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Will self invested personal pensions become more popular in the future?

The demise of the final salary pension scheme has prompted more and more people in the UK to look toward self invested personal pensions (SIPPs). While there are various regulations and rules regarding self invested personal pensions they do in general give holders more flexibility regarding the investment of their pension fund and a wider range of potential investments. But are they safe?

In effect a self invested personal pension is a money purchase pension arrangement whereby on retirement, or the date you choose to take your benefits, you will literally be able to acquire a policy in the open market else look to draw down your benefits from your investment fund over time. The risks are potentially enormous for people who have no experience and decide to go it alone in this sector and professional advice should be sought if you are even considering this type of arrangement.

If you take a long-term approach to investment there is every chance that you could do very well with your pension fund but as ever the need to balance your investments across a broad selection of sectors is vital. Overdependence on one particular sector, such as the banking sector over the last 12 months, would have seen your pension fund value decimated even though prior to the credit crunch the UK financial sector was seen as "safe as houses". Caution should always be the key word in any significant change in your pension arrangements and advice should be sought from professionals.

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