What is a SIPP?

We often receive initial enquiries from potential new clients saying things like – my mate said I need a SIPP.

Our first reaction is always…. “Really – is your mate a Pension Adviser?”

Generally, they may need to consider a pension, the type of pension all depends on many factors. So, what is a SIPP?

A self-invested personal pension (SIPP) is a personal pension that can hold a more diverse array of investments than a standard personal pension.

Most SIPPs allow you to invest in a range of assets, for example:

• Unit trusts;
• Investment trusts;
• Government securities;
• Insurance company funds;
• Traded endowment policies;
• Cash;
• Commercial property (such as offices, shops or factory premises);
• Individual stocks and shares quoted on a recognised UK or overseas stock exchange.

This list is not exhaustive as different SIPP providers may offer different investment options.

Residential property can’t be held directly in a SIPP as a general rule. You may also opt to pay an authorised investment manager to actively manage your investments, known as a discretionary fund manager (DFM).

With a standard personal pension, your investments are generally in pooled investments.

Another consideration when selecting the type of pension that is suitable are the costs involved. SIPPs generally have higher charges than other personal pensions or stakeholder pensions, due to the fact that they have the ability to invest in alternative assets.

SIPPs, therefore, tend to be more suitable for large funds and for people who are experienced in investing.