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HMRC internal manual

Inheritance Tax Manual

Pensions: types of pension scheme: personal pension schemes

A personal pension scheme is a general term used for an arrangement between an individual and a pension provider. This is usually an insurance company but may also be a friendly society, bank, building society or a unit trust company.

Contributions into the scheme may be made by the individual or by their employer on their behalf and may be made in a single payment or by regular amounts. Products on the market currently are extremely flexible both in making contributions and taking benefits.

Self-invested personal pension (SIPP)

A SIPP is a type of personal pension where the member or policyholder can select the investments or the assets held by the scheme, subject to some statutory restrictions. It can be used, for example, to hold commercial property from which the member trades. These arrangements are often used by sole traders, directors and high net worth individuals.

A recent development of such schemes involves a family (or small group) arrangement where investments are pooled to improve the potential returns. Each member has their own set of rights within the arrangement.

Stakeholder scheme

Stakeholder pension schemes are a type of registered personal pension scheme aimed at low or non earners. They have to meet minimum standards to provide value for money, flexibility, and security. It is also possible to set up a stakeholder pension for a child, with the parents or grandparents making the contributions.