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The Importance of Having Investment Principles

What is a SIPP?

A SIPP is a Self-Invested Personal Pension which accumulates a pension fund in a tax efficient way and offers greater control and flexibility in terms of how investments are made and when benefits are taken.

Approved by the UK Government, a SIPP allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue & Customs (HMRC). The fact that an investor can choose from a number of different investments, unlike other traditional pension schemes, means that SIPPs offer greater levels of control over where money is invested. A self-invested personal pension provides the policyholder with greater choice and flexibility as to the range of investments made and how those investments are managed as well as the administration of assets and the ways in which retirement benefits are taken.

Therefore a Self-Invested Personal Pension (SIPP) is essentially a pension wrapper that is capable of holding investments and providing the investor with the same tax advantages as other personal pension plans. The HMRC rules allow for a greater range of investments to be held than Personal Pension Plans, notably equities and property. Rules for contributions, benefit withdrawal etc are the same as for other personal pension schemes.

Put simply; a SIPP is a specialised form of personal pension where the individual investor is able to choose where and how their pension fund is invested, rather than entrusting their money to one insurance company or fund manager.

How does a SIPP work? Ryan Kavanaugh

A SIPP allows for regular and lump sum cash payments to be made, and also enables the investor to transfer other pension arrangements into the scheme. Most SIPP providers do not specify a minimum investment but SIPP are generally utilised with most success by those investors who have a substantial existing pension fund to transfer or those who will be aiming to invest lump sums of several thousand pounds a year.

In a full SIPP there is a wide range of investment options available to the investor such as;

• Stocks and shares

• Government securities

• Mutual Investment funds

• Investment trusts

• Insurance company funds

This level of choice can be expensive to offer and many people find that they do not need it, so lower-cost SIPPs have been developed that focus on investment funds only. These lower cost SIPPs usually offer significantly more fund options than would be offered in a traditional

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