DIY Investor Magazine
/
2015 Issue
51
A SIPP is a personal pension plan ‘with attitude’
that enables the holder to choose and manage their
investments or choose and replace investments and
managers without having to change the SIPP. In other
regards it meets standard personal pension plan rules.
The first SIPP was created in 1990, and historically
SIPPS were held by higher value investors. However
as the market develops, the efficiencies of SIPPs are
enabling those with smaller funds to participate too.
A SIPP is not for everyone but member-directed
investment can be attractive for those with time and
knowledge as it allows greater pension freedom (the
essence of the new pension reforms) both for savers
and for those drawing benefits.
A SIPP therefore offers the facility of:
•
SAVING FOR RETIREMENT FROM CRADLE TO
LATER LIFE
•
CONTRIBUTIONS TO BE MADE BY THE MEMBER,
GUARDIAN OR EMPLOYER (SUBJECT TO
ANNUAL HMRC MAXIMUM CONTRIBUTION
LIMITS).
•
SELF-INVESTMENT WHERE THE MEMBER MAKES
THEIR OWN INVESTMENT DECISIONS (WITH
OR WITHOUT THE SUPPORT OF INDEPENDENT
ADVICE) AND SELECTS INVESTMENTS SUITABLE
FOR THEIR RISK APPETITE WHICH MAY CHANGE
DURING THEIR LIFETIME.
Anyone considering self-investment should consider
their appetite for risk, time scales and objectives as well
as market conditions.
Investment in equities peaked in the 90s where after
focus on investment for pensions increasingly turned to
fixed interest investment - initially UK gilts, then bonds
and sovereign debt.
This was largely driven by institutional investors looking
for a ‘safer’ path for investors, followed by private
investors through personal choice or through adviser
recommendation.
Current volatile equity performance and low gilt and
bond yields has seen investors looking for higher
returns to provide a regular income or offer an under-
pin of more defined growth fuel the development of
alternative markets.
Nevertheless when devising an investment
strategy it is likely some of the more ‘traditional’
investments as listed below will also be
considered:
• UK shares
• Overseas shares
• Government securities
• Listed Bonds
• Unit Trusts
• Investment Trusts
• Insurance Company Funds
• Discretionary managed funds
• Deposit Accounts
• National Savings Products
• Gold
• Exchange Traded Funds and Exchange
Traded Commodities
• Commercial Property
In addition a SIPP may offer to more high net worth
and sophisticated members assets such as:-
•
Unlisted Securities and funds
•
Private company shares
These investments are complex and costly to
administer and increasingly the SIPP industry is pulling
back from more esoteric options.
Because of the 2% of a typical SIPP portfolio capital
adequacy requirement required by the Financial
Conduct Authority for non-standard investments
and the increased risk of fraud many providers
and customers do not see merit in these potential
investments.
