Gold has been one of the top performing investment assets so far in the 21st Century, a fact that should give it a place in your Self-Invested Personal Pension (SIPP) plan. Consider it part of an overall savings and investment plan for your retirement.
In point of fact, you won’t be able to rely on the UK State Pension alone. The maximum basic benefit you will receive under the plan is £113.10 per week for a single person, which is not nearly enough to live comfortably.
Using a SIPP to expand your retirement options
Fortunately, the government allows numerous pension options, over and above the State Pension. And you can choose any pension scheme you want. The government will automatically add tax relief to your plan as long as you don’t pay into it more than the higher of your total annual income, or £40,000.
You can contribute beyond the State Pension, using either an employer plan, or a personal or stakeholder pension. By setting up a SIPP, the Government will provide tax relief equal to as much as 45% of your pension contribution.
Putting gold into your pension
The UK Government began allowing gold to be held in a pension plan beginning in 2006. Not only will they provide tax relief on your contributions, but there is no capital gains tax on any of the gains as a result of owning gold in the plan. Also, the cost of holding gold in your pension is slight, at less then one-tenth the fees assessed on typical unit trusts.
Not all SIPP managers will allow gold to be held in the pensions that they administer. If that is the case, you can open a SIPP with a trustee that does allow it. You can maintain a dedicated gold-based SIPP, specifically for that purpose, as there is no limit on the number of SIPPs you can maintain as long as you stay within required contribution limits.
What kind of gold can you hold in your pension?
The investment is restricted to gold bullion, as traded in the bullion markets, and specifically excludes popular gold coins such as Sovereigns or Canadian Maple Leafs. As well, the investment must be in only gold, and not silver or platinum.
To qualify to be held in a SIPP, the gold must be of a “purity not less than 995 thousandths that is in the form of a bar, or a wafer, of a weight accepted by the bullion markets.” Known in the gold markets as “Good Delivery gold bars”, they are the way gold is commonly traded on the bullion exchanges, and that is based on a 400 ounce bar with a minimum purity of 99.5%.
You can find a list of accredited refiners who produce Good Delivery gold bars through the London Bullion Market Association (LBMA). The LBMA monitors the bars for integrity, as well as for shipping and handling procedures, from when the metal is refined.
Obviously you won’t be in position to invest in gold in denominations of 400 ounces. But through bullion dealers, such as Advantage Gold, you can purchase any amount of Good Delivery gold, ranging from 1 gram up to an entire 400 oz bar. For pension plans, the reduced amount of gold is available with lower transaction costs than is typically true of non-pension acquisitions, such as purchasing gold bullion coins.
Holding and trading the gold in your pension
Like any other security that you hold in your pension plan, you can choose to buy and sell your gold at any time. You can also withdraw the money held in one SIPP account, and transfer it to another. At the appropriate time, you can withdraw the money for personal use.
You won’t have direct management – as in custody over your gold – as that is maintained by the pension trustee. The SIPP trustee will handle any legal responsibilities, as well as government reporting requirements. The trustee will also claim your tax relief whenever they receive a contribution from you. And they will allocate the money into gold, or any other investment holdings you choose, automatically based on the portfolio allocation that you have specified.
Will gold improve the performance of your SIPP pension? There are of course no guarantees of future performance, but since 2000, the price of gold has increased at least four times, from the US $300 range, to the current price level of US $1,300-plus. Under different investment environments, gold could be the top performing asset in your pension portfolio. This is particularly true during times when conventional investments, such as stocks and bonds, are not performing especially well.
You can use a pension calculator to determine how much money you will need to have the kind of retirement you expect. Then decide for yourself if having gold in your pension portfolio will help you get there.
Putting gold into your SIPP is a perfect way to protect your retirement from any government collapse, wars, or disasters that could effect the devaluation of currency. If you would like to learn more about a bullion gold custodian that can setup one of these for you, click here to learn more.