Expert says SIPPs are not necessarily the best savings option
Francis Klonowski has claimed that the decision over whether to choose an SIPP or an ISA should depend on the particular needs of an individual.
There is not a definitive answer as to whether a self-invested personal pension SIPP is a better savings vehicle than an individual savings account (ISA), a personal finance expert has stated.Francis Klonowski, principal of Klonowski & Co, explained to moneywise.co.uk that the decision will often depend on the particular needs of an individual.
Both types of saving methods benefit from having no tax on income and growth within the fund, though the managers cannot claim the tax credit on dividends.
However, ISAs are free of tax income and do not affect the consumer's tax banding, while pensions, including SIPPs, are taxed at normal income rates.
Further to this, Mr Klonowski explained that for consumers who are higher-rate taxpayers pre-retirement and drop to basic-rate post-retirement, then a pension is the best option available.
He told the website: "A SIPP is paid outside the estate, with no inheritance tax liability. However, there is a 35 per cent tax charge if the fund is paid out as a lump sum, whether to the spouse or other beneficiaries.
"ISAs, on the other hand, form part of your estate and may therefore be subject to inheritance tax."
Meanwhile, the UK's largest independent small self-administered scheme provider recently revealed that its sales almost doubled in the first quarter of its financial year.
Rowanmoor Pensions stated that sales in the final quarter of 2009 climbed by 88 per cent across its SIPPs, SSAS and family pension trust products.
Posted by Tobias Bluth
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