Self Invested Personal Pensions (SIPPs)
A SIPP is a type of personal pension plan that gives you greater control over how your money is invested.
The SIPP itself is actually a tax-efficient ‘wrapper’, which holds your investments. It works in the same way as other personal pensions – the contribution limits, tax reliefs, eligibility and the age at which you can start drawing an income are exactly the same.
However, this flexible option offers a number of extra benefits:
- Widest investment choice – SIPPs give you more choice than any other type of pension. You can invest in a broad range of investments – including individual commercial property – and won’t be restricted to pension funds offered by any single pension provider. In the Barclays Stockbrokers SIPP you can choose from about 2,000 funds from 100 fund managers.
- Greater control – choose and manage your investments yourself, ideal if you’re a more experienced investor. If you’d prefer to get some help, some plans offer investment management, with a specialist making investment decisions for you.
- Flexibility – pay in regular contributions or lump sums – whatever suits you.
- Clear charges – you’ll usually pay a fixed fee for the SIPP wrapper. On top of that, you’ll pay charges depending on either the transactions you carry out, the type of investments you hold, or their value. Your pension provider will set the amount. Because of additional benefits and investment opportunities SIPPs offer, charges are usually higher than with other personal and stakeholder pensions.
How much will I get?
The amount of income your pension fund will pay depends on:
- The amount of money you have paid into it
- How well your chosen investment funds perform over time, after charges have been paid
- The size of any pension commencement lump sum you take at retirement
- The annuity rate when you start drawing your pension, or the rate applying to whichever arrangement you use to convert your pension fund into a regular income.
Is it for me?
SIPPs offer a number of attractive benefits however it’s important to remember that they are generally only suitable for experienced investors who have the time and ability to manage their own investments. You need to be prepared to take a risk as you could lose your money and end up with insufficient savings in retirement. Remember too that the favourable tax treatment associated with SIPPs may change in the future.
If you’re an experienced investor and are willing to take a risk with your money, a SIIP could be for you if you:
- Want more control over your retirement fund. That’s whether you want to make your own investment decisions, or to appoint a specialist discretionary or advisory investment manager to do this for you
- Want to select from a wide range of investments for your retirement saving
- Want to transfer your existing money purchase pension(s) from previous employers into a more flexible plan
- Want to use your retirement fund to purchase commercial property in a tax-efficient way – although not all SIPPs include this option
- Are comfortable paying the higher charges for SIPPs in return for the additional benefits they offer.
Guide to SIPPs
Learn more about saving for retirement with a SIPP in our expert guide.