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Oct
02
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UK SIPP Pensions - Are They Right For You?
Over the past 18 months or so, the financial services authority in the UK has conducted a thorough research exercise into UK SIPP Pensions, and taking a close look at cases where people have been advised to transfer from a cheap stakeholder pension or traditional pension plan to a more expensive UK SIPP Pension (which stands for ’self invested personal pension’).
The main reason to transfer to a SIPP is the investment choice is far broader - you may have access to literally thousnads of investment funds through this type of vehicle or more specialized areas for example gold, real estate, individual stocks and shares, and foreign currency instruments.
The key advantage of a UK SIPP Pension is its flexibility. Unlike other tax-efficient saving schemes, a SIPP gives you the ability to invest in a wide variety of stock market investments so you can potentially access higher rates of return even if interest rates are low. This will not be perfect for everyone, as a UK SIPP Pension can be exposed to more risk, but for those who are not attracted to the rates offered by savings accounts and ISAs, SIPPs are a great alternative.
However, many people are now questioning whether pension investors actually require such access to specialized investments. One of the downside of a UK SIPP Pension is that there are some set up charges which are payable to the SIPP trustee and administrator, which run into hundreds of pounds. In addition, there are ongoing dealing fees for each tttransaction carried out under the SIPP.
If you have arelatively small pension pot, you need to carefully consider whether a UK SIPP Pension is really cost effective for your retirement requirements. One alternative for you may be to invest in one or two pension funds in a cheaper stakeholder or traditional pension and save money on administrative and management fees.
The best thing to do if you are unsure as to the best way forward is to contact an independent fiinancial advisor, and ask him to do a review and look at the costs you are paying on your current arrangements, and how these may differ with a UK SIPP Pension. The average UK SIPP Pension may charge you around 2% per annum, whereas a typical stakeholder pension would cost only 1% - potentially saving you approx £2,000 per annum based on a pension fund worth £200,000.