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Frequently Asked Questions
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Last Reviewed: 16 Jul 2025
Navigating SIPPs and Equity Release
Planning for retirement requires clarity, and we are here to guide you every step of the way.
SIPPs: A flexible personal pension that lets you choose and manage your own investments. The value of investments can fall as well as rise, and you may get back less than you invest.
Equity Release: A regulated way to release tax-free cash from your home while continuing to live there. It reduces the value of your estate and may affect eligibility for means-tested benefits.
Everything You Need to Know About SIPPs and Equity Release
Weāve compiled answers to common questions about SIPPs and equity release.
These FAQs are provided for general information only to help you understand key financial concepts. They are not a substitute for personalised advice.
Always speak to an FCA-regulated adviser before making decisions about pensions, investments, or property finance.
What Is a SIPP and How Does It Work?
A Self-Invested Personal Pension (SIPP) is a type of pension plan that allows you to manage your retirement savings by choosing your own investments. Unlike traditional pensions, SIPPs offer more flexibility and control, letting you invest in a wide range of assets, including stocks, bonds, and commercial property. You can access your funds from the age of 55, with tax benefits on contributions.
Am I Eligible for a SIPP?
Anyone under the age of 75 and who is a UK taxpayer can open a SIPP. Contributions are based on your annual income, and you can contribute up to 100% of your earnings each year, up to the annual contribution limit (Ā£40,000 for most people, but this can be lower for high earners).
What Are the Benefits of a SIPP?
One of the primary benefits of a SIPP is the level of control it gives you over your retirement savings. You have the flexibility to choose from a wide range of investments, which can help diversify your portfolio and potentially grow your wealth. SIPPs also offer tax advantages, including tax relief on contributions and tax-free growth on investments. Additionally, you can access your pension pot from the age of 55 and enjoy a variety of options when it comes to withdrawing funds.
How Much Can I Contribute to a SIPP?
You can contribute up to 100% of your annual income or Ā£40,000 per year, whichever is lower. For high earners, the contribution limit may be reduced, and if your income exceeds Ā£150,000, this reduction applies. If you haven’t used up your contribution allowance in previous years, you can carry it forward and contribute more, provided you still meet the eligibility criteria.
What Are the Tax Advantages of a SIPP?
SIPPs offer several tax advantages, making them an attractive option for retirement savings. Contributions to a SIPP are eligible for tax relief at your highest income tax rate, whether itās 20%, 40%, or 45%. The growth of investments within the SIPP is not taxed, meaning your savings can grow more efficiently over time. When you reach retirement, you can also take up to 25% of your pension pot as a tax-free lump sum.
What Is Equity Release and How Does It Work?
Equity release is a financial product that allows homeowners aged 55 or older to unlock some of the value tied up in their property. This can provide a lump sum or regular payments that can be used to fund retirement or other needs. The most common form of equity release is the lifetime mortgage, where you borrow money against your home, with the loan plus interest typically repaid when you sell the property, often after your death. This allows you to stay in your home while accessing its value.
Who Is Eligible for Equity Release?
To be eligible for equity release, you generally need to be aged 55 or older, although the exact age requirement can vary by provider. You must own a property, and it should be worth a certain minimum value, typically around Ā£70,000 or more. Lenders also require you to have enough equity in the property, so the amount you can borrow will depend on the value of your home and the type of plan you choose.
What Are the Different Types of Equity Release?
There are two main types of equity release: lifetime mortgages and home reversion plans. A lifetime mortgage is the most common type, where you take out a loan secured against your property. You can either make monthly payments on the interest or allow the interest to accumulate over time. A home reversion plan involves selling a part or all of your property to a provider in exchange for a lump sum or regular payments, while still allowing you to live in the property for as long as you wish.
What Are the Risks of Equity Release?
Equity release is not without risks. One of the main concerns is that the value of your estate will be reduced, as the loan, plus interest, must be repaid when the property is sold. This means your heirs may inherit less. In the case of a lifetime mortgage, the interest on the loan compounds over time, which can significantly increase the amount you owe. Equity release may also impact your eligibility for means-tested benefits, and in some cases, falling property prices could lead to a situation where the amount owed exceeds the value of the property, although many plans now offer a “no negative equity” guarantee.
How Does Equity Release Affect My Inheritance?
Equity release reduces the amount of inheritance you can leave to your heirs, as the loan, including accumulated interest, will be repaid when your property is sold, typically after your death. If you release a significant portion of your home’s equity, this could drastically decrease the value of your estate. Itās important to consider how this might impact your family and discuss your plans with them before making any decisions.
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Important Note
BankingTimes is not FCA-authorised and does not provide financial advice. We act as an introducer to qualified advisers, including Age Partnership Limited (FCA FRN 425432). Equity release reduces the value of your estate and may affect eligibility for benefits, always seek guidance from an FCA-authorised adviser.
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