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Self Invested Personal Pension – SIPPs
A Self Invested Personal Pension or ‘SIPP pension’ is a personal pension with added flexibility that allows a policyholder to directly select and manage their own investments. As with other forms of pension plans, SIPP pensions are subject to the usual pension rules that relate to contributions and eligibility. The number of different investment options is far greater than those of traditional personal pensions and the emphasis with this type of pension is placed on putting savers in full control of their money and consequently, their future life plans.
Contributions
Contributions can be invested in a variety of assets including:
- individual shares
- stock-market and property funds
- futures and options
- REITS
- unquoted shares
- gilts (government bonds) and company bonds
- cash
- commercial property
Increased Flexibility
The increased flexibility and greater freedom of investment afforded by SIPPs requires active investment management on the part of the policyholder, in addition to an increased need for receiving investment advice due to the higher risks involved in many of the available investments. The value of investments made with contributions under a SIPP, as with all investments, can decrease as well as increase and could result in a policyholder receiving less upon retirement than they had initially invested.
Added choice
An added element of choice and flexibility afforded by a SIPP is that when a policyholder seeks to make a withdrawal from the fund they need not wait until retirement to take income from a SIPP, a benefit that is not available with a traditional pension plan. The ability to make such withdrawals is subject to the policyholder having enough money in the fund and participating in regular reviews to ensure that the fund can sustain the level of income being withdrawn. Depending on the terms of the plan’s provider, there may be charges to accessing the SIPP in this way.
Policy Holder
A policyholder must be under 75 years of age and UK-resident for tax purposes in order to start a SIPP.
If you are considering a SIPP or are unsure whether or not this would be the best plan for you, consulting an IFA could be a good idea. They will assess your personal situation and weigh up the pros and cons of this option, allowing you to make an informed decision.
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