SIPP stands for Self Invested Personal Pension Plan and is one of the options people in the UK can choose when it comes to working out finances through retirement. As with all products of this type, it is very important indeed that you do all of the necessary research before coming to a decision, as this is one of life’s biggest. This type of plan isn’t for everyone, but it certainly does have major benefits. Let’s take a look at the pros and cons of taking out a SIPP.
Pros
The whole point of a SIPP is that it gives more control than ever to the person taking out the plan. With traditional pensions, an annuity is purchased, and then that’s the end of involvement. You transfer your lump sum to the provider and then they pay out an agreed sum each month for the rest of your life. With a SIPP however, the investor can choose the assets they buy and sell and can choose when to move them around.
There are huge numbers of assets that can be traded under a SIPP, though certain ones will have different tax implications. The provider of the SIPP usually acts as what is known as a trustee – this means that you must agree on investment decisions with them beforehand – you don’t quite have completely free reign. This is often mainly a formality to ensure everything happens as it should.
Cons
SIPPS have two main drawbacks, though they may not be considered such by everyone. The first is of course that, as an investment plan, there is the potential for money to be lost. This isn’t necessarily going to be a major risk, but it’s certainly something that anyone thinking of taking out a plan should be aware of in advance.
The second con is of course that if you have little to no knowledge of investment strategies and the workings of financial trading, then you will not be able to make full use of the product. You can certainly get advice, but if you need advice at every single stage, then a different product may be a better choice.
SIPPS is just one of the various options available to you when it comes to retirement. They’re good for those who want to be hands on with their future and aren’t satisfied with the current annuity rates.
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