What is a Self-Invested Personal Pensions (SIPP)?

A Self-Invested Personal Pension, or SIPP, is a type of pension that lets you take control of your retirement money and investments. Anyone can start a SIPP. Whether you’re a contract worker, business owner, self-employed or simply looking for flexibility when managing your retirement savings, a SIPP could be the right pension plan for you.

In the same way as other pensions, you can add money into a SIPP as and when you like and, if you’re under 75 and resident in the UK for tax purposes, you can get a top up from the government in the form of tax relief. You’ll usually get at least 20% tax relief on anything you pay in and if you pay tax at a higher rate you can normally claim even more tax relief through your tax return. Once it’s in your SIPP, your money can also grow free from UK income and capital gains tax. 

Benefits of a SIPP may include:

  • Working with your financial adviser, you may have more flexibility to select and manage your own investment portfolio
  • You may invest a wide range of assets like company shares, corporate and government bonds, collective investment funds and cash, giving your investments the potential to grow over time. So you could have greater investment flexibility than if you kept your pension in its existing scheme.
  • Somes SIPPs will also allow you to hold investments in different currencies, helping you mitigate currency exchange rate risk.
  • A SIPP is a registered pension scheme and such schemes enable contributions to be made with tax relief.
  • Like most other pensions schemes, a SIPP provides the opportunity to pass on your pension to loved ones when you die. 

What to watch out for

Investing retirement savings in a SIPP may not be for everyone though. While SIPPs offer greater flexibility than traditional pension schemes, they often have higher charges and the investments they can hold mean they may be more suitable for experienced investors.

You can transfer a pension into a SIPP at any age, even if you no longer live in the UK. But if you do live overseas you may find you can’t make new contributions.

If you do consider transferring and old pension(s), before you do you should first contact your existing provider to check you won’t be losing any valuable benefits or need to pay high exit fees. 

Updated: 24th October 2020 

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