24 May 2018 | SHARES | 25M
any individuals with SIPPs (self-invested
personal pensions) are likely to enjoy
a cash windfall in late May as tax relief
ĨƌŽŵ,DZƌĞůĂƟŶŐƚŽƚŚĞƉƌĞǀŝŽƵƐƚĂdž
year is paid into their account.
/ŶƚŚŝƐĂƌƟĐůĞǁĞǁŝůůĞdžĂŵŝŶĞǁŚLJ
many investors will see cash drop into their account
ŶŽǁĂŶĚŽīĞƌƐŽŵĞƐƵŐŐĞƐƟŽŶƐĨŽƌŚŽǁLJŽƵŵĂLJ
ĐŽŶƐŝĚĞƌĂůůŽĐĂƟŶŐƚŚŝƐĐĂƐŚŝŶƚŚĞŵĂƌŬĞƚƐ͘HOW DOES THE SYSTEM WORK?
tŚĞŶLJŽƵŵĂŬĞĐŽŶƚƌŝďƵƟŽŶƐƚŽĂƉĞƌƐŽŶĂů
pension the administrator of your pension scheme,
typically your pension provider, will claim basic rate
(20%) tax relief on your behalf.
dĂdžƉĂLJĞƌƐŝŶƚŚĞŚŝŐŚĞƌ;κϬйͿĂŶĚĂĚĚŝƟŽŶĂů
;κρйͿƌĂƚĞƚĂdžďƌĂĐŬĞƚƐŵƵƐƚĐůĂŝŵƚŚĞŝƌŽǁŶĞdžƚƌĂ
ƌĞůŝĞĨƉĞƌƐŽŶĂůůLJƚŚƌŽƵŐŚƚŚĞŝƌƚĂdžƌĞƚƵƌŶ͘
tŝƚŚƐŽŵĞƉƌŽǀŝĚĞƌƐ͕ŽŌĞŶďŝŐŝŶƐƵƌĂŶĐĞĮƌŵƐ͕
you receive your tax relief immediately because
ƚŚĞLJŚĂǀĞƐƵĸĐŝĞŶƚĐĂƉŝƚĂůƚŽƉƌĞͲĨƵŶĚƚŚĞƐĞƐƵŵƐ
before they receive the cash from the taxman.
,ŽǁĞǀĞƌ͕ŽƵƚƐŝĚĞƚŚĞďŝŐŐĞƐƚĮƌŵƐƉƌĞͲĨƵŶĚŝŶŐ
isn’t the norm, so you only receive the relevant
relief once it has been paid by HMRC.WHEN DOES THE CASH ARRIVE?
Your SIPP provider collates the details of all thoseĐƵƐƚŽŵĞƌƐǁŚŽŚĂǀĞŵĂĚĞĂƉĞƌƐŽŶĂůĐŽŶƚƌŝďƵƟŽŶ
ŝŶĂƚĂdžŵŽŶƚŚĂŶĚƚŚĞŶŐŝǀĞƐ,DZĂƐŝŶŐůĞĮŐƵƌĞ
ĨŽƌĂůůƚŚĞĐŽŶƚƌŝďƵƟŽŶƐƌĞĐĞŝǀĞĚ͘
HMRC in turn sends the tax relief to your
ƉƌŽǀŝĚĞƌĨŽƌĂůůƚŚŽƐĞĐƵƐƚŽŵĞƌƐŝŶĂƐŝŶŐůĞ
ƉĂLJŵĞŶƚ͘ŌĞƌƚŚŝƐƉƌŽĐĞƐƐŝƐĐŽŵƉůĞƚĞƚŚĞĨƵŶĚƐ
are paid to customers’ accounts.
For a variety of reasons many of us wait
ƵŶƟůƚŚĞĮŶĂůŵŽŶƚŚŽĨƚŚĞƚĂdžLJĞĂƌ͕ƌƵŶŶŝŶŐĨƌŽŵ
ςDĂƌĐŚƚŽρƉƌŝů͕ƚŽŵĂŬĞĐŽŶƚƌŝďƵƟŽŶƐƚŽŽƵƌ
personal pensions.
This could be due to a natural tendency to
ůĞĂǀĞƚŚŝŶŐƐƚŽƚŚĞůĂƐƚŵŝŶƵƚĞŽƌďĞĐĂƵƐĞ
ǁĞĂƌĞǁĂŝƟŶŐĨŽƌĐůĂƌŝƚLJŽŶŽƵƌĞĂƌŶŝŶŐƐĂŶĚ
ƚĂdžƉŽƐŝƟŽŶ͘
If you contribute in this period, then your
ƐĐŚĞŵĞĂĚŵŝŶŝƐƚƌĂƚŽƌŚĂƐƵŶƟůϯϬƉƌŝůƚŽŵĂŬĞ
the claim to HMRC for the relief, which is then paid
on 21 May and will usually appear in customer
accounts a day or two later.
So what should you do with this extra cash?
>Ğƚ͛ƐŶŽǁůŽŽŬĂƚĮǀĞŝŶǀĞƐƚŵĞŶƚŝĚĞĂƐƐƉƌĞĂĚ
across funds, investment trusts and stocks.
ƐĂůǁĂLJƐ͖ŽƵƌŝĚĞĂƐĂƌĞĚĞƐŝŐŶĞĚƚŽŐŝǀĞLJŽƵ
ŝŶƐƉŝƌĂƟŽŶĂŶĚĂƉůĂƞŽƌŵĨŽƌLJŽƵƚŽŐŽŽīĂŶĚ
do further research. They may not be suitable
ĨŽƌĞǀĞƌLJŽŶĞĚƵĞƚŽĚŝīĞƌĞŶƚŝŶǀĞƐƚŵĞŶƚƟŵĞ
ŚŽƌŝnjŽŶƐĂŶĚƌŝƐŬĂƉƉĞƟƚĞ͘WHERE TO INVEST YOUR SIPP CASH