What are SIPPs

Self Invested Personal Pensions

Surprisingly SIPPs ‐ or Self Invested Personal Pensions to give them their full name – recently celebrated their 25st birthday. Yet it is only in the last 7 years or so that they have risen to prominence and become the preferred way for astute investors to manage their pension arrangements.

In this time, it has become progressively simpler to make pension contributions and switch between providers.

Now another raft of changes simplifies things further. They make contribution allowances easier to understand, make it more attractive to pass your pension to your heirs, remove the requirement to buy an annuity and make retirement options considerably more flexible.

It is fair to say that a great way to save for your future has become even better. 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.

With many SIPPs developed in the internet age, they often have a suite of online options that far surpass most older-style pensions. This gives investors the freedom to see a valuation, switch funds and trade shares at the click of a mouse.

New contributions (such as monthly payments and one off lump sums) which attract tax relief at up to 50% depending on your circumstances.

Transfers from other pensions allow investors to move away from out‐dated arrangements or consolidate numerous plans under one roof.

With an age of austerity in public spending upon us and private companies providing less generous pensions, individuals will increasingly be required to make their own retirement provision. SIPPs look set to serve their investors well and have a bright future as the rules have become simpler still.

This guide explains the pros and cons of SIPPs in plain English; indicates who can prosper and who may be more suited to a stakeholder pension. You should find it useful and if it raises any questions for you please contact your financial advisor.

Please note tax rules can change.