A SIPP (Self-Invested Personal Pension) is a type of personal pension for an individual who wants to make investment decisions and manage those investments on an ongoing basis. They are commonly used by individuals when working with discretionary fund managers and financial advisers because of the freedom of investment choices that they offer. These investment choices include funds, discretionary managed funds and commercial property.
A SIPP is offered by insurance companies, investment managers and usually as part of a wrapper / platform to house investments. SIPPs operate under the same contribution rules as other personal pensions, so you can claim tax relief on £40,000 of contributions per year.
There are many advantages of using a SIPP including:
However, there are disadvantages, including:
If you’re someone who wants to make investment decisions and plan for your own retirement then a SIPP could be a suitable pension for you. Likewise, if you generate income from multiple sources or a complex financial position, SIPPs may work favourably for you. They allow you to be efficient in your tax planning and if you’re looking to work with a discretionary fund manager and / or a financial adviser, it will make managing your investments easier, while bringing your pensions together may be easily done within a SIPP.
All of these advantages bring complexity with them though. If you’re looking for something simple and you’re not comfortable with the risk of loss that comes with making your own investment decisions, then a SIPP might not be for you. If you choose to work with a financial adviser, they may recommend a SIPP as the most appropriate vehicle for you, but when you partner with an adviser they will take on the complexity of the SIPP on your behalf.
If you’d like to talk to an adviser about a SIPP you have, or if would like to discuss your pension provision, please get in touch.
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When looking at options for funding your retirement, it’s important to understand that your pension pot will be invested – and as with all investments, your capital is at risk.
It’s now common for people to have multiple pensions. Finding details of lost pensions or investments can mean digging out paperwork from the attic, the basement or working out who to call.
In recent years final salary pension schemes have been phased out by employers because people are living for longer and the uncrystallised liabilities are wreaking havoc with corporate balance sheets. Robert Blumberger explains why this is happening and sounds a cautionary note for those attracted to the idea of transferring.
IMPORTANT: SIPPs may not be suitable for everyone, we suggest you speak to an independent financial adviser before you make any decision regarding your own personal circumstances.
The value of your investments may go down as well as up and you may not get back the full amount invested.