Self Invested Personal Pension FAQ

Can You Take Advantage Of A Section 32 Buy Out Policy?

If you are currently looking into your pension choices then you may have come across the Self Invested Personal Pension or SIPPs as they are also known. With so many different pension plans to choose from it is certainly advisable to get to grips with what each individual pension plan has to offer before deciding on what the best action for the future might be. Some of our most frequently asked questions about the Self Invested Personal Pension will definitely help you better understand what a SIPP is.

What Is A Self Invested Personal Pension?

The Self Invested Personal Pension works in the same way as other pension schemes by providing you with a pension on retirement and other related benefits. The Self Invested Personal Pension, however is different in that you are able to choose how much is invested and where it is invested, subject to HM Revenue and Custom Restrictions. This Self Invested Personal Pension enables you a greater access in controlling and investing your pension fund and allows you the possibility of withdrawing income from the pension fund. Furthermore you can decide how the benefits from the Self Invested Personal Pension are paid on retirement.

How Does The Self Invested Personal Pension Provide This Extra Flexibility?

An average pension plan would normally provide you with a choice of around 30 funds into which your pension can be invested. In comparison the Self Invested Personal Pension enables you to manage your own investment by providing greater flexibility through a choice of around 1,000 funds to pay into.

How Is The Self Invested Personal Pension Set Up?

The Self Invested Personal Pension can be set up with funds from existing pension arrangements, by making contributions, or from a combination of both. It is also possible for your employer to make contributions to your Self Invested Personal Pension.

What Are The Pros And Cons Associated With This Self Invested Personal Pension?

Some of the main benefits associated with the Self Invested Personal Pension include:

Tax-Free Profits - the Self Invested Personal Pension benefits from the same tax advantages as traditional pension schemes.
More Fund Choices - access to a larger number of fund managers than traditional pension plans.
Property Investment - from April 2006 you will also be able to hold property in your Self Invested Personal Pension fund.

Some of the main disadvantages associated with a Self Invested Personal Pension include:

Possible Excessive Fees Upfront - You need to check how much the upfront fees and annual fees are and whether these can be financially off-set against the benefits. Online Self Invested Personal Pensions often have lower charges.
Investment Management - The success of the Self Invested Personal Pension is entirely down to the way you manage it and if you don't understand enough about it then you may miss the opportunity to change your investments.