A self-invested personal pension acts like a personal pension except that have mulitple investments which are held within a wrapper until you retire. SIPPs are often suitable for wealthier individuals who like to take an interest in their investments. They give you the freedom to choose and manage your own investments.
The benefits of a SIPP are:
- One of the most tax-efficient ways of saving for retirement
- Greater investment choice than a personal pension
- Other assets can be held in SIPP as follows:
- UK stocks & shares
- Foreign stocks & shares
- Unlisted shares
- Investment Trusts
- Unit Trusts
- Open Ended Investment Companies (OEICs)
- Exchange Traded Funds (ETFs)
- Commercial property
- Gilts and bonds
- Certain National Savings & Investments products
The tax relief you get on contributions made is the same as a personal pension – up to 100% of your annual salary, up to a maximum of £40,000 per tax year (if you're a non-taxpayer, you can invest up to £2,880 into a SIPP and benefit from tax relief at 20%), and will benefit from government tax relief. So for every £100 a basic rate or non-taxpayer invests into a SIPP, as with a normal personal pension, this will actually mean £125 in their pension pot!
Before considering a SIPP, it is essential to seek financial advice, to see if the benefits of the SIPP outweigh the setup and ongoing management charges.
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