Take the legwork out of your retirement planning

People are living longer and the number of retirees is growing. Longevity should be a blessing but many investors are worried they will outlive their savings. So it is essential to consider saving for retirement as early as possible and to decide where best to invest for your requirements.

Deciding how to plan
There is a bewildering choice when deciding how to plan for your retirement, and it is important to weigh up the cost and complexity against the potential returns. If appropriate, one option to consider is a Self-Invested Personal Pension (SIPP). Originally designed for people with higher-value pension funds, they’ve become more prevalent since the UK pension simplification legislation of 2006.

SIPPs are tax-efficient wrappers within which you can select your own pension investments from a wide variety of sources and choose how to spread your money among a whole range of different investment types subject to both HM Revenue & Customs rules and any limits set by the SIPP provider.

Tax-efficiency
A SIPP offers the same tax benefits as other personal pension plans, with personal contributions eligible for Income Tax relief and investments within the SIPP able to grow free of Capital Gains Tax.

Investment choice
You can invest in a wide range of investments and this includes any number of approved funds. Most SIPP providers allow you to select from a range of assets, including:

• stocks and shares quoted on a recognised UK or overseas stock exchange
• government securities
• unit trusts
• investment companies
• insurance company funds
• traded endowment policies
• deposit accounts with banks and building societies
• National Savings products
• commercial property (such as offices, shops or factory premises)

Retirement flexibility
A SIPP allows you to choose from the full range of options at retirement, from purchasing an annuity to taking a managed income withdrawal from your fund.
The SIPP wrapper is separate from the contents and, as such, has distinct, often fixed charges. Because you can now accumulate a number of pensions over your working life, consolidating them all into a SIPP means that you have one company carrying out your pension administration. This could reduce your reporting and paperwork; however, you should ensure that the additional investment options a SIPP provides are required, as it can cost more to administer than a normal personal pension plan.

SIPPs are appropriate for people comfortable with making their own investment decisions and are not a risk-free product. The capital may be at risk due to the investments held within this pension arrangement; the value of investments can go down as well as up and you could get back less than you invested. Tax reliefs will also depend on your personal circumstances and the pension and tax rules are subject to change by the government.

Information is based on our current understanding of taxation legislation and regulations. A SIPP is a long-term investment, and the fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.