Self Invested Personal Pensions (SIPPs)

Self invested personal pensions (SIPPs) are a specialist type of personal pension that enables you more flexibility to choose where you want your retirement savings to be invested, instead of leaving a pension company to make the decisions. They are ideal if you want to make your own investment decisions and are comfortable with taking on the higher associated risk. As they typically have higher charges than stakeholder pensions or personal pensions, they are more suitable for large funds (at least £50,000).

A more detailed guide about Self Invested Personal Pensions (SIPPs), including permitted and restricted investments, can be found on InterSIPPs.co.uk.

How Much Will You Get?

The amount of pension you will get at retirement will depend on:

• How much you've contributed to the fund.
• How well your investments have performed.
• What charges have been made by your SIPP provider.
• The type of annuity you choose.
• Annuity rates at the time you retire.

You can take a tax free lump sum from your SIPP, plus an income between the ages of 50 and 75. However, from 2010, the minimum age at which you can take retirement benefits increases to 55.

Eligibility

To purchase a self-invested personal pension, you must be:

• Under 75 years of age.
• A United Kingdom resident or a Crown servant or the spouse or registered civil partner of a Crown servant.

Providing that you don't exceed the maximum pension contribution limits (£255,000 a year in 2010/11), you can put money into a SIPP even if you are already contributing to another pension (such as an occupational (company) pension scheme). However, as SIPPs are more expensive than other types of pensions, it's a good idea to ensure that you are really going to make use of the investment flexibility a SIPP offers.

Many people transfer previous pension policies into a SIPP so they can consolidate their retirement savings in one place and thereby benefit from easier administration and possibly more cost-effective charges.

Investment Choices

You can hold a wide variety of investments in a self-invested personal pension, from shares and investment funds to commercial property and futures and options. The scheme gives you the freedom to choose and manage these investments yourself, or you can employ an authorised investment manager to make the decisions for you.

Most SIPPs allow you to select from a range of assets, such as:

• Commercial property (such as offices, shops or factory premises) - note: NOT residential property
• Government securities
• Particular stocks and shares quoted on a recognised UK or overseas stock exchange
• Unit trusts
• Investment trusts
• Deposit accounts with banks and building societies
• Traded endowment policies
• Insurance company funds
• National savings products