People planning for their retirement have been urged to look at setting up a SIPP as the scheme comes with several advantages.
Ed Monk, associate director, Personal Investing at Fidelity International, told Express.co.uk: “A SIPP is a tax-efficient way to start saving for your retirement with any contribution you make boosted by the Government.
“For example, if you are a basic-rate taxpayer and save £80 into a SIPP, the government will top this up with an extra £20.
“And if you are a higher or additional rate taxpayer, this benefit can be even greater. SIPPs have a wide range of investment options which gives you plenty of choice over how your pension is invested.”
He said that as SIPPs offer “flexibility and control” over a person’s pension pot, they are a “popular option” for contractors, sole-traders and limited company directors, and those who do not qualify for automatic enrolment.
Mr Monk said it’s a simple process to open a SIPP and this can be done online by providing some basic details, such as a National Insurance number and the relevant bank details.
He added: “Contributions can be made by you, an employer or by someone else on your behalf and there is no limit on the number of SIPPs that you can have.
“You can also bring existing pensions together and consolidate into a SIPP – this is especially useful and beneficial from a money management point if you have accrued several pensions from jobs throughout your career.
“Many people do this because of the flexibility and convenience of this type of pension.”
Anna Murdock, head of Wealth Planning at JM Finn, spoke about the different assets SIPPs can be invested in.
She said: “Most SIPPs offer a wide range of underlying asset classes including, collective investment funds, exchange traded funds (ETFs), direct UK and overseas equities, UK gilts, bonds and other fixed interest securities.
“Some SIPP providers also offer options to hold commercial property, land and loans. SIPPs also offer a good deal of flexibility when it comes to retirement.
“Changes to the pension regime introduced in 2015 have meant there is a far greater degree of flexibility in how people can use their pension pot at retirement.
“Historically, most people had to purchase an annuity that would provide an income for life, but today it is possible to withdraw an income from the fund, whilst keeping the fund invested.
David Jeal, head of Pensions at CMC Invest, said a SIPP can sit alongside other pensions a person has, including one with an employer.
He said: “Just remember the annual and lifetime allowances apply to all your pensions in total. Most employers will only contribute to the workplace scheme when you do – opting-out is generally not a good idea as you could them lose out on the additional contribution your employer makes.
“Workplace schemes and some SIPPs offer ‘packaged’ investments (usually based on your attitude to risk) where they invest your money in a managed fund or a specific portfolio of funds.
“Where a SIPP really lives up to its name as being a ‘self-invested’ pension is one where you’ll have a wider range of investment options – such as mutual funds, investments trusts, UK and overseas shares, ETFs, and gilts/bonds.
“They also offer a full range of drawdown options which are currently available from age 55, which you can mix and match to suit your financial plans.”
He added: “SIPPs can be seen as a good way to manage your retirement provision. Used alongside ISAs, they can help you manage that transition from full-time work to full-time retirement in a flexible and tax-efficient way.
“But the initial driver is the desire to be in control of how your pension is invested. After all, they are ‘self -invested’ schemes, whether you’re literally doing it yourself or being supported by a financial
adviser.
“The growth of impact investing and the desire to make sure your pension funds are invested in line with your environmental or social beliefs is already seeing more people using a SIPP to help them achieve this.
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