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Self Invested Personal Pensions (SIPPs)

With the personal pensions market having been dominated for many years by insurance company products offering limited funds, consumer demand for a more bespoke approach to investing for retirement has been gathering pace.

Self Invested Personal Pensions were created to meet that demand by allowing investors the options to choose from a wider range of asset classes including:

* Stocks and Shares * Commercial Property * Deposit Accounts

* Fixed Interest Securities * Futures and Options

* Unit Trusts, Investment Trusts & OEICs

* Traded Second Hand Endowments

SIPP’s have the same tax benefits and are subject to the same regulations as conventional personal pension plans – the only real difference is that they separate the administration function, which is handled by the SIPP provider, from the investment function, which the investor can either undertake personally or perhaps delegate to his stockbroker.

Choosing a SIPP Provider

Several factors should be taken into account when choosing which SIPP provider to use:

Cost – charging structures vary between providers although most have an establishment charge of around £450+VAT plus an annual administration fee of around £300+VAT. Thereafter they may have fixed charges for each investment transaction and for holding property. Give some thought to the way in which you intend to operate your SIPP and identify the most cost effective plan for you.

Services – Some providers offer more than one SIPP product. This enables them to cater for investors who want on-line facilities so they can operate the plan themselves as well as those who wish to delegate investment decisions to a discretionary fund manager. Again, make sure you choose the model which best meets your objectives.

Specialisms – If you want to use your SIPP to acquire commercial property or unlisted shares, make sure you choose a SIPP provider with specialist knowledge and experience of dealing in these complex areas. Most SIPP providers say that they can handle commercial property transactions but In reality some of them have very little experience whereas others administer large property portfolios and are much more adept. Similarly if you want to contribute property or shares to your SIPP instead of cash, it’s important to use a provider that understands the issues and offers the facility – not all do.

The complex nature of SIPPs means that they are not suitable for all investors. Often, the benefits of ‘self investment’ are only advantageous to those with very large funds and / or an above average level of sophistication when it comes to investment decisions. Furthermore, the additional charges for arranging and dealing within a SIPP might erode smaller funds quickly.


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