A Guide to SIPPs


What are they?

SIPP stands for Self Invested Personal Pension. It is a personal pension plan but has the added advantage that you, as the investor, have complete control over the investment strategy and investments contained in the pension plan.


How do they work?

Personal pensions are usually provided by insurance companies and they often limit your choice of investment to a number of investment funds, often managed by the same company.

A SIPP should be viewed as a tax efficient wrapper into which you can invest almost any type of financial asset. Although a SIPP may be provided by an insurance company, it can also be provided by specialist SIPP administrators. .

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A SIPP provider will establish the SIPP wrapper which will receive all the tax advantages that are enjoyed by a standard personal pension. Once the SIPP has been set up, you invest your lump sum or begin investing regular contributions which will initially be placed in a cash account.

The list of permitted SIPP investments is extensive and includes:
  • UK and international company shares
  • UK and international government and company debt (gilts and corporate bonds)
  • Collective investment schemes such as unit trusts, pension funds, investment trusts
  • Commercial property
  • Deposit funds and currency
  • Commodities
  • Futures and options
  • Warrants
  • Derivatives


How much can I invest?

You will receive tax relief at your highest rate on any contributions that you make within the annual allowance. From the tax year 2011/12 the annual limit for income tax free pension contributions will be £50,000. Even if you are a non-taxpayer the government will pay the basic rate of tax on top of contributions up to £3,600 a year.


Is a SIPP suitable for me?

If you are unsure about whether to invest in a SIPP, further advice can be sought from an independent financial adviser. Generally, SIPPs are suitable for investors who want to be in control of their pension investments, have a wide choice of investment options, require flexibility over their investment strategy, and are comfortable making their own investment decisions.Pension Advice
There will be some fees involved with a SIPP, with charges varying between providers. There may also be initital and annual management charges for specific investments made. 

There will also be a charge if you receive financial advice about SIPP investments. However, many SIPPs are primairly non-advised services so there is no financial adviser costs.

If you have an existing pension plan this may be elligible for pension transfer but this will depend on the type of existing schemes you have.


Anything else that I need to know?

The charges associated with a SIPP and the types of investments available will vary between providers so you should look carefully at what a SIPP offers before making a decision to open a plan. 

For example, some SIPPs may solely provide access to mutual funds (collective investment schemes) provided by fund managers, while other SIPPs may allow access to low cost tracker or passive funds, Exchange Traded Funds (ETFs) and structured investment products.

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 Important Risk Information:

This website contains information only and does not constitute advice or a personal recommendation in any way whatsoever. The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future.

Different types of investment carry different levels of risk and may not be suitable for all investors. Please ensure that you read the Important Risk Information for further details. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment and should read the product literature. If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.