Sometimes known as a pension ‘wrapper’, a Self-Invested Personal Pension or ‘SIPP’ allows you to move funds from a more standard Defined Benefit or Defined Contribution Pension scheme to then be invested in relatively fewer investment schemes. It then gives you (or your appointed Fund Manager/IFA) control to manage the growth of those investments until you are either ready to retire or begin to draw a retirement income.
The main selling point for most people is that with a SIPP you have a wider range of flexibility with the investments you can choose from rather than relying on a larger more standard fund.
However, it’s important to note that SIPPS may not be suitable for everyone, with the added flexibility and potential rewards, comes added risk and responsibility. As a standard ‘Retail’ customer, you need to make sure you are getting the right advice on this type of personal pension, especially if you have little investment experience.
How does it work?
SIPP’s are essentially a ‘do it your self pension’. They provide you with the ability to choose what investments you want to put your savings into while keeping control of them at the same time, while a standard pensions investment is managed for you.
Having the ability to invest in a wider range of assets allows you to have the options between putting your money into resources such as Property, Investment trusts, Government securities, and Energy schemes. You can find more information here: Read more:
Is it the right choice for you?
Self-invested personal pensions have been used as a go-to pension product for those people who want to gather all their pensions into one pot before they decide to retire. A Which? report states that ‘SIPP’s became popular in the wake of the 2015 pension freedoms, which gave people more control of their retirement savings. It’s estimated that savers now own around two million products in 2019, containing assets of approximately £180bn.’Read more:
If you’re considering this route you need to remember, with greater flexibility comes BIG responsibility.
Due to the inherent risks involved, SIPP’s are most suitable for people who understand the world of investing, have done detailed research, and are ultimately prepared to accept the high possibility of losing those funds. You should carefully consider the impact of losing your retirement savings and have taken impartial regulated financial advice before deciding that the option of a SIPP is the right one for you. The most important question to ask is “How would I survive in retirement if I lost my pension?”
Can it go wrong?
The answer is simple; YES.
Any type of investment is classed as a ‘risk-based product’. This means that the overall value of your initial investment and any revenue produced can fall just as easy as it can rise.
Some investments are very risky, betting on some of these schemes is just like putting all your hopes on red on the roulette wheel and giving it a spin.
Without doing enough due diligence to thoroughly understanding what your putting your money into or, by putting all your trust into an adviser that only gets paid if you invest has the potential to go terribly wrong. Something that unfortunately we see daily.
As previously explained a SIPP introduces its own opportunities and risk so you should weigh all this up responsibly before making a final decision to ensure you don’t end up being worse off in the long run.
If you find yourself in this situation then that is when APJ Solicitors could be able to assist you.
If you think you may have been previously mis-sold a SIPP, please speak to one of our expert solicitors to see whether you have a claim. Read up more at our Industry Insights.
