What is a SIPP?
A SIPP Is a self-invested personal pension. It allows you decide how your pension money is invested and can often offer a wider selection than other pension types. You can either let your provider choose for you, pick your own investments or pay a financial adviser to help you.
Why would I need a SIPP?
With life expectancy growing and retirement often lasting longer; saving for retirement is becoming increasingly important. A self-invested personal pension or SIPP is a type of pension that allows you to manage and control your savings.
What are the advantages and disadvantages of a SIPP?
SIPPs are designed for people who want to manage their own fund by dealing with, and switching, their investments when they want to. However, 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.
How does a SIPP work?
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.
The Flexibility with SIPPs
Once you reach 55 (57 from April 2028), you can access your whole pension pot. You decide how and when to use the fund built up in your SIPP to provide you with an income. You can take up to 25% of your fund as a tax-free lump sum and use the balance to provide you with a pension through income withdrawal from your SIPP, or through the purchase of an annuity. You can also take a series of lump sums from your SIPP – it’s flexible.
SIPPs can be opened by almost anyone under the age of 75 living in the UK. You can open a SIPP for yourself or for someone else, such as a child or grandchild. Even if you’ve already retired, you can still open a SIPP and take advantage of the extra flexibility that it gives you over your pension savings in retirement – but you may be limited by how much you can pay into it.
Investment choice
A Self-Invested Personal Pension (SIPP) allows you to invest in a wide range of assets, essentially giving you more flexibility than a standard pension. The specific assets you can invest in within a SIPP are subject to HMRC regulations. Generally, SIPPs can invest in a variety of assets, including stocks, shares, bonds, funds, and more.
Tax Relief
SIPPs offer the same tax relief as other pensions, with contributions potentially benefiting from tax relief.
Retirement Planning
Retirement should be a time of freedom, but achieving that dream often requires planning.
If you need advice with a pension, we would be happy to guide you on retirement savings options.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
Pension savings are at risk of being eroded by inflation.
Pension income could also be affected by interest rates at the time benefits are taken.
The tax treatment of pensions in general and tax implications of pension withdrawals will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future.
Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means tested benefits.
You should seek advice to understand your options at retirement.