What is a SIPP?

What is a SIPP?

Transferring out of a Final Salary scheme is unlikely to be in the best interests of most people.

The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.

With so much financial jargon out there it can be confusing to know if you are making the right decisions with your investments – that is why we’ve put together this short guide to help.

Personal pension

A SIPP (self-invested personal pension) which has the ability to give you a level of flexibility as to how you invest your retirement savings. With a SIPP you are in total control of how, where and when your money is invested – you make the decisions which will determine how your fund performs.

What are the advantages?

With a SIPP you pay money to your pension as and when you like, with the government paying in an extra 20% in tax relief. There are tax benefits if you are a higher rate taxpayer and your savings will be free from UK capital gains and income tax. Of course tax benefits will be dependent on your individual circumstances, so make sure you seek financial advice if you are not sure.

What are the disadvantages?

While some people have a good understanding of the areas that they would like to invest in, as well as knowledge of the marketplace, others can be at risk of being mis-sold or making ill informed decisions.

You also need to remember that your money is tied up for a long period and you might be better off having a company pension with contributions made by your employer as well as you.

At Pensionlite we can help advise you as much as possible, as there are many different types of SIPPs, with each offering different investment options.

How do I pay into a SIPP?

You can make regular or one-off payments and if you start paying in early it will ensure that you give yourself the best chance of having a decent pot of money to support yourself in retirement.

When can I take money from my SIPP?

When you reach 55 (set to rise to 57 in 2028) you are free to start withdrawing money from your SIPP, even if you are still working. Pension freedoms allows you to take up to 25% of your pot tax free. The rest of your withdrawals will be taxed as income at your standard rate.

Is a SIPP for me?

This will come down to personal circumstances as well as your attitude to investment risk. You might feel that your current fund is not delivering the expected return, which might prompt you to investigate a possible pension switch.

Speak to the experts

At Pensionlite our team of expert pension specialists have the industry experience to make informed decisions about your retirement. If would you like to speak to one of the team about a SIPP you can email us directly support@pensionlite.co.uk or call 01952 279379