{"id":52025,"date":"2021-10-14T08:30:00","date_gmt":"2021-10-14T08:30:00","guid":{"rendered":"https:\/\/finsbury-associates.com\/?p=52025"},"modified":"2021-09-07T12:07:42","modified_gmt":"2021-09-07T12:07:42","slug":"uk-pensions-defined-benefit-self-invested","status":"publish","type":"post","link":"https:\/\/finsbury-associates.com\/uk-pensions-defined-benefit-self-invested\/","title":{"rendered":"UK Pension: Defined Benefits Schemes vs Self Invested Personal Pensions (SIPPS)"},"content":{"rendered":"<p>[et_pb_section fb_built=&#8221;1&#8243; _builder_version=&#8221;3.22&#8243; min_height=&#8221;2101.8px&#8221; custom_margin=&#8221;||-1px|||&#8221;][et_pb_row _builder_version=&#8221;3.25&#8243; background_size=&#8221;initial&#8221; background_position=&#8221;top_left&#8221; background_repeat=&#8221;repeat&#8221; min_height=&#8221;658px&#8221; custom_margin=&#8221;-1px|auto|-114px|auto||&#8221; custom_padding=&#8221;44px||0px|||&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;3.25&#8243; custom_padding=&#8221;|||&#8221; custom_padding__hover=&#8221;|||&#8221;][et_pb_text _builder_version=&#8221;4.9.4&#8243; background_size=&#8221;initial&#8221; background_position=&#8221;top_left&#8221; background_repeat=&#8221;repeat&#8221; min_height=&#8221;246px&#8221; custom_margin=&#8221;-33px||40px|||&#8221; custom_padding=&#8221;0px||0px|||&#8221; hover_enabled=&#8221;0&#8243; sticky_enabled=&#8221;0&#8243;]<script src=\"https:\/\/2927056918d24d899d00333edddf19f0.js.ubembed.com\" async><\/script><!-- divi:image {\"id\":51791,\"width\":479,\"height\":479,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} --><span style=\"font-weight: 400;\">UK Pensions can be confusing and the first step is to understand them. One question that we get asked a lot is \u201cWhat is the difference between a Defined Benefit Scheme as Self Invested Personal Pension (SIPP)\u201d.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Before delving into the differences, let\u2019s first explore what each of these pension schemes is. We also have a free downloadable guide on <span style=\"text-decoration: underline;\"><a href=\"http:\/\/www.finsbury-associates.com\/uk-pension-guide\">UK pensions<\/a><\/span> which you may find useful and can be found <a href=\"http:\/\/www.finsbury-associates.com\/uk-pension-guide\">here<\/a> and you can also book a <span style=\"text-decoration: underline;\"><a href=\"http:\/\/www.finsbury-associates.com\/contact-us\">free consultation<\/a><\/span> if you need some advice.<\/span><span style=\"font-weight: 400;\"><\/span><\/p>\n<p><span style=\"font-weight: 400;\"><\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p><!-- \/divi:paragraph --><!-- divi:paragraph --><\/p>\n<h2>What is a Defined Benefit Scheme?<\/h2>\n<p><span style=\"font-weight: 400;\">A <a href=\"https:\/\/en.wikipedia.org\/wiki\/Defined_benefit_pension_plan\" target=\"_blank\" rel=\"noopener\">Defined Benefit Scheme<\/a>, also sometimes referred to as a Final Salary Scheme is pre-defined in its structure. These schemes provide a structured income for life, with elements such as; the age of access, death benefits and benefit escalation also structured by the scheme.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><\/span><\/p>\n<h2>What is a Self Invested Personal Pension (SIPP) Scheme?<\/h2>\n<p><span style=\"font-weight: 400;\">A Self Invested Personal Pension Scheme, also known as a SIPP, is a flexible pension structure. Within this structure, individuals can choose from a diverse range of investments, all of which are approved by HM Revenue and Customs.\u00a0 SIPP schemes are known for providing flexible retirement options.<\/span><span style=\"font-weight: 400;\"><\/span><\/p>\n<p><span style=\"font-weight: 400;\"><\/span><\/p>\n<h2>What Types of UK pension schemes are there?<\/h2>\n<p><span style=\"font-weight: 400;\">In addition to Defined Benefit Schemes and SIPPS, there are multitude of other schemes such as:<\/span><span style=\"font-weight: 400;\"><\/span><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p><!-- \/divi:paragraph -->[\/et_pb_text][et_pb_text _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221; min_height=&#8221;683.9px&#8221;]<\/p>\n<table border=\"1\" style=\"width: 100%; border-collapse: collapse;\">\n<tbody>\n<tr>\n<td style=\"width: 50%;\"><strong>Defined Contribution Schemes<\/strong><\/td>\n<td style=\"width: 50%;\">Members and their employers typically contribute a percentage of the members salary into a defined contribution scheme where a fund value is held. This fund value is then invested and will rise\/fall depending on investment performance as well as if and when further contributions are added.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\"><strong>Small Self Administered Schemes (SAAS)<\/strong><\/td>\n<td style=\"width: 50%;\">\n<p><span style=\"font-weight: 400;\">A SSAS is primarily set up by private and family run businesses for the benefit of the owner directors and family employees. The number of members for a SSAS generally does not exceed 11. A SSAS can offer particular benefits to business owners including:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Commercial property can be bought and leased back to your business (or any third party)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Loans can be advanced to your business.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Investing in your company via the SSAS by purchasing an equity stake<\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\"><strong>State Pensions<\/strong><\/td>\n<td style=\"width: 50%;\">\n<p><span style=\"font-weight: 400;\">To be eligible for the State Pension, you must have paid or been credited with NI (National Insurance) contributions. The amount provided by the State Pension changes, increasing yearly by the \u2018triple-lock\u2019 or whichever of the following are higher:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Earnings \u2013 this is calculated on the % increase in average wage growth in Great Britain<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Prices \u2013 The Consumer Prices Index (CPI) measured the % increase in UK prices<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">2.5%<\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221; min_height=&#8221;119px&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;][et_pb_text _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;]<\/p>\n<h2>What are the major differences between DBS and SIPP Schemes?<\/h2>\n<p>[\/et_pb_text][et_pb_text _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;]<\/p>\n<p>&nbsp;<\/p>\n<table border=\"1\" style=\"border-collapse: collapse; width: 100%;\">\n<tbody>\n<tr>\n<td style=\"width: 50%;\"><b>Defined Benefit Scheme<\/b><\/td>\n<td style=\"width: 50%;\"><b>Self Invested Personal Pension (SIPP)<\/b><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\"><span style=\"font-weight: 400;\">Normal retirement age (NRA) typically at 60 or 65. Only at NRA can the pension be accessed without penalty<\/span><\/td>\n<td style=\"width: 50%;\"><span style=\"font-weight: 400;\">Can be accessed from the age of 55\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\"><span style=\"font-weight: 400;\">Fixed income<\/span><\/td>\n<td style=\"width: 50%;\"><span style=\"font-weight: 400;\">Ability to set income<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\"><span style=\"font-weight: 400;\">Income is calculated as a percentage of final salary and years at the employer<\/span><\/td>\n<td style=\"width: 50%;\"><span style=\"font-weight: 400;\">Income is determined by investment value and drawdown rate chosen. Flexibility is provided to the income which is drawn each year<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\"><span style=\"font-weight: 400;\">No investment rule, income grows in line with the scheme rules and typically this is in line with inflation<\/span><\/td>\n<td style=\"width: 50%;\"><span style=\"font-weight: 400;\">Investment approach<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\">\n<p><span style=\"font-weight: 400;\">On your death, your spouse will receive typically \u00bd or \u2153 of what you would have received<\/span><\/p>\n<\/td>\n<td style=\"width: 50%;\">\n<p><span style=\"font-weight: 400;\">On your death, a nominated beneficiary receives 100% of the pension value<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\">\n<p><span style=\"font-weight: 400;\">Risk is at a corporate level (if the pension fund is underfunded or the company goes into liquidation, the pension can be reduced or lost)<\/span><\/p>\n<\/td>\n<td style=\"width: 50%;\"><span style=\"font-weight: 400;\">Risk is at an investment level (this depends on what assets you invest your pension into)<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 50%;\"><span style=\"font-weight: 400;\">Generally no passing of benefits after spouse<\/span><\/td>\n<td style=\"width: 50%;\"><span style=\"font-weight: 400;\">Ability to pass in entirety to the beneficiaries<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>[\/et_pb_text][et_pb_text _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221; custom_margin=&#8221;49px|||||&#8221;]<\/p>\n<h3><strong>What next?<\/strong><\/h3>\n<p><strong><span style=\"font-weight: 400;\">If you would like further information on your specific situation, you can book a complimentary consultation <\/span><span style=\"text-decoration: underline;\"><a href=\"http:\/\/www.finsbury-associates.com\/contact-us\"><span style=\"font-weight: 400;\">here<\/span><\/a><\/span><span style=\"font-weight: 400;\">. You can also download our FREE guide to UK Pensions <\/span><\/strong><span style=\"text-decoration: underline;\"><a href=\"http:\/\/www.finsbury-associates.com\/uk-pension-guide\">here<\/a><\/span>.<\/p>\n<p>[\/et_pb_text][et_pb_button button_url=&#8221;https:\/\/finsbury-associates.com\/contact-us\/&#8221; button_text=&#8221;Book a free consultation&#8221; button_alignment=&#8221;left&#8221; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221; custom_button=&#8221;on&#8221; button_text_color=&#8221;#FFFFFF&#8221; button_bg_color=&#8221;#A49564&#8243; button_border_color=&#8221;RGBA(0,0,0,0)&#8221; button_border_radius=&#8221;11px&#8221; button_font=&#8221;|700|||||||&#8221; background_layout=&#8221;dark&#8221; box_shadow_style=&#8221;preset1&#8243; box_shadow_color=&#8221;RGBA(116,129,141,0.62)&#8221;][\/et_pb_button][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>UK Pensions can be confusing and the first step is to understand them. One question that we get asked a lot is \u201cWhat is the difference between a Defined Benefit Scheme as Self Invested Personal Pension (SIPP)\u201d. &nbsp; Before delving into the differences, let\u2019s first explore what each of these pension schemes is. We also [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":52028,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","cybocfi_hide_featured_image":"","footnotes":""},"categories":[61,40,5],"tags":[],"_links":{"self":[{"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/posts\/52025"}],"collection":[{"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/comments?post=52025"}],"version-history":[{"count":0,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/posts\/52025\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/media\/52028"}],"wp:attachment":[{"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/media?parent=52025"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/categories?post=52025"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/tags?post=52025"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}