How SIPPs Compare With Traditional Pension Schemes

SIPP vs Personal and Stakeholder Pension

"A good way to think of a SIPP is as a shopping trolley into which you can place many different types of investment, including funds, shares, bonds, gilts, futures and options, commercial property and more. The SIPP itself is merely a tax‐efficient wrapper around those investments"

Both types are usually run by insurance companies, which generally only offer their own funds or a limited selection from other fund managers. The drawback is while a single company may have expertise in one area, it is unlikely to have the best record across all fund sectors. One might offer a good Far East fund, while another may be renowned for its expertise in picking European shares.

SIPPs offer the widest possible choice of investments, allowing holders to pick funds from across the market. You could choose a top UK smaller companies fund run by investment house A, a leading US manager at investment house B and a top fixed income manager at investment house C. With a personal pension, you must choose from the investments offered by that particular pension provider. Some of the funds offered may be good, but it is unlikely that all of them will be.

• Personal/Stakeholder Pension

  With a personal pension you can choose from a limited selection of investment funds offeredby your pension provider.




• SIPP

  With a SIPP you can choose a wide variety of different investments, from a wide range of providers. Collective investments are extremely popular and include unit trusts, investment trusts, OEICs and insurance company funds. Together they make up a range of thousands of different investment funds, offered by hundreds of different fund managers and insurers. Some invest widely around the world and across different types of asset, while others are more specialised, focusing on a particular region or type of share.
  
  Investors can also hold individual UK and overseas stocks and shares, as well as UK gilts, corporate bonds and other fixed interest securities. Even futures and options can be included.
  
  Whilst waiting to make an investment decision you may keep your SIPP in cash. Indeed some SIPP holders are happy with cash in the knowledge they have obtained tax relief.
  
  In summary, you may invest across a whole spectrum.

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