The basics of a SIPP
A SIPP is a form of defined contribution personal pension that allows you to choose your own investments. If you don’t want to manage your own investments you can appoint a money manager to make investment decisions for you.
When you’re deciding where to invest your money you can usually pick from options including stocks and shares and several types of funds, policies and trusts.
A SIPP is flexible and portable: you can keep paying into it even if you change jobs or stop working. Your employer can also choose to contribute to your SIPP.
As with all defined contribution pensions , the amount that you will have available when you retire depends on the contributions that you (and any employers) have made and how your investments perform over time.
Why choose a SIPP?
With other types of pension, decisions about how to invest your money are in the hands of your pension provider.
This means that a SIPP comes with a certain level of responsibility, and requires savers to have some understanding of investing and to keep an eye on their investments.
You can usually opt to pay quite a low monthly amount into your SIPP, but a higher monthly contribution sometimes gives you access to more investment options.
SIPP fees and charges
If you’ve got a substantial pension pot then you can choose a ‘full SIPP’, which will offer a wide choice of investments but is also likely to charge a high set-up fee, an annual management fee and hefty trading fees.
The more accessible and affordable SIPPs are often called ‘low cost’ or ‘lite’ SIPPs. These tend to impose lower charges for buying and selling shares and lower annual admin fees. Many of them charge a minimal set-up fee or none at all.
There are many different SIPPs available and they have different fee structures, so it’s important to check and compare carefully. As well as fees for setting up your SIPP, annual fees and trading charges, also take a look at any exit penalties and the charge you’ll have to pay if you want to draw an income from your SIPP.
Seek professional advice if you’re not sure if a SIPP or any other type of financial product is right for you.
PensionBee pension plans
Our personal pension plans are managed by State Street Global Advisors, BlackRock, HSBC and Legal & General. Find out more about PensionBee plans in our Pensions 101 video.
Last edited: 28-03-2019