SIPPs are most appropriate to those who have a number of pension schemes and want to bring these retirement plans, plus any investments together in one easily manageable pension wrapper. A SIPP may also be suitable if you are self-employed independent woman or if you're current employer does not have a pension scheme.
Additionally SIPPs will also be of benefit if you are looking for; increased freedom to invest in a wider range of investment options, more versatility on when you start to draw your pension and how you choose to take this income and in the end a far greater choice of pension benefits for your dependants or spouse when you die.
With a SIPP a 25% income tax free lump sum is able to be withdrawn and the remainder is available to buy an annuity. As with all pensions, the money cannot be withdrawn until age 55.
Simple and inexpensive a "low-cost" SIPP has opened the market to middle-income investors looking to boost returns by going it alone making them ideal for independent women.
One of the key differences between a SIPP and a Stakeholder pension is even though they are both classed as Personal Pension Plans and have the same rules regarding tax relief and contributions stakeholder pensions are more basic. They in most cases can accept payments of as little as ?20pm and investment choices are limited to about 20 funds managed by the pension provider; whereas SIPPs offer a far more extensive list of investments and greater versatility and control. Investments are not limited to funds and also include, but this is not limited by, shares, bonds, gilts, investment trusts, cash and commercial property. As such each SIPP is individual reflecting each individual's short and long-term financial goals and needs as well as circumstances.
Set up fees and annual charges vary depending on the SIPP Provider but can start around the ?250/?350 region.
5 Great Things About a SIPP?
Gives you a sense of autonomy and control over your financial future
The choice of vehicles to put in your SIPP wrapper is extensive, and can include products such as: Carbon Credits, Rare Earth Metals and Precious Metals aka Gold!!!
Funds go to your beneficiaries on death rather than the government, Pension Company and/or your employers.
Tax benefits similar to any personal pension plan.
Can borrow up to 50% of the net value of the pension fund to invest in any assets, although in practice SIPP trustees are only likely to permit this for commercial property purchase.
5 Thinks NOT So Great about a SIPP?
You are willing to accept a higher level of investment risk
You are willing to accept a higher level of charges depending on the type of SIPP you go for; there are three types: Deferred, Hybrid and Pure or Full.
You could lose some benefits such as Guaranteed Annuity Rates or cover for life assurance if you choose to transfer
You have to be prepared to do the homework and regularly monitor your investment
You have to be confident as well as I comfortable to stand by your own investment decisions
Conclusion
When looking at a SIPP you obviously need to look at how it will fit into your long term financial planning target as such its suffice to say that you need to do your due diligence in the VEHICLE in which you wish to use for your SIPP - remember you can use multiple; as well as not put all your assets in one basket (if possible) and of course get some advice - which will also be, ultimately someone else's opinion, rather than fact! As I always advocate YOU should be your own best financial advisor as it is your assets not an IFA; a SIPP allows you to be that.
finally, take this into consideration this outline, if you have a pension fund worth ?30k which if crystallised today would give maybe ?7,500 or less tax free then approximately ?20 a week. Firstly, who can live on this? Secondly, what normal fund can increase this up to a liveable level in 10 - 15 years with sensible but frequent contributions? What then is the real risk of, at a minimum, considering the range of vehicles a SIPP wrapper offers? Especially if you look at how multiple pension funds are currently negative or even negligible i.e. do not have enough money to pay out.
Author Resource:
Elena Theodorou is the co-founder of infinitely wealthy women a resource designed to further the understanding of the changing world of personal finance for a female audience: http://www.infinitelywealthywomen.com/blog
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