In many respects there is little difference between a Self Invested Personal Pension (SIPP) and a Stakeholder Pension, or indeed a Personal Pension available through a conventional plan provider.
They are all subject to the same contribution rules, have exactly the same taxation treatment and can provide the same type of benefits at the same time.
The key difference between SIPPs and the other types of personal pensions is that the choice of investment options is usually greater under the SIPP.
It brings a potential problem in the context of a divorce settlement where one of the parties is granted a share in the SIPP value of their ex-spouse.
SIPPs for example can invest directly in commercial property and also raise a mortgage to aid the purchase of that property. So in this respect they can be quite “illiquid”.
In order for the SIPP value to be shared and for the receiving spouse move their share to their own pension plan, the commercial property might need to be sold.
Unless of course the SIPP has other more liquid assets as well as the property, for example cash or shares, the latter of which might be sold more quickly to provide a transfer value.
Sometimes the commercial property inside a SIPP is being used as the business premises of a company associated with the member and therefore it might be disadvantageous for all parties concerned to force the sale of the property.
However in circumstances where the property would need to be sold to complete the share it might be better for the parties to agree to “offset” instead.
So instead of sharing the SIPP value the receiving party agrees to a greater share of the residential property owned by the couple or perhaps a greater cash lump sum from other resources.
Either way it pays to acquire detailed information about investments held in the SIPP as early as possible in the divorce process.
Photo credit: Flickr/Alan Cleaver
