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What is a SIPP?

I’m evaluating my retirement plans and I am considering opening a SIPP, but what are they and are they suitable for me?

What is a SIPP?

A SIPP is a self-invested personal pension and is designed for people who want more control over the funds held within their pension.

SIPPs typically offer a wider range of investment options than other pensions and enable investors to make their own decisions about how their pension funds are invested.

It’s relatively simple to open a SIPP with many companies offering an online service, in fact, most SIPPs can only be opened and managed online.

SIPPs give the holder greater visibility on how the funds are performing and enable the investor to make changes more easily and with fewer fees and charges.

Often an investor will still use an independent financial advisor to help manage their SIPP to ensure that any funds selected meet their risk profile and are likely to enable them to reach their retirement plans.

For UK residents, SIPPs carry the same tax reliefs as any other pension and also adhere to the same rules meaning that funds cannot be accessed until the investor reaches 55 years old. For UK non-residents, it is important to seek advice to ensure you fully understand the tax rules in the local jurisdiction as the rules will be different to those in the UK.

If you no longer live in the UK, while it is possible to open a SIPP, there are different rules regarding contributions and pension transfers into the SIPP. For example, you can normally only make contributions to a UK SIPP up to £3,000 per year and only if you have been non-resident for five or fewer years. It is possible to transfer funds into a SIPP regardless of how long you have spent outside the UK.

If you live outside of the UK, it is highly recommended to seek independent advice before opening a SIPP to avoid restrictions, additional fees or charges and ultimately ensure that you are choosing the most tax efficient investment vehicle for your funds.

SIPPs will often have fewer costs and charges, but the trade off for that is that you are take on more responsibility for the investments held within the SIPP and therefore they may not be suitable for everybody.

You should never solely rely on online advice and you should always seek independent advice before making an investment decision, especially regarding your pensions.

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During the consultation, the advisor will be able to answer your general questions and offer advice about investment platforms, including detailing the options you have available.

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Last updated: 16 November 2018

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