Sipp pensions

Many people will have heard the term SIPP or SIPPs pension, without understanding what it stands for. SIPP stands for self invested personal pension, and is exactly what it says - a pension fund which is self invested. For those people who are confident in controlling their funds, and who have the time to invest in keeping a watch on them, then an SIPP pension could be a good choice.

Before entering into SIPPs pensions, investors need to be confident in their abilities to deal in investments, as this is a big commitment, and gamble, to take. You can, of course, engage the advice of an independent financial adviser, before any change is made, but this may come with a cost.

Advantages of a SIPP pension

1. Unlike a normal pension, which is invested in a traditional arrangements, sipps can be invested in a wider range of options, such as shares, gilts, investment trusts, unit trusts, commercial property and insurance companies.
2. Monthly contributions can be as little as £50
3. If investments are performing badly you can simply move funds to another investment
4. There are tax advantages to be gained from investment in commercial property, with rental being received tax free to the fund (or when the property is sold on).

Disadvantages of a SIPP pensions

1. You cannot draw on a SIPP pension before age 55 (from 2010)
2. You need to spend time managing your investments
3. Where investment is made in commercial property, you may have periods without rental income, and in some cases, the pension fund may need to sell on the property when the market is not at its strongest
4. Because their may be many transactions moving investments around, the administrative costs are higher than those of a normal pension fund

If you think a SIPP pension scheme may be for you, you will need to engage the services of an FSA regulates financial advisor, as the fund must be registered correctly, but then investment management is over to you (or your advisors).

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