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Self invested pensions

The traditional model for a personal pension involved starting a savings contract with an insurance company who provided all the administration and investment services required in a packaged product.

Typically the plan was invested in a with profits or managed fund although some insurers offered a range of funds for clients to choose from. Fund ranges available through insured personal pensions change from time to time but frequently the new fund range is not available to existing policies.

It has been possible to break the link between insurance company and investment management for many years but as a result of changes to pension rules, falling with profit bonus rates, changes of fund manager, and several high profile life offices closing to new business and others having new owners, self invested pensions have become more popular.

Self invested personal pensions (also known as SIPPs, SSAS or member directed pension plans) enable you to have greater control over the investment of your pension fund. The most popular of the range of permissible investments include: -

• Collective investments such as unit trusts and open ended investment companies (OEICs).
• Commercial property including shops, offices, industrial units.      
• Stocks and shares either held directly within the pension fund or managed by a discretionary fund manager.

Many SIPPs are set up to receive transfers from other pension plans to simplify your pension funds by consolidating to one scheme and improve administration. SIPPs may also be useful as a receiving scheme for large pension credit rights arising from pension sharing orders on divorce or cessation of a civil partnership.

SIPPs are more suitable for larger single or regular pension contributions than a traditional insurance company product. Large contributions can result from salary or bonus sacrifice arrangements where your employer makes payment to the scheme on your behalf and adds in the employer national insurance saving.

Whatever the reason for using a SIPP, you benefit from transparency of charges, a greater choice of investment funds (than a traditional insurance company model) and control over asset allocation and investment timing so as to enable the creation of a coordinated investment strategy aligned to your risk profile and requirements.

We have sophisticated risk profiling software and fund analysis tools that allow us to identify where your pension fund is currently invested, whether it is attaining expected returns, and whether it is suited to your requirements and risk profile. We can analyse the ‘efficient frontier’ for your risk profile and demonstrate the benefits of a diversified and well managed investment portfolio for your pension fund.

SIPPs are generally more flexible than traditional insurance company products in relation to retirement income options. SIPPs can also therefore be suitable for clients who do not wish to purchase an annuity at or near to retirement age, perhaps because one or more of the following applies: -

• Annuity rates represent poor value and this may improve in future.
• You wish to continue investment exposure in your chosen funds.
• You have a distrust of the annuity system.
• You or your spouse or civil partner is in poor health and so you wish to postpone a decision about annuity purchase.
• A spouse or civil partner is much younger than you making a joint life annuity seem poor value.
• You wish to take tax-free cash from your pension fund but do not wish to take an income.
• You do not wish to purchase an annuity at age 75 but wish to continue with alternatively secured pension.

For more information or to arrange a no cost initial meeting to discuss your requirements please contact us.