Self-invested personal pension (or SIPP for short) has become the go-to traditional pension scheme alternative in the United Kingdom. It offers expanded control over your financial future in retirement, as in theory a SIPP can not only help sustain your pension pot in these uncertain times but even further it if managed correctly. Since the inception of the Internet, SIPPs have flourished more than ever before, with low cost SIPPs now accessible to anyone who qualifies. However, SIPPs may not be for everyone, so it is worth determining whether or not one is right for your situation.
A SIPP is a form of personal pension that allows users to exhibit more control over their retirement in the form of investments. While a normal pension is limited in how it can be controlled, SIPPs offers extensive access to more funds and assets to allow you to grow your pension pot. Those who see a SIPP as a suitable form of pension fund will be given access to stocks, shares, trusts, OEICs, ETFs, gifts, bonds, properties, CNS and of course cash. Simply put, SIPPs place the power of a pension back into the your hands and that of a account manager if you choose to hire one.
How does a SIPP work?
SIPPs are classed as a pension and thus there are rules in place with regards to what can be contributed, along with how much and when. In many ways they operate in a similar fashion to standard pensions. The tax relief you receive when it comes to SIPP contributions is exactly the same as what you would receive on a standard pension, in the sense that it is up to 100% of your annual salary, or £40,000 per annum. Even if you are unemployed or a non-taxpayer you can still invest up to £2,280 per annum and benefit from 20% tax relief. When it comes to the withdrawal of a SIPP you will find the rules to be equally as familiar, as 25% can be withdrawn as a tax-free amount, with the remainder to still be used as a retirement based income.
Is a SIPP right for you?
Technically, anyone and everyone can have a SIPP as long as they can pay the fees and charges involved. The big question is whether or not you should choose to have one, but if you are truly dissatisfied with your current pension situation then the answer to that will almost definitely be yes. SIPPs are considered a leading option for those who are experienced investors, who understand the markets and that profit can be made when navigated correctly. Such individuals will also be understanding of the risk element of investing and that you may not get out more than what you pay in. Those adverse to any form of financial risk may consider a SIPP too much of a gamble, if this is you it may be worth looking towards other forms of pension schemes.
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