A SIPP (Self Invested Personal Pension) gives you more choice and control over where you can invest your money.

A SIPP offers many investment advantages over traditional pensions such as flexibility, diversification potential and sheer investment choice. They are not restricted to the limited fund range offered within an ordinary personal pension or stakeholder pension.

It is also possible to invest in individual quoted shares, bonds, gilts and many other types of investment such as commercial property but there will be more expense attached to this. The allowance of direct investment in stocks and shares means that a discretionary fund manager can run a portfolio of shares and/or collective investments for you within your SIPP.

The Benefits of a SIPP

Traditional pension plans tend to offer a narrow choice of funds managed only by the pension provider and no option is given to use funds managed by other fund managers. They can also carry hefty charges, particularly on older plans. One possible drawback of using a single fund manager is while they may have expertise in one particular area, they are unlikely to have the best record across all fund sectors. One fund manager may offer a good Property fund, while another may be renowned for its expertise in picking US shares.

The difference is that SIPPs are basically subject to the same rules as personal pensions. They have the same limits on contributions, the same 25% restriction on the tax-free lump sum on retirement and the same restrictions on how you can take your money once you’ve retired. For detailed advice about the SIPP tax benefits, go to http://sippadvice.co.uk

You are permitted to contract out of State Second Pension (S2P) if you’re using a self invested pension for your pension but the rebate you receive in its place doesn’t actually go into your SIPP. Instead it goes into a type of personal pension called an Appropriate Personal Pension.

So, are SIPPS a good thing? Well, you’ll be controlling your own nest egg, so you need to be a reasonably experienced investor. You can freely shop around for the annuity you want to buy when the time comes (though you can do that with any pension).

For more information about a SIPP or self invested pension, go to SIPP Advice.