The purpose of a SIPP is to provide the pension holder with a tax-efficient vehicle to generate adequate funds to secure retirement income for you and your family. Also, if aged 55 or above, you can use your SIPP to provide a tax-free lump sum and income. The most beneficial characteristics of a SIPP are those of choice, control, and flexibility allowing greater flexibility of investment, income and benefits in the event of death.
Generally, SIPPs work under the same rules that apply to nearly all personal pensions. However, they do have some extremely beneficial improvements on standard pension plans. Some of these beneficial improvements include the option to invest in commercial property, your own choice of investments (within limits), and being able to defer starting and vary income as appropriate to your personal circumstances.
SIPPs allow you to construct a diverse portfolio of investments that you can change as and when you need to, offering a level of flexibility you simply cannot get with more conventional pensions.
Types of SIPP
Different SIPPs offer varying levels of access to property and insurance-based investment vehicles. To simplify, SIPPs generally fall into one of two categories:
- Personally managed, fully flexible SIPP’s
- Low-cost SIPPs with restricted access to collective investments and share options
More commonly, the larger SIPP providers are stricter on how they apply these rules. As a general rule of thumb, the bigger the SIPP provider, the less flexible they are. Normally, smaller specialist providers can be much more flexible when it comes to finding the most appropriate plan for your needs.