Guide

Think IFA guide to the‘SIPP’

What is a SIPP / Self Invested Personal Pension?

Family with a Self Invested Personal Pension - SIPPA SIPP is a government approved personal pension scheme that is sometimes referred to as a diy or do-it-yourself pension plan.

One of the biggest appeal of SIPPs are their flexibility as they put you firmly in control of how your retirement savings are invested.

You can even run your self invested personal pension along side any other pension schemes you may have by allocating a percentage of your pension savings each month. This will help spread the risk should you not feel very confident with investing.

The tax benefits of a SIPP

Another great advantage with a sipp is that the government will also contribute towards it.

Let’s say your a basic rate tax payer who pays 20%. When you pay £100 into your pension pot it only actually costs you £80 as the government will refund you 20% (which works out at £20).

Imagine if you invest £1000 per year into your self invested personal pension scheme. Your actual contribution would work out at £800 so a £1000 investment is only actually costing you £800.

For those of you in the higher tax bracket then obviously the financial benefits are even greater!

What investments can I hold in a SIPP?

Quite an extensive and diverse range of investments can be held within your self invested personal pension which include:

Pension piggy bank

  • Stocks and shares
  • Cash
  • Commercial property
  • Investment trusts
  • Gold bullion
  • Company bonds
  • Gilts
  • Futures and options
  • Unquoted / unlisted shares
  • Reits

Please note that the above list is not exhaustive and their are other investments which are allowed but some of which may be liable to tax charges.

Self Invested Personal Pensions are not for everyone

Whilst a SIPP puts you in complete control of your pension investments, they are not suitable for everyone.

You must feel comfortable in researching, choosing and managing your portfolio of investments and need to be fully aware that many investments can go down as well as up.

A simple stakeholder pension is an alternative to the SIPP.

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