Self Invested Personal Pensions (SIPPs)
A SIPP is a Self Invested Personal Pension Scheme that provides you with the option of choosing when, where and how you invest the assets of your pension fund. Any contributions that you make to a SIPP will receive tax relief of between 20% and 40% depending on what the current tax rates are and what personal tax band you are in. Contributions are limited to 100% of your annual salary, although your employer can make additional contributions. There is also provision to carry forward relief from previous years.
SIPPs have been around for a long time, since 1989, but after the introduction of Pension Simplification legislation in 2006, SIPPs have become more accessible. Until recently, SIPPs have not fallen within the regulation of the Financial Conduct Authority (FCA) but this has now changed. Consequently more investors are feeling comfortable with taking control of their pension planning.
With a SIPP you are free to invest in:
- Unit Trusts
- Investment Trusts
- Insurances Company Funds
- UK Gilts
- UK Shares
- US & European Shares
- Cash & Deposit Accounts
- Commercial Property
The most important thing to remember is that the range of available investments depends largely on the choice of SIPP provider. Ultimately it is down to the trustees of your pension plan to agree whether they are happy to accept your investment choices into the SIPP. After all, the trustees are responsible and liable for ensuring that the investment choices fall within their remit.