Introduction

A Self-Invested Personal Pension (SIPP) is the name given to the type of UK government-approved personal pension scheme, which allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and Customs (HMRC). A pension is one of the most tax-efficient ways of saving for retirement. Like all pensions, a SIPP (self-invested personal pension) can offer tax relief on contributions and there is no UK capital gains tax. The tax benefits will depend on your individual circumstances and tax rules are subject to change by the government.  Traditional pensions typically limit investment choice to a shorter list of funds, normally run by the pension company’s own fund managers, however a SIPP lets you invest almost anywhere you like and choose your own investments.

Things to consider

– No‐one should care more about your retirement planning than you.

– A SIPP gives you access to the top fund managers, and the power to change your investments when you want.

– This flexibility allows you to spread the risk, especially if some investments perform badly. However, these do tend to have higher costs than a standard pension.

– Active management is essential to maximise the benefits of the wider investment choice on offer. For these reasons, they will not be suitable for everybody and generally only those who are fairly experienced at actively managing their investment should consider this type of investment.

– The investment growth within the fund is currently free from all UK personal Income and Capital Gains Taxes. Though of course, the levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

Summary

The key attributes that make SIPPs stand out from traditional pensions are the freedom and control they offer. Instead of being restricted to a handful of, often mediocre, insurance company funds; SIPP investors can take their pick from almost the full spectrum of investments from unit trusts and shares, right up to whole commercial properties.

Additional Information Resources

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