The Freetrade SIPP

Key Features Document

Version 2.0, January 2021

Introduction

The Freetrade SIPP is administered by Gaudi Regulated Services Limited (Gaudi). The Financial Conduct Authority is a financial services regulator. It requires Gaudi, the Scheme Administrator, to give you this important information to help you to decide whether the Freetrade SIPP is right for you. You should read this document carefully so that you understand what you are buying, and then keep it safe for future reference. If you are unsure whether this product, its features, investment options and charges are right for you then you should take appropriate financial advice. Neither Gaudi nor Freetrade are authorised to give you financial or investment advice.

Aims of the Freetrade SIPP

The pension plan is designed to let you:


Please note that the Freetrade SIPP does not currently offer a facility to take your pension benefits when you reach your intended retirement age. This currently means you will have to transfer your pension fund to another provider when you want to take your money out or convert it to an income.

Your commitments

Once you have commenced a Freetrade SIPP, your commitments include:

Risk factors

Below are outlined risks associated with saving for retirement through a pension plan. Some of the risks below refer to the investment performance of the funds in your pension plan. Remember that you are responsible for the investment decisions. We recommend you read the key information documents, where these are available, that outline the specific risks applicable to potential investments.

The favourable tax treatment for pension savings and the age at which you can first start to take benefits could change in the future.

Investment performance or charges may be better or worse than expected, which could affect the potential size of your pension fund and therefore the benefits you receive.

The charges or fees you pay in relation to this pension plan may be higher than expected, which could affect the potential size of your pension fund and therefore the benefits you receive. Other things that can affect the potential size of your pension fund and the benefits you receive include the amount you pay or transfer in to the pension plan, which could be lower than you anticipated, or if you take benefits earlier that you were aiming for.

Investment conditions can also affect your pension income - if you convert your pension fund to an annuity (i.e. purchase a policy from an insurance company that provides you with a regular income) then prevailing interest rates at the time of conversion will affect the amount of annuity you will receive.  Generally speaking, lower interest rates mean lower annuity amounts, although annuity amounts are also affected by other factors such as life expectancy and your state of health.

Alternatively, if you decide to draw your pension income directly from your pension fund then investment returns may not sustain your income requirement.

There may be a delay in receiving benefits if some of your investments cannot be sold quickly.

You have a right to cancel your pension plan within the first 30 days. Where you have invested during this period and you exercise your right to cancel then the amount returned will be the amount realised less any costs associated with the investment and subsequent disinvestment.

Whilst the pension plan can accept transfers from other pension schemes, not all transfers may be suitable. For all transfers you are responsible, with the help of a financial adviser if necessary, for ensuring that the transfer is suitable for you.

A cash transfer from another pension scheme will mean your pension fund may miss out on investment growth for the time it takes from disinvestment under the transferring scheme to investment under this pension plan. You may therefore wish to consider transferring the  investments in-specie where this is an available option. The transferring scheme may charge you for making an in-specie transfer.

Questions and Answers: 
About the Freetrade SIPP
What is the Freetrade SIPP?

The Freetrade SIPP is a pension plan that allows you to save for retirement in a tax-efficient and flexible way. 

The benefits you can receive are subject to UK pensions legislation. This includes rules about limits on contributions that can qualify for tax relief, the earliest age you can take benefits and limits on what those benefits can be without incurring tax penalties, including the amount that can be taken as tax-free cash.

Who is the Freetrade SIPP for?

To be eligible for this product you must be a UK resident and have attained age 18.

It is intended to be used by people who want to:

Who will administer my Freetrade SIPP?

Gaudi Regulated Services Limited will administer your pension plan in accordance with the Trust Deed and Rules. This involves the day to day running of your pension plan, ranging from processing contributions, transfers, investments and paying benefits, to ensuring the pension plan adheres to HMRC rules and regulations.

Is this a Stakeholder pension scheme?

No. Stakeholder pension schemes are a specific form of pension that must meet Government minimum standards relating to contributions, charges and provision of a default investment fund. Stakeholder schemes are generally available and it is for you to consider, with the assistance of a financial adviser, if required, whether one might meet your needs as well as the pension plan on offer.

What are the Trust Deed and Rules?

The Trust Deed and Rules are the legal documents that have established the Scheme under which the Freetrade SIPP operates. These documents also appoint The Trustee and the Scheme Operator, who is responsible for registering the Scheme with HM Revenue & Customs (HMRC) to ensure the favourable tax treatment mentioned earlier is applied to the pension plan. The Trustee of the Freetrade SIPP is Gaudi Trustees Limited and the Scheme Operator is Gaudi Regulated Services Limited who is authorised and regulated by the Financial Conduct Authority.

Will my pension plan have its own bank account?

This type of pension plan does not have a separate bank account for each pension plan but operates under a designated Scheme bank account which is a pooled account run by the Lloyds Bank on behalf of Freetrade and the Trustee. Money paid in to or out of your pension plan will go via this account, which may also hold uninvested cash.

What will my pension plan be worth?

The final value of your pension plan will depend on how much is paid in, how long you invest for, the charges paid, and how well the investments perform. 

The following information are examples to show the effect time and performance could have on the returns you could receive with the Freetrade SIPP. In reality your circumstances may differ meaning you could achieve more or less than the amounts shown below. 

The table below shows what the value of your Freetrade SIPP could be, and the annual income it could provide if you didn’t take the tax-free lump sum, using a range of possible contributions and periods to retirement. These figures account for the effects of inflation, so are in ‘real terms’.


The figures are based on the following assumptions:


The actual rates of return will depend on the value of your portfolio and the performance of your investments. As such, returns may differ from those shown below.

Here’s what you might get back from your Freetrade SIPP:

Years to retirement

Monthly contributions

Single payment

£50

£100

£300

£10,000

£20,000

£50,000

5 Years
Value
Income
£3,854
£156
£7,709
£312
£23,127
£937
£11,560
£468
£23,119
£937
£57,798
£2,341
10 Years
Value
Income
£7,947
£318
£15,893
£637
£47,680
£1,911
£13,363
£536
£26,725
£1,071
£66,813
£2,678
15 Years
Value
Income
£12,348
£489
£24,696
£979
£74,089
£2,936
£15,447
£612
£30,893
£1,224
£77,234
£3,061
20 Years
Value
Income
£17,138
£671
£34,276
£1,342
£102,828
£4,026
£17,856
£699
£35,712
£1,398
£89,280
£3,496
25 Years
Value
Income
£22,405
£867
£44,810
£1,734
£134,429
£5,202
£20,641
£799
£41,282
£1,597
£103,204
£3,994
30 Years
Value
Income
£28,249
£1,081
£56,497
£2,162
£169,492
£6,485
£23,860
£913
£47,720
£1,826
£119,301
£4,565
35 Years
Value
Income
£34,783
£1,316
£69,565
£2,633
£208,695
£7,898
£27,582
£1,044
£55,163
£2,088
£137,908
£5,219
40 Years
Value
Income
£42,135
£1,578
£84,270
£3,155
£252,809
£9,466
£31,883
£1,194
£63,767
£2,388
£159,417
£5,969

The monthly SIPP fees are paid directly by you as opposed to being deducted from the pension fund and the impact of these fees is therefore not reflected in the illustrations.  These illustrations should not be used directly to compare the Freetrade SIPP with alternative pension products which take charges from within the pension fund. 

You will be sent an annual statement showing how your pension plan is doing. The value of your pension plan will also be available through the Freetrade mobile app. 

How much pension income will I get?

Whilst you cannot currently draw benefits from the Freetrade SIPP and will have to transfer to another pension plan to do this, pension plans usually allow you, once you have attained minimum pension age, to draw as much or as little of your pension fund as income as you like, when you like, along with offering different benefit options. How much pension income you will get therefore depends on your choices and many variable factors such as income tax, the value of your pension plan and investment performance.

What are the charges?

All of the charges applicable to the Freetrade SIPP are detailed in the Charges Schedule which you should read as part of this Key Features Document and the Terms and Conditions.

The Freetrade SIPP fee will be taken via your linked debit card on the day you first fund your SIPP, which will become your monthly billing date for future payments.

Paying into the Freetrade SIPP
What are my payment options?

Transfers in from other pension plans

You can transfer pension benefits from other suitable pension arrangements.

The transfer can be received in the form of cash or by transfer of the investments, provided those investments can be held under the Freetrade SIPP. If the same investments are available under your Freetrade SIPP with lower fund management fees, you will be given the option to convert to those investments.

There is no minimum or maximum amount.

Transfers in of funds that are in drawdown are not currently accepted.

Transfers from defined benefit pension schemes and schemes that provide safeguarded benefits are not accepted.

Please note that if you are transferring benefits from another pension scheme that has tax free cash protection this protection may be lost on transfer.

Making contributions

If you are eligible to make UK tax relievable pension contributions you can make one-off contributions into your Freetrade SIPP at any time.

This gives you the flexibility to pay exactly what you feel you can afford to contribute, when it suits you. Remember though, reducing or stopping contributions, even temporarily, will reduce the possible value of your pension fund at retirement. 

Contributions can be made by Apple Pay, Google Pay and bank transfer or other methods Freetrade may allow at its discretion from time to time.

Are there limits on what I can pay in?

There is no minimum contribution.

The maximum contribution is an amount up to the tax relievable contribution limit allowed by HMRC.

All relevant UK individuals can pay, and get tax relief on, contributions up to £3,600 gross each year. Where your earnings are in excess of £3,600 you may make gross contributions of up to 100% of your earnings known as relevant UK earnings subject to a maximum amount known as the Annual Allowance, which is set by the Government. The Annual Allowance applies as a total limit across all of your registered pension schemes in a tax year.

It covers:

The Annual Allowance does not include transfers from other pension arrangements. They do not receive extra tax relief, so there is no upper limit on them. The Annual Allowance does not apply in a tax year in which severe ill-health benefit conditions are met or death occurs.

Where you have started drawing benefits flexibly from any pension arrangement, then contributions to this pension plan and other money purchase pension schemes will be restricted to the much lower Money Purchase Annual Allowance.

If you are a high earner i.e. have `adjusted income’ of over £240,000 and `threshold income’ of over £200,000 then your Annual Allowance will be subject to a tapered reduction of £2 for every £1 of earnings above £240,000 up to £312,000.

Any payments over an Annual Allowance will be subject to an Annual Allowance charge. The amount of tax charged will be your highest marginal rate of income tax and will ordinarily be paid by you to HMRC via declaring the excess payment on your self-assessment tax return.

Where you were a member of a registered pension scheme but had not fully used your available Annual Allowance from the previous three tax years, you may be able `carry forward’ that unused allowance and include it in your self-assessment tax return which may reduce or eliminate the Annual Allowance charge.

If you think you may be close to, or exceed, an Annual Allowance and you are in any doubt about its impact, you should seek financial advice as this is a complex area.

Can I claim tax relief on what I pay into my pension plan? 

Yes; your contributions can attract tax relief.

All relevant UK individuals can pay up to £3,600 gross per annum (i.e. before tax relief) or 100% of their relevant UK earnings (subject to the Annual Allowance or Money Purchase Annual Allowance if applicable) whichever is the greater. The Scheme Administrator will claim basic rate tax relief from HMRC and invest it in your pension plan. For example, for a contribution of £10,000 you would pay £8,000 and the Scheme Administrator would reclaim £2,000 from HMRC. (This example is based on 20% basic rate tax.)

Contributions are made net of basic rate tax irrespective of whether you are employed or self-employed. Contributions made by your employer are made gross.

If you pay income tax at a higher rate than the basic rate, you can claim the extra tax relief through your self-assessment tax return on your personal contributions.

Unused Annual Allowances for the previous three tax years may be “carried forward” for the purposes of making a contribution in excess of the Annual Allowance for the current tax year but not greater than 100% of your earnings. This cannot be used where you are subject to the Money Purchase Annual Allowance.

Can I make contributions if I have ‘Enhanced Protection’ or ‘Fixed Protection’?

If you have either Enhanced or Fixed Protection then it will be lost if you make, or someone on your behalf makes, a contribution. Losing protection could have serious tax consequences as you may have to pay a Lifetime Allowance charge (See `Is there a limit on benefits I can take from my pension plan?’ below for what this means).

Enhanced Protection was introduced to protect pension funds built up prior to 6th April 2006 from being subject to a Lifetime Allowance charge.

The Government subsequently reduced the Lifetime Allowance on three separate occasions on 6th April 2012, 2014 and 2016 and accordingly introduced Fixed Protection to protect pension funds built up prior to each of those dates from the Lifetime Allowance charge.

Protection from the Lifetime Allowance is a complex area and if you are in any doubt as to whether making a contribution will affect any protection you have, you should seek appropriate financial advice.

Investing in the Freetrade SIPP
What can I invest in?

All investments held within the Freetrade SIPP must be purchased via, and held under ‘Invest by Freetrade’, which currently offers US and UK stocks, ETFs and investment trusts.

Freetrade offer two investment service accounts:

  • The standard Freetrade account which provides a wide choice of the above investments.

  • The Freetrade Plus account, for which there is a monthly subscription, which extends the range of investment further and provides additional add on benefits.


Further details of the range of investments available under both accounts is available in the separate ‘Investment Brochure’. 

The Freetrade SIPP investments meet the FCA’s definition of ‘standard’ which broadly means FCA authorised or recognised collective investment schemes, structured products or listed securities which are capable of being valued on a regular basis and sold within 30 days.

How do I decide what to invest in?

You can choose to invest in anything available through the ‘Invest by Freetrade’ service via the Freetrade mobile app, subject to whether you have selected the standard Freetrade account or Freetrade Plus account.

The investment decisions are yours but you can refer to investment guidance provided by Freetrade to help you determine what investments may be suitable for you. Please note that the guidance provided on suitable investments does not constitute advice and you are responsible for selecting the investment appropriate for you.

Limits
Is there a limit on benefits I can take from a pension plan?

Whilst you cannot currently take benefits from the Freetrade SIPP and will have to transfer to another pension plan to do this, you should be aware that there are limits on how much benefits you take without incurring additional tax charges. 

The maximum you can take from all your pension arrangements without incurring an additional tax charge is called the Lifetime Allowance (LTA) as set each year by the Government. If you exceed the LTA and any LTA protections you may have, you will be subject to the Lifetime Allowance charge. If the excess is taken as pension income the charge is 25% and if taken as a lump sum it will be 55% of the amount above the available Lifetime Allowance. The charge will be deducted from your pension fund and paid to HMRC when paying your benefits.The Lifetime Allowance is now increasing each tax year in line with inflation. However, in the past there have been a series of reductions. The Government has made it possible for individuals potentially affected by the reductions to apply for various types of protection from the Lifetime Allowance charge.

You can still apply for Fixed and Individual Protection 2016 provided that you have not had contributions paid to any pension schemes from 6th April 2016 and you do not already have Enhanced or Primary Protection. This will generally only be of interest to those who anticipate that the value of their pension benefits at the time they take them will exceed the standard Lifetime Allowance prior to it having increased to £1.25m.

Every time you take benefits from a pension plan, some of your LTA is used up. Checks against the LTA are carried out at various points, including:


At each of the above stages, an allowance is made for any tests that have already been carried out.Lifetime Allowance charges apply to any further benefits taken once all the LTA is used.

Transfers out
Can I transfer out of my pension plan?

You can transfer all or part of your pension plan to another registered pension scheme at any time.

You may be able to transfer some or all of the investments held in your Freetrade SIPP to your new pension plan if it is also able to hold those investments. Otherwise your investments will have to be sold and a cash transfer made.

Taking benefits from the pension plan

Currently you will need to transfer some or all of your pension fund in the Freetrade SIPP to another pension plan in order to take benefits. The type of benefits you can typically take from a pension plan are summarised below but you should check the terms and conditions of any alternative pension plan

Benefits summary

Option

From age 55

Pension Commencement Lump Sum (tax free cash sum) Up to 25% of your pension fund can normally be taken as a tax free lump sum when combined with designating funds to flexi-access drawdown or purchase of an annuity. Note: receiving the Pension Commencement Lump Sum does not trigger the Money Purchase Annual Allowance.
Use your pension fund to buy a lifetime or five-year pension income, often referred to as an annuity An annuity can be purchased, the amount of which will be determined by the value of your pension fund and annuity rates available in the annuity purchase. Generally speaking, annuity rates depend on interest rates, life expectancy and the type of pension benefits you are buying (e.g. an increasing or level pension and whether any guarantees or dependants’ benefits are included). If you are in poor health or have a lifestyle that could adversely affect your life expectancy (e.g. heavy smoker), then you may get an enhanced annuity rate. Note: income received via an annuity does not trigger the Money Purchase Annual Allowance.
Draw a pension income directly from your pension fund Flexi-access drawdown - You may designate some or all of your pension fund into flexi-access drawdown. The fund remains invested and you can draw as much or as little income from the drawdown fund as you wish, when you wish (subject to the Terms and Conditions of the pension plan). The income you draw from the pension fund will be subject to income tax at your marginal rate. Note: the Money Purchase Annual Allowance is triggered when you first drawdown an income but there is no obligation to draw an income.
Uncrystallised Funds Pension Lump Sum – You may use some or all of your pension fund to pay you this type of lump sum. 25% of the lump sum is tax free, the remainder will be subject to income tax at your marginal rate. Note: taking this lump sum will trigger the Money Purchase Annual Allowance.
A combination of the above to meet your individual requirements You could take a combination of the benefits described above and you do not have to take benefits all in one go. An annuity can be purchased from funds in drawdown as well as from uncrystallised funds. The way in which you take benefits is flexible and can be structured to meet your individual requirements.

When can I take benefits?

You may take benefits from a pension plan from age 55. You may also take benefits earlier if you suffer serious ill health or an illness or an accident which leaves you permanently unable to carry out your current occupation and you cease that occupation.

If you are 50 or over the Government provides a free and impartial service to help you understand what your choices are and how they work. This can be accessed online, over the telephone or face to face - see www.pensionwise.gov.uk.

It is strongly recommended that prior to accessing your pension benefits you seek advice from a suitably qualified financial adviser or obtain guidance from Pension Wise.

Death benefits from your pension plan
What if I die?

The table below summarises the benefits payable.

What benefits can be provided?

All of the pension fund is available to provide your beneficiaries with a lump sum payment or an annuity.

Who can receive a lump sum payment? Most people will qualify as an eligible beneficiary for lump sum death benefits under the scheme rules. The Scheme Administrator will use its discretion to choose who to make the payments to having made reasonable enquiries to identify the eligible beneficiaries. It is highly recommended that you complete and keep updated an “Expression of Wish” of who you would like your beneficiaries to be that, whilst it cannot be binding, will be taken into consideration.

How are death benefits claimed?

To claim death benefits, the person dealing with your affairs should contact Freetrade directly, at the email address “hello@freetrade.io”. They will confirm the information needed to pay the benefits as quickly as possible.

Are death benefits taxable?

Is my pension fund taxable?

Pension funds do not pay UK taxes on income or capital gains. However, tax cannot be reclaimed on UK and some overseas dividends.

Further Information 

Can I cancel my pension plan?

You have a legal right to cancel your pension plan if you change your mind. 

If you want to cancel the pension plan, you should notify Freetrade through in-app chat on the Freetrade mobile app within the 30 day cancellation period. The pension plan cannot be cancelled once the 30 days have elapsed.

The right to cancel applies to the commencement of the pension plan and on all transfers into the pension plan.

If you decide to cancel your pension plan, any contributions will be returned to you less any tax relief claimed on your behalf, which will be returned to HMRC. Where you cancel your pension plan in respect of a transfer from another pension scheme, the transferring scheme may not agree to accept back your transfer value, or may only accept it on revised terms which are not acceptable to you, in which case you will be responsible for finding an alternative scheme to transfer the funds to. 

In the event of cancellation, the net realisable value of any assets purchased and subsequently disinvested will form the basis of the amount returned. This means that having taken into account any fees or charges paid in relation to the investment and any price movements (particularly downwards), you may get back less than you originally invested.

What if I have a query or complaint?

If you have a query or complaint, please contact Freetrade through in-app chat on the Freetrade mobile app. If you have a complaint, Freetrade will do all they can to resolve it. Details of the complaint handling process are available on request.

If you are not happy with the response and you wish to take the matter further you can refer it, without giving up any other rights you may have, to one of the following:

Where can I find more information?

Please contact Freetrade through in-app chat on the Freetrade mobile app or email us at hello@freetrade.io.

Compensation

The Financial Services Compensation Scheme (FSCS) may provide protection if the Scheme Administrator cannot meet claims made against it or if investments or money cannot be returned.

If you are eligible, the maximum level of compensation for claims against firms declared in default on or after 1 April 2019 is £85,000 per person per firm. Further information about compensation arrangements is available from the FSCS website at www.fscs.org.uk.

Pension plans are regulated contracts in their own right and hence are covered by the FSCS. Investments with regulated investment providers or insurance companies will be covered separately under the FSCS.

Those companies will provide information about the levels of cover provided. Your status under the FSCS does not affect any statutory right you may have to compensation.

Some, but not all, investments held by your pension fund may also be similarly covered by compensation schemes. It is your responsibility to establish where this is and is not the case. 

Law

The law of England and Wales will be used to decide any dispute.

The information in this document is based on current understanding of the law and practice as at its Version date. Every effort is made to ensure that this information is helpful, accurate and correct but the law and practice may change or may not apply to your personal circumstances. You should not take any action on the basis of this information alone as you should also read the Terms and Conditions and the Trust Deed and Rules. Before taking any action you should always consider taking appropriate financial advice.

HMRC practice and the laws relating to pension taxation are complex and depend on individual circumstances and changes which cannot be foreseen.

This product is an investment regulated by the Financial Conduct Authority. The Freetrade SIPP is operated by Gaudi Regulated Services Limited who is authorised and regulated by the Financial Conduct Authority with permission to establish, operate and wind up personal pension schemes.

Terms and Conditions

This Key Features Document gives a summary of the Freetrade SIPP. It does not include all the definitions, exclusions or terms and conditions.

The full contractual terms are set out in the Trust Deed and Rules and the Terms and Conditions. If you would like copies of these, or clarification of any of the information provided in this document, please contact Freetrade through in-app chat on the Freetrade mobile app. 

The Terms and Conditions may be varied from time to time by giving you one month’s notice.

Contacting the Freetrade SIPP

The Scheme Administrator of the Freetrade SIPP is Gaudi Regulated Services Limited.
The Trustee of the Freetrade SIPP is Gaudi Trustees Limited and the Operator is Gaudi Regulated Services Limited.

The contact details for Freetrade are:

Freetrade Limited
Techspace
32-38 Leman Street
London
E1 8EW

Email: contact@freetrade.io 
In-app chat on the Freetrade mobile app.
There is currently no dedicated phone helpline.

Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority (Firm Reference Number: 783189). Registered in England and Wales (Company Number: 09797821) at 32-38 Leman Street, London. E1 8EW.

“Gaudi” refers to the applicable entities of the Gaudi Group including Gaudi Limited (Company Number: 6502014), Gaudi Regulated Services Limited (Company Number: 6638918) and Gaudi Trustees Limited (Company Number: 7898388) each being registered in England and Wales at 2 Oakridge Office Park, Whaddon, Salisbury. SP5 3HT.

Gaudi Regulated Services Limited is authorised and regulated by the Financial Conduct Authority. (Firm Reference Number: 488015).

You can check out these details on the Companies House website at www.gov.uk/government/organisations/companies-house and the FCA’s website at www.fca.org.uk/register.