SIPPs (Self-invested Personal Pensions)

What happens to us and our families when we retire?

It’s a question that at some point we all hope to be lucky enough to ask. We want to be financially secure and for our family not to worry about us or them if something happens. In such a case a will may be required. Pensions are a natural way to secure our future. There are different pensions to suit different people in different circumstances. A SIPP pension is one upon which you can take out investments. In this particular case, the investments are effectively preserved until the point that you start to draw from your pension. What seperates this from other forms of personal pensions plan is the greater autonomy and choice you have over the investments you make. Ordinarily, this is not a choice you would have. You are able to make investments that suit you, that you may find to be more ethical for instance or that you believe are sound investments.

Let’s look a bit closer at the defining feature of a SIPP:

Here are some key facts:

  • – SIPP is a kind of personal pension.
  • – Offers far greater investments opportunities than other pensions.
  • – You can also borrow money to purchase investments.
  • – There is no obligation for your employer to pay into your SIPP.
  • – Flexible and portable. Not automatically cancelled if changing jobs or unemployed.
  • – Tend to have higher charges than other forms of personal or stakeholder pensions.


What is a SIPP?

SIPPs give you the opportunity to buy into a range of investments; UK and international stocks and shares, collective investments (e.g. OEICs), property and land bonds and investment trusts. There may be further options depending on the SIPP provider too, so make sure to ask questions. Since 2006, there have been no limit on the number of pension schemes you can be enrolled in. This means that you could benefit from a SIPP as an alternate store of finance for old age as well as having your existing pension as the main source of income.

The value of a SIPP is determined by; the amount of contribution made to it, the level of charges and when investments were made, including how they have fared since then. You can currently start to draw benefits from pensions at age 55 without having to retire. This means you can start getting the benefit from your pension at an earlier age and not be faced with further uncertainty and worries.

Another selling point is the tax benefits a SIPP can provide you. As with other personal pensions, you add in money when you please and the government will pay an additional 20% of relief for those paying at a basic rate. If you choose to pay at a higher rate there are improved tax benefits too if you claim them back with your tax return. The benefits will depend upon your individual circumstances too.

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