SIPP: Pensions With Freedom Of Choice

by Paul Forrest on 30 May, 2012

The pensions industry has attracted much negative news in recent years. Whether it is the government clawing back pension schemes or mis-selling by overzealous financial advisers, pensions have not enjoyed a good press.

You could be forgiven for wondering whether it is worthwhile investing hard-earned cash into a pension scheme at all, particularly given the continual financial crises over the past few years.
You may be thinking that it would be nice to have some control of where your money is being invested, either for sound financial or ethical reasons.

Well, there is a product that meets your needs. It is called a SIPP (Self-Invested Personal Pension). You can choose the investment fund in which you would like to put your pension savings.

The pension holder’s money is invested into assets by the SIPP trustees. The investor has complete freedom, subject to the agreement held with the SIPP provider, to choose which assets to be purchased, leased or sold.

SIPPs have been around for over twenty years, but recent legislation and more competition in the SIPP marketplace has opened up the accessibility to blue collar workers through a reduction in administration fees.

HMRC allows SIPP funds to be invested into any assets. Some assets, however, are subject to tax charges. Assets that are not subject to taxation include: equities invested on a recognised stock market; authorised unit trusts; investment trusts that are regulated by the Financial Services Authority (FSA); commercial property; traded endowment policies; gold bullion (subject to appropriate regulations); residential property (through collective investment vehicles, such as real estate investment trusts or property trusts) and luxury items, such as vintage cars and wines.

There are essentially three available formats of SIPP. The first is known as a deferred SIPP. Self-investment, in these plans, is deferred until a later date during the term of the plan. Initial investments are generally held in insured pension funds. Deferred SIPPs are not as restrictive as they used to be because there are currently more than 1,000 funds to choose from.

The second category of SIPP is known as hybrid. In these plans, part of the investment is held in conventional pension funds; the remainder of the scheme is freely available to purchase any of the permitted assets.

Finally, we have the full or Pure SIPP. These schemes allow investment in all allowed assets.
So how do you decide which type of plan is best for you? Similarly, how do choose a SIPP provider? Needless to say, there are many competing suppliers all claiming to be the best.

These are a few pointers you should consider when making your decision. Some SIPP providers will charge higher management fees. You should remember that this is your money being invested for your benefit and for the benefit of your loved ones. Bearing that in mind, it would be wise to look for a low-cost option. Does the SIPP provider offer online dealing? What are the related costs? Does the provider offer a discount for frequent dealing and regular investing?

Does the SIPP provider offer an annual cash bonus on fund investments? What account charges are there? Some SIPP providers offer no account charges.

In addition to comparing relevant fees, consider the range of investment assets available. The more options you are allowed, the better equipped you will be for choosing the best funds.

Another point to take into consideration is the functionality of the plan. Can you view your SIPP plan twenty four hours per day, seven days a week, anywhere in the world? How quickly and simply can you make your transactions? Can you use your debit card in order to make transactions?

The SIPP is clearly the most flexible type personal pension investment plan available. And the great thing is that you don’t have to be a company director to take advantage of SIPPs.

About the Author

Paul Forrest

Paul Forrest is an experienced writer in many fields of interest and we are delighted that he will now be a regular contributor to in 2012.