Why a SIPP is the smartest way to save for retirement

ElderlyGuest blogger Stewart Dick of Hornbuckle Mitchell looks at how to get the most out of a SIPP.

Self Invested Personal Pensions (SIPPs) are undoubtedly the investment of choice at the moment. As the economic malaise wreaks havoc, more and more pension investors have, quite rightly, been driven to taking matters into their own hands.
The attraction of a SIPP is that they give access to a huge range of funds and investments, and it's down to the individual investor to decide where their money goes. So not only are you able to pick and choose the best fund managers rather than be confined to poorly performing funds run by insurance companies, but you also enjoy greater flexibility to shape and mould your pension pot in accordance with your changing needs over time.

Ditch the one-size-fits-all approach
It's a bit like picking a suit. Rather than a one-size-fits-all, off the hanger suit, you can build your own, made-to-measure.

This flexibility isn't only offered during your saving years - the accumulation phase - either. You also enjoy more choices once you retire, as you have the option of capped drawdown or flexible drawdown pension schemes.

As such, a SIPP has been specifically designed for the individual investor and under their guidance may well leave them better off than the alternatives. In my opinion that makes them the perfect pension vehicle for life.

An option for all budgets
SIPPs were once considered the exclusive preserve of wealthier individuals. But the market has evolved dramatically over recent years and today's investor now has the option of everything from a lower charge, execution-only SIPP all the way up to a full SIPP.

This range of SIPP models means you get differing levels of access to the various assets on offer. So you need to work out for yourself what type of portfolio suits your circumstances, goals and appetite for risk.

For those with a desire to invest in just funds or shares, an execution-only SIPP can prove an effective approach, albeit somewhat limiting.

At the other end of the scale sits the full SIPP, its beauty being that it strays away from the vanilla investments to the more esoteric.

A full range of investments
With a full SIPP, the SIPP administrator merely provides the SIPP wrapper, leaving it up to the investor to choose from the full range of investments permitted by HMRC.

From tapping into commercial property, direct securities, gold bullion and unlisted shares to dabbling in collective funds and even buying a domain name, there's not much that a full SIPP won't allow.

Commercial property has certainly proved a hit; a typical investment in commercial property can be one's own business premises, offering the SIPP holder a capital gain in the property's value as well as untaxed rental payments.

It is even possible to use a mortgage to buy property within your SIPP, once again adding to its flexibility and potentially boosting returns.

Property purchases aside, there are plenty of other daring investments that appeal to more exotic tastes, such as unregulated collective investment schemes that invest in areas including forest plantation and film production.

Getting advice
But whatever SIPP an investor plumps for, one rule applies across the board: seek professional advice.

An adviser is there to help make the right decision and pick a good SIPP provider, as well as assist with the more daring investments.

Stuart Dick is head of sales at Hornbuckle Mitchell.

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