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Personal Pensions – All you need to know about these helpful investments |
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| Date Added: February 08, 2010 07:22:00 AM | |
| Author: Kevin Stelfox | |
| Category: Business: Financial Services | |
SIPP is an abbreviation for Self Invested Personal Pensions. As the name implies, this is a pension plan where you are the contributor and the investor. Unlike the conventional and traditional pension plans, SIPP pensions offer you the benefit of doing your own investments. While this may seem to be a wise choice for many, remember there are many risks that come with the territory, especially if your knowledge of finances and investments is meager. What are SIPP pensions? Before we proceed to knowing the pros and cons of SIPP pensions, let us try to understand them better. In simple words SIPP is nothing but do-it-yourself personal pensions. The need for these types of pensions arose because innumerable people who invested in pensions were not very happy with the funds being invested erroneously by fund managers without sufficient knowledge of the market trends. Hence, most people desired the option of having a say in the way the pension funds were invested and that is how SIPP pensions came to existence. The benefits these pensions offer There is a lot more flexibility when it comes to these pensions because you can not only invest in your regional market, but also trade in international markets by buying stocks and shares of international products and goods. You can also consider unit linked funds, investment trusts and commercial property too while looking for ways to invest the money you contribute towards SIPP pensions. With SIPP pensions, you will have the option of switching your investment options easily if you are unhappy with the returns of a particular investment option. Unlike in the case of personal pensions where switching from one pension provider to the other will involve certain amount of money, SIPP pensions go light on your pocket. With SIPP pensions, you can engage in an aggressive investment strategy and still enjoy all the tax perks and benefits of a normal personal pensions program. This means you can save a lot more and earn a lot more than the conventional pension programs. The drawbacks to consider Though SIPP pensions see too good to resist, all is not a bed of roses. There are a few drawbacks that you will need to consider before taking a plunge into SIPP pensions. First of all, there is the cost of setting up these pensions. Most providers charge a fee of at least 1% of the total amount which can actually mean quite some amount of money. In addition to this, you will need to pay annual charges to keep it running. Also, every time you sell or buy an investment or make some income with SIPP pensions, you are charged on it. However, one of the main disadvantages is that the amount of money you can avail monthly during your retirement period is dependent on the strength of the investment you have made. If your investment has failed badly, then, the amount you will get monthly will be pretty low and might not be sufficient to see you through the entire month. Hence, ensure you consider all aspects and plan well before you opt for SIPP pensions. |
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