All You Need to Know About Self Invested Personal Pension (SIPP) What is a SIPP? A SIPP is a Self-Invested Personal Pension which accumulates a pension fund in a tax efficient way and offers greater control and flexibility in terms of how investments are made and when benefits are taken. Approved by the UK Government, a SIPP allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue & Customs (HMRC). The fact that an investor can choose from a number of different investments, unlike other traditional pension schemes, means that SIPPs offer greater levels of control over where money is invested. A self-invested personal pension provides the policyholder with greater choice and flexibility as to the range of investments made and how those investments are managed as well as the administration of assets and the ways in which retirement benefits are taken. Therefore a Self-Invested Personal Pension (SIPP) is essentially a pension wrapper that is capable of holding investments and providing the investor with the same tax advantages as other personal pension plans. The HMRC rules allow for a greater range of investments to be held than Personal Pension Plans, notably equities and property. Rules for contributions, benefit withdrawal etc are the same as for other personal pension schemes. Put simply; a SIPP is a specialised form of personal pension where the individual investor is able to choose where and how their pension fund is invested, rather than entrusting their money to one insurance company or fund manager. How does a SIPP work? A SIPP allows for regular and lump sum cash payments to be made, and also enables the investor to transfer other pension arrangements into the scheme. Most SIPP providers do not specify a minimum investment but SIPP are generally utilised with most success by those investors who have a substantial existing pension fund to transfer or those who will be aiming to invest lump sums of several thousand pounds a year. In a full SIPP there is a wide range of investment options available to the investor such as; Stocks and shares Government securities Mutual Investment funds Investment trusts Insurance company funds This level of choice can be expensive to offer and many people find that they do not need it, so lower-cost SIPPs have been developed that focus on investment funds only. These lower cost SIPPs usually offer significantly more fund options than would be offered in a traditional pension scheme. SIPPs can be held alongside other personal and occupational schemes further increasing the options open to investors. What are the main benefits of a SIPP? A Self-Invested Personal Pension offers a far larger range of investment options than other pension schemes and the subsequent control over these investments retained by the investor is far greater. For example, investors can transfer in funds from other-pensions, enabling the consolidation and unification of retirement savings. This ensures that it is easier for an individual investor to manage their investment portfolio and also means that conducting regular investment reviews is far simpler. Combined with the fact that some SIPP plans allow 25% of any pensions saving to be taken as a tax-free lump sum means that a SIPP can give greater control over the initial level of income derived and also income flexibility during retirement. Some SIPP providers offer differing levels of fund management as an option, so an expert strategy can be tailored for the individual requirements and objectives of the investor if that investor does not wish to oversee the more complex aspects of SIPP management. SIPP - Key Features: Self-Invested Personal Pensions (SIPP) are designed to offer investors greater levels of choice and control over their pension scheme. A SIPP is essentially a pension wrapper that is capable of holding investments and providing the investor with the same tax advantages. SIPPs can be held alongside other personal and occupational schemes. Some SIPP providers offer differing levels of fund management as an option. The value of tax savings and your eligibility to invest in a SIPP depends on individual circumstances and all tax rules may change. The value of investments can go down as well as up and you may get back less than you invest.
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