Self-Invested Personal Pensions have grown in popularity as an increasing number of investors to take control over the management of their pension and ultimately their retirement.
SIPPs allow investors to pay into and manage their own pension without the interference of an IFA or Pension Fund Manager who can reduce the long-term performance of a pension pot with their high fees.
What you can invest in
Investors can invest in a wide range of assets within a SIPP including stocks, bonds, property and some alternative investments. Certain SIPP providers will only facilitate the purchase of funds where as some will allow the use of derivatives.
It is important to only invest in products you have a good knowledge of because the performance of your SIPP can have an impact later in life.
How to invest
Stocks and bonds can be bought and sold in a SIPP just like they can in a normal share dealing account or Stocks & Shares ISA. Dealing commissions a typically the same for dealing within an ISA or a standard ISA account.
Some SIPP providers will charge to deal over the phone and most will provide regular statements.
SIPPs carry generous tax benefits from the tax man which include the adding of cash to your SIPP when you contribute. For example, if you invest £8,000, the government automatically adds a further £2,000, totalling a £10,000 contribution. The amount that the government adds depends on your tax bracket and has a upper limit for those earning £150,000 or more.
SIPP fees vary from provider to provider so it is important to review each option carefully. Some providers will charge more for a SIPP if they are manging the funds you invest in as it will include fund management fees. Lower cost options can be good for those who want to build a portfolio of shares themselves.
The main consideration for fees paid are the annual charge, set-up costs and any charges associated with withdrawals.
To review and compare the fees of the UK’s leading SIPP providers, please use the Investment Superstore SIPP Comparison and Review Tool.
You must be aware that the value of investments can fall as well as rise so you must understand the risks of securities you purchase within a SIPP.