Ok, this one is for the UK young adults out there. Are you familiar with a SIPP? A SIPP is a Self Invested Personal Pension and it is very similar to the Roth IRA in the US. IRA stands for individual retirement account and provide similar tax benefits to that of a SIPP retirement pension in the UK. That is because SIPPs are pensions plans that give you the freedom to decide exactly how your retirement savings are invested. A SIPP has also been known as a “do-it-yourself pension plan”. If you are comfortable investing your own money and want to have the tax benefits that come along with saving for retirement then this plan could be for you.
When Can I Withdraw from a SIPP?
At the age of 55, you will be able to start withdrawing your pension. This is the minimum age for penalty free withdrawals. You can then decide how you want to use the fund built up in your SIPP to provide you with an income. But before then, you will have to contribute into your SIPP to take advantage of the benefits. You can make one off payments or regular payments into your SIPP, which are known as contributions to take advantage of the generous tax benefits available.
You can take up to 25% of your fund as a tax free lump sum and use the balance to provide you with a pension through income withdrawal from your SIPP or through the purchase of an annuity, from your choice of insurance company. One of the biggest advantages of a SIPP over a personal pension is the enormous range of investment opportunities that SIPPs offer and your ability to manage and change your investments as and when you want to.
What Can I Invest in Inside of my SIPP?
Here are some of the investment options offered to you as a SIPP holder.
- Shares quoted on a recognized stock exchange that can be settled within CREST
- Over 2,300 unit trusts and OEICs.
- Government bonds
- Corporate bonds
- Permanent interest bearing shares (PIBS)
- Investment trusts
- Exchange traded funds
- Exchange traded commodities
Are you a UK investor and familiar with SIPPs?