchase annuities to provide a taxable income for dependants Provide any dependants with a drawdown pension which would be subject to income tax. If you die at or after age 75 and before taking benefits, or die while taking benefits from funds still invested in the SIPP, the Scheme Trustee may: Use any remaining funds to provide a dependant with a taxed pension directly from the SIPP Purchase annuities to provide a taxable income for dependants Pay any remaining funds to your beneficiaries as one or more lump sums, less a tax charge, which is currently 55%

11 Pension New rules could give you even more flexibility. New legislation that affects SIPP retirement benefits will come into force from 6th April There will be fewer restrictions on the way you can take your benefits, making it easier to shape the retirement benefits that match your lifestyle. The include: Taking all your pension fund as a lump sum. You can still take 25% of your fund tax-free if you have sufficient remaining lifetime allowance, but you ll have to pay income tax on the rest Drawing flexible income and lump sums known as flexi-access drawdown. You could take a cash lump sum at any time after age 55 and vary your pension income up or down whenever you like. Remember, you ll still have to pay income tax on any payments above the lump sum (subject to having sufficient remaining lifetime allowance). Passing your pension on to your loved ones free from tax. If you re taking income drawdown and die before age 75, the fund could be passed to any nominated beneficiary free from tax. On death or after age 75 a nominated beneficiary will have to pay tax on the inherited pension when they take money out. If you have an existing capped drawdown pension, you will be able to elect to convert it to a flexi-access pension allowing you to vary your pension up or down at any time without limit. This will occur automatically if you ask to request a pension that is more than the maximum capped drawdown pension.

12 Wide investment choice - Choose from over 7,000 funds (OEICs and unit trusts), UK listed shares, investment trusts, exchange traded funds, exchange traded commodities, gilts, bonds, cash and certain overseas shares. Easy to invest and manage online - Check how your funds are performing, make payments, and switch between investments online, anytime. Dealing transactions take place during market hours. Make a transfer from your other - If you have previously accumulated you can transfer them to the Charles SIPP and manage all your retirement savings in one place. If you re not sure that transferring a pension is right for you, please seek professional financial advice. Competitive charges - No hidden charges, just competitive pricing across the board: VAT SIPP wrapper fee Low platform fees No charge for holding UK shares if you trade six times each half year Free fund dealing Share trading from 10

13 Original in-house research and analysis - Our in-house experts will provide you with frequent, comprehensive reports on of a wide range of UK listed companies, investment trusts and funds. We also work with other fund management companies to capture their views on markets and their funds. Supporting your investment decisions - Regularly updated services that make choosing your investments easier. Foundation Fundlist - our preferred funds in each sector Foundation Portfolios suggested investment portfolios based on different investment aims Award winning client service - Our UK-based helpdesks are staffed by teams of polite, friendly experts who have won awards for client service and innovation. In-house SIPP Trustees and Administrators - Having our own in-house Trustee and Administrator, EBS Management PLC, helps us to offer a seamless service. EBS Management PLC has been administering SIPPs for over 18 years and has a wealth of experience. Investors should be aware that past performance is not a reliable indicator of future results and that the price of shares and other investments and the income derived from them may fall as well as rise and the amount realised may be less than the original sum invested.

14 Charles Platform/Custody Fee Stocks and Shares (inc. ETPs, Investment Trusts, Gilts and Bonds) Clean Priced Funds (Unit Trusts & OEICs) Annual SIPP Administration Charge No charge if 6 or more chargeable trades are placed in a six-monthly period. (Please note the six monthly charging periods run from 1st April to 30th September and 1st October to 31st March. Otherwise, 0.25% per annum on all share investments (excluding cash balance) held across all accounts (minimum 20, maximum 150 per annum), charges pro rata six-monthly in arrears. 0.25% per annum on first 500,000 of Funds held across all accounts, 0.15% per annum on Funds in excess of 500,000 (across all accounts), and a further reduction to 0.05% per annum on the balance of Fund holdings (across all accounts) in excess of 2 million, charges pro rata monthly in arrears VAT per annum VAT is not applicable except where stated. Where stated it is levied at the standard rate for UK and EU residents Charles SIPP Ad Hoc Charges Set Up of SIPP Transfer in of existing Excess fund repayment (return of over contribution) Pension Splitting on divorce Triviality Payment Transfer out to UK Scheme Set Up of SIPP Transfer out to Overseas Pension Scheme Arranging Annuity Purchase if not through Charles Stanley Charles SIPP Drawdown Charges Set Up of Capped Drawdown Set Up of Flexible Drawdown Each GAD Calculation Annual Payroll Fee No charge No charge 75 + VAT Time cost only + VAT VAT VAT (+ costs of stock withdrawal) VAT Time cost only + VAT VAT No charge VAT VAT 50 + VAT For our full Rates and Charges please see: Alter Payment Amount/Frequency Ad Hoc Income Payments 10 + VAT 25 + VAT

15 Pension contributions Charles Stanley & Co. Limited is one of the oldest firms on the London Stock Exchange, and can trace its origins back to For over 220 years we have provided stockbroking and investment management services to private investors, charities, trusts and companies. We launched Charles in 2013 to provide an alternative for the modern, self-selecting investor. Charles is a low cost online execution-only trading platform that offers ISA s, Investment Accounts and SIPPs. We aim to provide a fairer deal for all our clients, backed by expert market analysis and opinion, and UK-based telephone support during business hours.

16 This guide is solely for purposes and does not constitute advice or a personal recommendation or take into account the particular investment objectives, financial situations or needs of individual investors. If you are unsure whether an investment or a pension is suitable for you, please seek professional financial advice. This guide is based on our interpretation of the Taxation of Pensions Act 2014, Part 4 of Finance Act 2004 (as amended) and associated Regulations, existing law, and H M Revenue & Customs published guidance as at the date of this Guide, all of which may be subject to change. While we believe this interpretation to be correct, we can give no guarantee in this respect. The tax treatment of depends on individual circumstances and may be subject to change in future. Charles Stanley & Co. Limited All rights reserved. No part of this factsheet may be reproduced or distributed in any manner without the written permission of Charles Stanley & Co. Limited, and accept no liability whatsoever for the actions of third parties in this respect. Charles Stanley & Co Limited and EBS Management PLC are both authorised and regulated by the Financial Conduct Authority and wholly owned subsidiaries of Charles Stanley Group PLC. Charles Stanley & Co. Limited is a member of the London Stock Exchange. Registered in England No Registered office 25 Luke Street, London EC2A 4AR. T January 2015