Self-Invested Personal Pensions (SIPP’s) offer many investment advantages over traditional pensions, such as flexibility, diversification potential and sheer investment choice. They are not restricted to the limited fund range offered within an ordinary personal pension or stakeholder pension. A SIPP investor can choose from, and switch between, a vast choice of unit trusts, investment trusts and Open Ended investment Companies (OEICs), from across the market. You can therefore create a rich and diverse investment portfolio with these possibilities.
It is also possible to invest in individual quoted shares, bonds, gilts and many other types of investment, including commercial property, but there will be more expense attached to this.
The allowance of direct investment in stocks and shares means that a discretionary fund manager can run a portfolio of shares and/or collective investments for you within your SIPP.
The Benefits of a SIPP
Due to the investment flexibility of a SIPP, you won't have to change your contract if you want to switch investments, for example if you wish to increase or decrease your funds to a higher or lower risk. In terms of tax benefits, investment limits and retirement options, a SIPP works exactly the same as any other personal or stakeholder pension.
Traditional pension plans tend to offer a narrow choice of funds managed only by the pension provider and no option is given to use funds managed by other fund managers. They can also carry hefty charges, particularly on older plans. One possible drawback of using a single fund manager is while they may have expertise in one particular area, they are unlikely to have the best record across all fund sectors. One fund manager may offer a good property fund, while another may be renowned for its expertise in picking US shares.
Newer styles of pension plans run by insurance companies now tend to offer a limited selection of funds from other fund managers, plus their own in-house funds.
SIPPs offer the widest possible choice of investments for individual pension plans, allowing holders to pick funds from across the market.
A SIPP can hold all the asset classes required to give you the chance to build a diverse investment portfolio that has just the right level of risk you are happy being exposed to.
SIPPs are now a real option to cost effective personal pension planning