The best way to secure a luxurious retirement is to start planning it well in advance, and this means choosing the right pension option early on. For many people, this is a self-invested personal pension (SIPP).
SIPPs are, rather obviously, a type of personal pension, and they share the same tax benefits and contribution limits as all of their counterparts. However, they offer a wide range of additional boons that really set them apart, and it these that have prompted the exponential boom in popularity that SIPPs have experienced over the last decade.
If you’re considering your pension options, here are just three of the reasons that a SIPP might be the perfect choice for you:
#1: A Range of Investment Options
Standard personal pensions tend to be provided by insurance companies, and it is a widely acknowledged truth that they only offer a limited range of funds for investors to sink their money into. SIPPs share no such limitations. They offer an incredibly wide array of investment choices, from equities to bonds to funds. The control to decide where to place your capital rests entirely in your hands, and is completely unhindered by the selections made by professionals on your behalf.
#2: Flexibility and Control
SIPPs have the additional advantage of being incredibly flexible. Not only does the decision of where, when, and how to invest rest in your hands, but the final total you accrue is determined entirely by the success of your endeavours. This means that the risks you take and the amounts you make are yours to decide, so that when you get things right you’re the one who profits. Equally, it’s your decision when to take your retirement benefits, and how. Whether you prefer to go into income drawdown or purchase an annuity, you have control over how things work.
#3: Tax Benefits
Perhaps the greatest boon of investing in a SIPP are the tax benefits, foremost amongst them a generous amount of tax relief. For basic rate taxpayers, this sum is set at 20 per cent, meaning that for every £8,000 you invest, the government will add an additional £2,000. For higher rate and additional rate taxpayers, this relief is even more generous, at 40 and 45 per cent respectively. Additionally, your funds will not be charged for either income or capital gains tax, and can be inherited by your heirs tax-free when you die.
Could a SIPP be the ideal pension option for you?