SIPPs

The basics

Fancy a Rolls Royce pension, rather than the pension equivalent of a Ford Mondeo or a Smart car?

Then take a look at Sipps – the luxury model of the pensions market, which comes with all the bells and whistles you could dream of, compared to personal pensions (think Ford Mondeo) or stakeholder pensions (think Smart car).

But remember that luxury comes at a price and that while we may all yearn for a de-luxe car or pension, they may not necessarily suit our needs, or more importantly, our pocket.

Self invested personal pensions (Sipps) are personal pensions which allow you to choose where you want your retirement savings to be invested, instead of leaving a pension company to make the decisions.

You can hold a wide variety of investments in a SIPP, from investment funds and shares to commercial property and futures and options.

SIPPs have been around since the early 1989, but until recently were only economic for those with very large pension funds because they were so expensive. Increasing competition in recent years has brought charges down and made them more accessible.

Changes in the pension rules in April 2006 (known as the A-Day changes) allowing increased contributions have also made it easier to set up a Sipp. In addition, more people are now turning to SIPPs when they reach retirement, if they want to take an income direct from their pension fund, in the form of a so-called ‘unsecured pension,’ which gives them greater control over how and when they take income from their fund.