To SIPP Or Not To SIPP

Could you beat the pension companies at their own game by taking your own pension investment decisions? A growing number of Britons are opting to do just this through Self Invested Personal Pensions (SIPPs).

Although SIPPs have been around since 1990, in recent years they have become far more popular as savers aim to achieve the best level of pension income possible. Today, an estimated 70,000 SIPP plans exist in the UK with assets of over 14bn.

The main appeal of SIPPs is that they offer you far greater choice and more control over your pensions investments than traditional pension schemes. They can also work out cheaper too as you can save on management fees.

You can invest in most main asset classes through a SIPP, with the big exception of residential property. So while you wont be able to include a buy-to-let flat or house in your SIPP, shares, unit trusts and commercial property are all eligible.

Property is one of the most popular investments for SIPP holders, who benefit by paying no income or capital gains tax on bricks and mortar investments, including offices, hotels, student accommodation, care homes, land and even prisons.

Think twice about property as a good potential investment before you act, however. Its a high-risk move to invest a large portion of your pension in property as youll need a fair stash of cash to invest in a property directly through a SIPP. The most you can borrow through a SIPP to buy property will be 50% of the fund value: so if your pension pot totals 50,000, an extra 25,000 wont buy you much.

And while youre at it, it also pays to be clear whether a SIPP is right for you in the first place. Most commentators say they are suited to relatively sophisticated investors who want more of a say in where their money is invested and with larger than usual pension pots to invest.

Bear in mind also that the paperwork involved may cost more than an ordinary personal pension or stakeholder pension plan because each SIPP is unique to the individual. However, a number of packaged plans are available to streamline the process of setting up and running such schemes.

BeatThatQuote.com can help you find out whether a SIPP is right for you, says product director Sophie Neary. "You can use our Pensions Calculator at BeatThatQuote.com to estimate how UK SIPPs could benefit you. Alternatively complete a short form online and one of our advisors will contact you to compare your options and the possible advantages of saving for your pension through a SIPP.

"Remember that SIPPs are complex, so only fools rush in. Its essential that you take expert advice before making any decisions. Our independent financial advisors are experts in UK self-invested personal pensions. Their advice is completely free and youre not obliged to take it."

Philip Smith writes for Beat That Quote on all loans and finance topics.

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