Self-invested personal pension (SIPP)
As the name suggests, a self-invested personal pension – or SIPP as it is commonly known – is a method of saving for retirement.
Like all pension schemes, it involves providing regular payments which are put into funds or assets which generate high rates of interest. Eventually, enough money will hopefully have been put away, and interest paid on top, to provide an income, or a lump sum, upon retirement.
The difference with a SIPP, however, is that the holder can choose where and how their money is invested.
Many pension schemes are run by employers, so most people allow their company to run the scheme and take a proportion of their salary to invest in it. A SIPP, however, is a type of personal pension, which means it is a private scheme which the holder arranges to be set up in their own right.
But while, in a traditional personal pension, the company providing the scheme chooses the funds in which your money is invested, a SIPP allows you to make that decision. You can invest in unit trusts, investment trusts, bonds, shares or even commercial property. And it has flexibility, which means you can switch investments at any time.
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