Self-Invested Pension Plans (SIPPs)
Self-Invested Pension Plans (SIPPs) offer numerous advantages for financial planning, including a generous tax treatment.
SIPPs are Personal Money Purchase pensions and represent the cutting edge of current modern retirement planning for individuals (outside of a final salary scheme). They may be particularly appropriate for you if you have a medium to large pension pot(s) for either pre or post retirement planning.
Additionally, if you also have other income streams (perhaps from other pensions such as a final salary scheme) rental or investment income or even a salary a SIPP can offer significant financial planning opportunities to meet your unique individual needs.
SIPPs offer access to wide and diverse investments. Furthermore these types of policy are also associated (though not exclusively) with taking one’s retirement benefits in a flexible manner through drawdown. In other words, taking your retirement benefits in a more flexible way while leaving your funds predominantly invested.
Although they were once considered more expensive than the alternative and more basic personal pension, if you have a significant size fund a modern SIPP may be more cost effective. This is because many SIPPs charge set fees that are not necessarily related to the size of your pension funds; therefore, the larger your pension funds the relatively less onerous these set fees become.
Whereas personal pensions are normally associated with insurance companies many SIPPs are offered by bespoke companies who do not invest your monies for you but simply allow you to organise your affairs through the legal framework they provide. Even if your investments requirement can be met with a personal pension, a SIPP may be more appropriate if you have a medium to large pension pot.
Many fundsupermarkets and investment platforms provide SIPPs as part of their offering; it is therefore possible to monitor (not invest) many of your financial plans from one reporting site.
It should be added that many traditional insurance companies also provide SIPPs as they complete with other providers to offer the perceived most up to date ‘fit for purpose’ policies for people with medium to large pension funds, including access to share portfolios, commercial property and drawdown, etc.
A pension policy is a less tangible purchase then buying most other goods; it is not apparent that one will work much faster or better than the latest mobile phone, microwave or television set but through competition and technological progress within the various pension offerings these have progressed in a similar fashion as the improvement in many products of a more tangible nature. They do work more efficiently, cost less and are more user friendly. A SIPP policy represents, one may argue, one of the leading modals for a pension policy
SIPPs are a major part of retirement planning that I advise my clients on. Many of the plans and strategies described on this website can be undertaken using SIPPs because they represent the most cutting edge means of reporting, managing and organising your personal pension planning both before and post retirement (or semi-retirement) for individuals with medium to large pension pots.
Questions and considerations
The following scenarios may be applicable to you if you are considering a SIPP:
- You may have several smaller pensions which you may wish to consolidate (please see also: pension transfers and consolodation).
- You are not happy with your current investments and wish to take a more proactive approach.
- You are not happy with the way your SIPP has been managed currently and are considering changing your Financial Advisor.
- You may be contributing relatively large amounts of money (or your employer is) into your current pension which was originally designed for much smaller funding levels and you want a more suitable policy to meet your higher funding levels and accumulated assets along with taking your retirement benefits in a flexible manner.
- Your current pension(s) have very few funds available and you are not comfortable with all of your eggs in one basket.
- You may wish to invest in assets which are currently not available to you within your present policy.
- You may wish to buy your business property (see link self employed).
- You may want to take some or all of your free tax cash but do not currently require an income.
- You may want to take some cash and income but not all of it.
- Once you have taken your retirement benefits you may wish to ensure that if you were to predecease your partner that you left your pension pot to them.
- Many of the reasons I have outlined under the heading pension transfers and Drawdown may be relevant here.
If you have a question or would like to arrange an initial consultation without cost or obligation, call Nigel on (01295) 660571 or request a call-back.