Top tips on your SIPP Pension

One of the most attractive points about a modern day pension is that almost anyone can have one. It is a common misconception that taking out a SIPP pension is a long and complicated process, only used by people in the know. Yes pensions can be confusing and complicated but as most providers will tell you, a SIPP is a flexible form of personal pension plan with the ability to hold investments until you retire. Typically, a conventional personal pension involves the holder paying money to an insurance company for investment in an insurance policy whereas a SIPP allows the plan holder greater freedom in what to invest in and for the plan to hold these investments directly. The plan holder possesses much more control over the investment strategy or can appoint a fund manager or stockbroker to manage the investments on their behalf. Conventionally SIPP Pensions were used by individuals with larger pension pots but as these plans have developed over the years, charges have been reduced and thus it is now possible to manage a SIPP no matter the level of investment. It is entirely the choice of the individual to seek the assistance of an advisor. The clear advantages of using a SIPP plan is that they potentially offer lower costs and offer a larger, more flexible choice of investment. Another top tip is being aware of your limits; there are limits to the amount that can be saved and receive basic tax relief without even being a taxpayer. Currently the maximum gross contribution is £3,600 per year, £2,880 net. SIPPs provide a wide range of investment choice to the individual, including shares, stock-market and property funds, futures and options, unquoted shares, gilts (government bonds) and company bonds, cash and commercial property. It is possible to even invest in your own company by using a SIPP to buy commercial premises, while borrowing up to half of the purchase price. You don’t have to go it alone, if you feel that you may require a helping hand and steering in the right direction some SIPP providers offer optional fund management. In this situation, a professional will pick the stocks and shares for you, however be aware that there will be an associated cost for this level of service. This type of pension plan will not suit individuals who do not take any responsibility for their retirement plans and savings. Most importantly check the type of SIPP you are getting as not all SIPPs are the same. Some offer the full range of fifteen core investment options whereas others only offer a restricted choice; for example, some providers will not allow investment into offshore bonds, foreign currency or commercial property. Finally and by no means the least important, start saving as soon as you can and over the long-term, the more time the compound interest has to work in your favour.