A SIPP holds many advantages over a regular pension scheme, so here are five reasons you might want to start one.
A SIPP provides ample flexibility, allowing you to take control of your financial decisions and investments. They can be paid into by you as well as your employer, and can usually be accessed through online platforms, meaning that managing them regularly is easy. You can also select your own fund manager to ensure your investments are being looked after by an experienced professional.
One of the best aspects of these schemes, and the part which attracts many people, is that you can choose where your money is invested for retirement. This opens up a range of markets for you to choose from, and you can manage investments regularly to maximise your potential returns.
Leading on from this, you can diversify with investments to reduce overall risk. You could, for example, invest in a range of asset classes such as equities, bonds and property. Financial services like Bestinvest can help you decide which investments would best suit your objectives.
Another major benefit which SIPPs offer is tax relief. All money invested has 20% of its value added on top, and even more can be claimed back by those on higher income tax rates. Additional rate taxpayers, for example, have the ability to claim back up to 25% of their investment.
Higher Potential returns
Depending on which markets you choose, and whether investments are successful, you can make a decent profit from investments. This means you can stand to build a larger fund for retirement, and could potentially live more comfortably than you would on an income from a more restricted pension scheme. As with all investments, your potential returns will largely depend on how much you are willing to invest.
SIPPs are ultimately for those who are willing to take a slightly higher risk in order to build a better pension fund. They require attention and time, but successful investments are likely to yield good returns, and if you are unsure about how/where to invest, there is plenty of financial advice available which you can utilise to help you along.