One of the most tax-efficient ways of saving for retirement
If you want the freedom to manage your own investments that will enable you to achieve your retirement goals, a Self-Invested Personal Pension (SIPP) could be an option for you to consider. A SIPP is a pension ‘wrapper’ that holds investments until you retire and start to draw a retirement income. It is a type of personal pension and works in a similar way to a standard personal pension. The main difference is that with a SIPP, you have more flexibility with the investments you can choose.
A nyone under the age of 75 can pay into a SIPP; even if you are not earning, you can contribute up to £2,880 net each tax year and receive tax relief. Parents are able to open a Junior SIPP for their children, although you must remember that the child will not be able to access their pension until they reach 55.
Freedom of choice
With standard personal pension schemes, your investments are managed for you within the pooled fund you have chosen. SIPPs are a form of personal pension that give you the freedom to choose and manage your own investments. Another option is to pay an authorised investment manager to make the decisions for you.
SIPPs are designed for people who want to manage their own fund by dealing with and switching their investments when they want to. SIPPs can also have higher charges than other personal pensions or stakeholder pensions. For these reasons, SIPPs tend to be more suitable for large funds and for people who are experienced in investing.
Different providers, different options
Most SIPPs allow you to select from a range of assets, such as:
Individual stocks and shares quoted on a recognised UK or overseas stock exchange
Insurance company funds
Traded endowment policies
Deposit accounts with banks and building societies
Some National Savings and Investment products
Commercial property (such as offices, shops or factory premises)
These aren’t all of the investment options that are available – different SIPP providers offer different investment options.
Residential property can’t be held directly in a SIPP with the tax advantages that usually accompany pension investments. But, subject to some restrictions
(including on personal use), residential property may be held in a SIPP through certain types of collective investments, such as real estate investment trusts, without losing the tax advantages. Not all SIPP providers may accept this type of investment though.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND UPON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.