SIPPs: Are they the right retirement saving option for you?


Self-Invested Personal Pensions (SIPPS) give you more control over your pension investments and could potentially increase your returns too. But they might also come with greater risk and require you to take increased responsibility.

Could a SIPP be right for you?

What is a SIPP?

A SIPP is a Personal Pension, but one where you have flexibility over your investment choices. SIPPs can often be managed online, through portals managed by your SIPP provider, and allow you to keep track of where your money is invested and how it’s performing. You can also choose – and switch – the funds you are invested in.

A range of assets are available. Most SIPPs allow investment in Unit Trusts, Investment Trusts and commercial property to name but a few.

This added flexibility comes at a cost though and you may find that the charges for a SIPP are higher than for a ‘standard’ Personal Pension. But if you have experience in investing, or if your fund is large, a SIPP might be worth considering.

Types of SIPP

SIPPs are broadly split into ‘low’ and ‘high’ cost (although ‘hybrid’ or Insurance SIPPs are also available).

  • A low-cost SIPP. Unsurprisingly, a low-cost SIPP is categorised by lower fees. You may not pay an Annual Management Charge (AMC) for example, but you will probably still be charged for dealing shares. It’s also likely that you won’t receive advice from your SIPP provider. A low-cost SIPP might be your best option if your pension fund is lower. A low-cost SIPP could be started with an initial investment as low as £5,000.
  • A higher-cost, or ‘full’ SIPP, will have a wider choice of investments than its low-cost alternative. You’ll likely have to pay an AMC as well as set-up and trading charges, but the provider may offer advice on your investment choices, as well as (in some cases) administrative support from a specialist team.

The average investment in this type of SIPP is between £150,000 and £450,000. There may also be a minimum monthly contribution.

Why you might choose a SIPP

SIPPs aren’t right for everyone. But if any of the below apply to you, then a SIPP may be worth considering:

  • You are comfortable with managing your own investments and making decisions from a wide range of investment choices.
  • You have a larger pension pot that can cope with the added costs associated with a SIPP, or you intend to grow your pot significantly in the future through increased contributions.
  • You already have an adviser making investment decisions on your behalf and will continue to grant you adviser control over your SIPP investment.
  • You are looking to move all your individual pension pots into one place.
  • You want to take advantage of Flexi-access drawdown – keeping your money invested once you retire whilst taking an income from it.
  • You own a commercial property and want to take advantage of valuable tax relief.

Why a SIPP might not be right for you

There are many reasons why a SIPP might not be right for you:

  • SIPPs can be more expensive than other types of Personal Pension. If your initial investment is relatively small, your potential returns could get eroded by charges.
  • If you don’t have experience of investments – or do not have a financial adviser to aid you – SIPPs can prove complicated and may be time-consuming to manage.
  • You should also be wary of higher-risk investment options available in a SIPP.

In conclusion

A SIPP is a great retirement savings option if you know your way around investments or have a financial adviser on hand to guide you. They can offer a number of different investment vehicles to suit most investors, but the charges you pay will be higher too, so you’ll want to consider the size of your ‘pot’ and think about the correct type of SIPP for you.

It’s also worth noting that you can have multiple types of pension. Having a SIPP doesn’t bar you from having a workplace pension or other forms of retirement savings.

It’s possible a combination of retirement savings options might work best for you.

Get in touch

If you’d like to discuss the possibility of taking out a SIPP, or would like to chat about anything connected to your current retirement or investment options, please get in touch. Please email or call 0115 933 8433.

Please note

A pension is a long-term investment not normally accessible until age 55. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.