What is SIPP?
A Self-Invested Personal Pension (SIPP) is a UK government approved personal pension scheme that allows you to make your own investment decisions. You can choose from a wide range of investment options as approved by the HM Revenue and Customs (HMRC).
If you are tired of dealing with investment advisors, then this DIY pension scheme is the right approach for you. With a SIPP, you decide how much to invest, what to invest in and how much it will cost.
However, you need to know and understand investing. This mean researching and understanding the options that work best for you.
- Unit trusts and Open Ended Investment Companies (OEICs)
- Exchange traded funds (ETF)
- Investment trusts
- Gilts and Corporate Bonds
- Commercial Property
Frequently Asked Questions
- Pick the investments that you prefer and add it to your SIPP.
- You are protected from taxes as you pay the money prior to the income tax being taken.
- Manage your SIPP online. You will be given an account to manage your investments. Buy and sell online as you see fit.
There are two ways to start a SIPP – a completely new contribution or move an existing pension scheme.
- New contribution – you can start with a monthly contribution or open one using a lump sum.
- Existing pension scheme – you can consolidate your existing pension schemes into a SIPP. This will ensure they are all in one location. However, unless you are self-employed or opted out, you will have a personal pension as a result of the pension auto-enrolment rules.
- If you opt for a low-cost SIPP then you are in control of the investment and the decision-making. This type of SIPP is execution only.
- A high-cost SIPP often known as a full SIPP is where you receive advice on SIPP and, therefore, increased charges. However, these offer the widest range of investments.
You can contribute 100% of your annual earnings before tax up to a limit of £40,000 for 2015/16. From April 2016, the amount you can contribute will be gradually reduced at a rate of £1 for every £2 earned over £150,000, until the tax-free limit hits £10,000.
You can contribute up to £3,600 per tax year and still get basic-rate tax relief. So, non-workers can pay in £2,880 per tax year, to which the taxman will add £720.
Still open questions? Ask Now