A self-invested personal pension, or SIPP is a flexible retirement investment option. It is designed specifically for those who want to manage their own fund and make their own investment decisions.
While standard pensions are managed for you, SIPPs afford much more freedom. This allows you to stay in control of your savings. You can also switch your investments, whenever and wherever you choose.
Why do people choose a SIPP?
Broad investment options
Unlike standard personal pension schemes, which have a set number of funds, SIPPs allow for a broader range of investments. The opportunity to invest directly into a variety of different assets is wider. These include commercial property and UK stocks and shares.
Multiple pension pots
SIPPs have become increasingly popular among those with numerous pension pots. They appeal to people who have worked for several employers and have multiple schemes. This is because they can transfer all of their pensions into one place.
As with all pension schemes, SIPPs allow you to claim up to 45% tax relief on whatever you invest in them. There are other tax relief benefits available through SIPPs. These include those who own a commercial property, and when it comes to inheritance tax.
Following the introduction of the pension freedoms in 2015, those aged 55 or over can take money out of their pension whenever they want to. SIPPs have always afforded more flexibility when it comes to money drawdown. This is because they were better equipped to react to the regulation. People have become increasingly inclined to opt for this type of pension scheme.
What to be wary of
All that said, SIPPs carry much higher risks than standard pension schemes. A SIPP should only be considered by those who are experienced in investing and comfortable making important investment decisions.
What’s more, SIPPs are costly. For smaller investment pots, the fees can quickly consume your returns. SIPPs are much more suited to those with large amounts of savings.
Becoming the investment decision-maker
Saving for retirement is a long-term commitment, whether you choose to self-manage your investments or leave it to a professional Independent Financial Adviser (IFA) to do on your behalf.
If you opt for a SIPP, then you must be absolutely committed to regularly monitoring your funds and making critical decisions on where your savings should be invested.
Due to their high level of risk, SIPPs aren’t suitable for everyone, and many people have been mis-sold SIPPs that aren’t suitable for their situation.
If you think you may have been previously mis-sold a SIPP, please speak to one of our expert solicitors to see whether you have a claim.