The Self-Invested Personal Pension Explained (SIPP)

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What Is A Pension?

A pension is a way of saving for retirement. When you’re young it’s easy to dismiss them, as retirement seems too far away, however if you think about your expenses as an adult in your thirties or forties ( a house, raising children or paying for a wedding ), saving for retirement will most likely not be on your priorities.

Making the best out of pension will ensure a decent income when you retire, because when you stop working the bills will keep coming and you won’t have a salary, you won’t be able to maintain your way of life.

A retirement pot is built up by investing over a couple of years. The money that you save into a pension gets a boost from tax relief, so you are saving from untaxed earnings. Most people start investing in a pension through their workplace, however you can also set up and manage your own pension through a self-invested personal pension (SIPP).




What Is A SIPP Scheme?

Over that past couple of years, the SIPP scheme has become the top choice for investors with middle and high income. If you want to unleash yourself from pension providers and take control of your retirement with a low-cost DYI option, then SIPP is perfect for you. A Self-Invested Personal Pension (SIPP) is a type of pension that allows the holder to choose and manage the pension pot. The usual pension schemes are quite limited in terms of investment choices and will shorten your list of funds. They are normally run by the pension company’s fund manager. However, with a SIPP scheme you can invest almost anywhere you want and choose your own investments.

With this flexibility, comes great responsibility.  In order for your SIPP  to work, you need to know all the information, do the research, understand investing and you need to be willing to spend a bit of time working on it. In order to make the best choices in terms of investment and avoid making mistakes, you need to know the right information.




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How Do SIPPs Work?

You can think of SIPP as a storage closet. You can place lots of different investments in it, it will hold those investments for you and like any other pension, it protects them from taxes.

SIPP can be managed from the comfort of your home – completely online. Phone and postal services may be an option, but you should check with the provider to see if it costs more. However, you can buy and sell investments at the click of a button and you can also keep an eye on them, just as you’d check your accounts with online banking. More detailed and specific information about how SIPP works can be found by clicking here.

How To Start A SIPP?

You can start a SIPP from scratch by investing a sum of money in it, or you can switch to it from your current pension scheme and your pension pot will be moved in it. If you don’t have one, you can either start by contributing to it every month – the sooner, the better, as there will be more time for a generous amount of money to pile up, or if you have a big lump of money, you can invest that.

If you already have a pension pot or more you can secure them all into a SIPP and you will have them in one place. Or if you are not satisfied with your current pension plan, you can switch from your present one to a SIPP, but make sure you check if there are any fees for leaving your current one.

To find out more specific details, such as how to benefit best from the newest pension freedoms, how to improve existing pensions, how the tax rules work and how tax advantages can help boost your pension and so much more. Again, being well informed is crucial when it comes to SIPP, which is why we want to show you a FREE SIPP guide.