Understanding if a SIPP is right for you

Self-Invested Personal Pensions (SIPPs) have become a very popular as a way to save for retirement in recent years, providing a more flexible type of investment for anyone looking to diversify their pension investments and have their money work for them. Here we will explore if a SIPP could help you make the most of your financial future.

What is a Self-Invested Personal Pension (SIPP)?

A Self-Invested Personal Pension is a retirement fund with more options for investment than a traditional fund. Your employer may pay into your Self-Invested Personal Pension, but they have no obligation to do so by law. SIPP pensions give you more freedom to make decisions about your savings and where you want to invest them, more so than a standard employer’s pension scheme.

There are many different SIPP schemes, and each one will have it’s own rules and range of investment opportunities. However, in general, SIPP pensions are more diverse with the options for investment in your hands rather than leaving the decisions up to a third party. For example, with iSIPP you are currently able to choose from three fund options suited to your needs, values and attitude to risk.   Our funds are managed by world-leading fund houses BlackRock or Schroders giving you piece of mind that your investments are in knowledgeable hands. For added flexibility you can manage your SIPP and see how your investments are performing at any time through your own online account 24/7.

Contributing to a pension can have other benefits too, namely certain tax benefits on income generated by your pension investments. However, the benefits don’t just apply to you; your pension can also assist your relatives as your remaining savings can be passed onto your beneficiaries tax-free if you pass away before the age of 75.

Understanding Self Invested Personal Pensions

SIPPs put you in charge of your investment and in charge of your money, and they can be an excellent way to provide for your retirement. SIPPs are particularly favoured by the self-employed and freelancers, but they can be opened by anyone in the UK under the age of 75 and provide many people with a good pot for retirement funds, with the ability to shift investments as you see fit. In most circumstances you will be able to contribute up to £40,000 a year of your earnings and not pay a single bit of tax on this.

There is no age that is ‘right’ to begin saving for a pension, but the earlier you begin to save, the more potential there is for your money to grow. Opting for a Self-Invested Personal Pension will ensure that you have the opportunity to invest in growing companies, build your investment portfolio, and increase the return you will get in the form of dividends. Remember, as with any investment product, the value of your pension may go down as well as up and you may not get back the amount your originally invested.

Flexibility For When You Need It

Choosing how to reinvest the dividends could see your personal pension pot grow a lot faster than some employer-based pensions that do not allow you to have the same level of control and flexibility.

Investing money is one method of growing your personal portfolio, and having the ability to be flexible means you can change your mind and change your investments when you feel the time is right.

The Benefits Of a SIPP

Self-Invested Personal Pensions are one of the most flexible and tax-efficient ways to save for your retirement. They have many more benefits aside from just the investment flexibility too, these benefits include:

• From 20% to 45% tax relief, up to 46% in Scotland, on your savings depending on your circumstances
• When you reach 55, you can take A lump sum of up to 25% of your pension fund tax-free
• No capital gains tax or income tax on any of your investments
• Continue working after the age of 55, even if you dip into your pension pot
• You may add savings from other pensions to your SIPP, making it a great option for keeping your pension when you change jobs

If you would like to know more about how iSIPP can help you to take control of your financial future you can read more about what we do here.

Disclaimer 

The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.

This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.