Self Invested Personal Pension (SIPP)

What is a SIPP?

A SIPP is a Personal Pension Plan but with one very significant difference; administration is separate from investment content, giving the investor freedom to choose and change the investments within it.

A SIPP must be set up with a recognised provider and professional trustee and is unique to the individual. 

Who is a SIPP suitable for?

SIPPs are generally available to anyone below the age of 75 who is resident in the UK.  These schemes are attractive to individuals with larger pension funds or those who are keen to make their own investment decisions from the widest range of investments.

What are the benefits?

There is wide range of permitted types of investments for SIPPs including stocks and shares - both quoted and unquoted, Investment Trusts, Unit Trusts, Open Ended Investment Companies and cash deposits.  Commercial property either held directly or via property shares can also be included.  Residential property can be held as an asset class but only via a collective scheme, such as a residential property fund.

Charges for the SIPP “wrapper” are separate from the charges levied on the underlying investments and are therefore more transparent.  Charges for the SIPP wrapper are usually fixed amounts, for example, £400 per annum and are not related to the size of the fund, so there is economy of scale.  Some providers charge on a transaction basis, so you do not pay for services that you do not use.  Some SIPP providers offer online access, offering the ability to monitor the performance of your pension everyday.

What are the disadvantages?

In addition to the “wrapper” charges, there are also likely to be separate charges on the underlying investment.  Many investors have a SIPP but do not take advantage of the additional investment opportunities, thereby potentially exposing themselves to unnecessary additional costs.