Is a Self Invested Personal Pension for me?

June 7th 2008

For those clients seeking a more individual approach to pension investment, a SIPP will offer additional options that most investors will find attractive. Not only is it an option to directly hold commercial property as an asset, but most SIPP providers will offer access to portfolio managers and in some cases discretionary management for the larger investors.

A SIPP is basically a personal pension with the taxation benefits being just the same; the individual will have the option to take 25% of the fund value at retirement as a tax free lump sum. Tax relief on contributions made by the individual will attract relief at the highest marginal rate of tax applicable in the year the contribution is made and any contributions made by the employer will also attract relief in the usual manner. Rental Income can be treated as pension contributions, therefore, there is the added advantage of obtaining further tax relief in this way.

One of the main attractions with SIPPs is the greater investment powers allowed. Clearly, with an investment decision, certain issues need to be addressed one of which is the individual's attitude to investment risk. 

Permitted investments can include stocks and shares, futures and options, and a freehold or leasehold interest in commercial property. Unacceptable investments include loans of any sort, unquoted stocks and shares, classic cars, jewellery and paintings.