Pensions Gold: Legislation.
In April 2006, the UK Government updated pension parameters to allow for the investment of physical gold into pensions, supporting the notion of a more balanced, and therefore protected retirement wealth. Relaxed rules also mean a more flexible lifetime limit for contributions, so you can save more when you can afford it.
The type of pension required to house gold is called a Self Invested Personal Pension (SIPP). These benefit from the flexibility of the updated legislation and can house a mix of traditional paper assets with tangible assets such as commercial property and now investment grade gold.
This can be achieved if you have no current pension provision but want to open a SIPP, or if you have an existing pension which you wish to transfer into the more flexible structure. A SIPP can even be opened alongside existing personal or company schemes to allow versatility.
Investments are chosen by you, and the SIPP provider acts as a fund trustee. When retirement comes, the capital provides an income which can be drawn either directly from the SIPP (subject to limits) or via an annuity purchased from an insurer. The SIPP trustee takes care of wrapping all these investments into one portfolio, while assuring that reporting and legal obligations are met.
You can establish a SIPP either directly or by using an Independent Financial Advisor (IFA) of your own to guide you through the risks and rewards of the various asset classes on offer, before you make any decisions.
Good Deliver Bars.
The type of gold required for a gold Sipp has to be of purity not less than 995 thousandths, and in the form of a bar. These ’Good Delivery Bars’ are recognised by the bullion market and the high purity levels mean you own more gold content for your money.
Gold is the only physical commodity you can currently hold directly in a SIPP.
I recommend your gold should be in the form of small 100 gram bullion bars, providing you the flexibility to sell any part of your gold holding at any time. These bars are fully allocated to yourselves and segregated from other holders.
Like other forms of investment gold, there is no VAT applicable to gold bars.
The low cost of purchasing gold into a pension is illustrated by two factors.
Gold receives the same tax relief as other qualifying assets when bought as part of a pension. So for top rate tax payers, that means a whopping 40% off the price of gold.
Secondly, for many of the securities products which dominate pension portfolios, management costs have steadily escalated, eating away at their tax efficiency. Investing in physical gold attracts far lower management fees, less than one tenth of the charge applied to a typical unit trust.