What you need to know about SIPPs
Written by Emma Bunting
Planning for your retirement can be a difficult task due to there being so many pension plans on the market. It is important to do a lot of research in order to find the plan that suits you. This article is going to focus on Self Invested Personal Pension Plans (SIPPs).
A SIPP is a type of pension plan. It differs from a traditional pension plan as it allows you greater control as to how to invest your funds and when and how they can be taken as retirement income.
A SIPP allows you to invest in a broader range of areas than other plans. You are free to move around your investments whenever you like. You can manage the investments yourself, appoint a financial adviser or appoint an investment manager to advise you or manage your investments.
Members also benefit from tax relief. For example, if you invest £780, the government will add £220. It is also possible to take out a lump sum of 25% tax free at 50 (55 from 2010). It is also possible to purchase commercial property using your SIPP fund. You can contribute up to 100% of your yearly earnings.
What are the advantages? The main advantages are tax benefits and relief, flexibility and the fact that you have the control over your investments.
What are the disadvantages? The main disadvantage is that SIPPs are only suitable for certain individuals. It can also be expensive especially if the value of your funds is low. There can be SIPP administration charges, in addition to fund management charges and possible professional fees if a financial adviser and/or investment manager is used.
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