A self-invested personal pension (SIPP) is a way of holding any investments you have until you retire and have to draw an income for your retirement. SIPPs are personal pensions, and are therefore different to other standard pensions. With an SIPP, you have more flexibility and control over your investments.

Do you need advice on SIPPs for your future? Financial Advisor UK offers a national network of fully FCA-registered and approved pension advice professionals that you can be matched with to receive the right advice and best deals for your circumstances.

If you have a standard pension plan, you don’t have to worry about how your investments are managed, as this is done for you through a pooled fund. With an SIPP however, you have more control over where to place your investments, or you can hire someone to manage your SIPP for you. You can switch your investments whenever and wherever you want to with an SIPP, which is why SIPPs often have higher charges, and are more suitable for those with investment experience. An SIPP is available to anyone in the UK who is under 75, and you can start to draw your funds once you reach the age of 55.

There are four different types of SIPP available, these are:

• Full SIPP – this type of SIPP gives you a full range of products to invest in, including share trading and property. This type of SIPP can incur high fees.
• Lite SIPP – this type of SIPP only invests in one type of product or asset. If you want to, you can turn a lite SIPP into a full SIPP when it suits.
• Deferred SIPP – this type of SIPP is designed for people who may want access to an SIPP in future. It is held in trust, and offers access to a range of investments at a later stage.
• Hybrid SIPP – like a deferred SIPP, you can have access to a range of investments through this plan and your own personal pension investment fund.

SIPPs and investments

You can make several types of investments with an SIPP. These include:

• Investment trusts
• Unit trusts
• Government-backed trusts
• Funds from insurance companies
• Traded endowment policies
• NS&I products
• Deposit accounts
• Commercial property
• Stocks and shares

There are many other types of investments available through an SIPP – the above is not an extensive list. You should get yourself matched with a professional from Financial Advisor UK, who can discuss your options with you.

As of April 2015, you can access your pension pot from the age of 55, and have the flexibility to choose how you invest it. Always speak with a financial advisor before deciding how to access your pension.

Pros and cons of SIPPs

The advantages of a SIPP include:

• A lump sum worth 25% of your pension pot, tax free, plus tax relief on contributions
• Flexibility and control over your investments
• A choice of different investments
• Employer contributions
• Ability to switch investments, should you wish
• The option to grow finance to purchase commercial property, if desired

The cons of a SIPP include:

• Higher charges than a standard pension plan (including set-up and management fees)
• Greater level of risk

SIPP rules for contributions

Just as with standard pensions, there are contribution rules for SIPPs. For every £100 a basic rate taxpayer puts into their SIPP, the UK government puts in an extra 25% (£25). For higher rate taxpayers, the government puts in 40% (£40), and for the top band of taxpayer, the government puts in 45% (£45). The maximum amount you can save in total per year into an SIPP is 100% of your total yearly wage, or an annual allowance of £40,000 (depending on whichever of these is the lower sum). There is also a lifetime allowance you can save into an SIPP, which is £1,055,000.