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Self
Invested Personal Pension (SIPP)
A SIPP is a type of personal pension plan. It follows the
same basic rules with regards to contributions ,
tax relief and eligibility. The difference is the investment
freedom
that
a member has and the ability to borrow against the fund for
further plan investments.
A conventional personal pension generally involves the plan holder
paying money to an insurance company for investment in an insurance
policy. The choice of investments is limited to that offered
by the plan provider.
A SIPP allows the plan holder much greater freedom in what to
invest in and for the plan to hold these investments directly.
The plan holder can have control over the investment strategy
or can appoint a fund manager or stockbroker to manage the investments.
The SIPP itself is established under a trust. The trustee controls
the investment under instruction from the member. It is possible
for the plan holder to be the trustee. If this is the case, an
approved administrator must be appointed to carry out investment
transactions.
A SIPP can borrow money against the value of the fund for investments
that the trustees consider will benefit the scheme (for example,
commercial properties). It can borrow, at any time, up to 50%
of the scheme's assets.
One of the main reasons for the popularity of SIPPs is the control
and flexibility they provide. Your SIPP will be unique to you,
investing in whatever you choose, for however long you like.
You have the ability to change your investments or add new ones
whenever you feel it necessary. To a large extent, its overall
performance will be in your control, rather than reliant on the
performance of one particular fund or company.
Key Features of a SIPP
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Control – you decide in what and where you
invest |
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Flexibility – you can change or add in new
investments whenever you like |
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Performance – you have access to a wide range
of funds or other investment vehicles, increasing your
overall
opportunity to grow your investment. |
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Diversification – by having a range of
different investments you are spreading your risk, rather
than holding ‘all your eggs in one basket’ |
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Tax Efficiency – like other personal pensions,
your contributions receive income tax relief at the highest
rate. All investments held in the scheme are exempt from
income and capital gains tax |
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Transparent Charges – the SIPP wrapper is
separate from the contents and as such, has separate, often
fixed
charges |
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Choice on Retirement – as with other pensions,
you can choose from phased retirement, drawdown and open
market annuities |
However, SIPPs are not suitable for every investor and in terms of charges can be more expensive than a stakeholder or personal pension.
We have been told that a good quality stakeholder or personal pension may be more suitable to meet your needs therefore you should seek independent financial advice from a suitably qualified adviser.
To have an independent expert get in touch with you to offer some initial advice,
simply enter your details below.
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