What is a SIPP?

A Self Invested Personal Pension (SIPP) is a personal pension arrangement approved by the Inland Revenue under the Income and Corporation Taxes Act 1988. The vehicle is designed for investors who want maximum control and flexibility over their pension. As a consequence it is totally independent with no ties to any fund manager or insurance company, and has wide investment powers to meet each individual's personal circumstances. However it also requires active management and investment expertise and charges may be higher than for a personal pension or stakeholder plan.

A SIPP allows a pension to be drawn directly from the funds held within it. This facility is called income drawdown and enables the continued control and management of the scheme's assets whilst benefits are being drawn. These benefits are very flexible and can be changed on an annual basis within guidelines set down by the Government Actuary's Department. A SIPP will also enable you to draw benefits in tranches under an arrangement known as phased.

The pension fund can be invested in commercial property which may be illiquid at certain times and the value of the property is generally a matter of a valuer's opinion rather than fact. This may have an impact on the drawdown facility of the SIPP.

It is also worth noting that not all transfers may be suitable and you should seek advice before embarking on a course of action.

A pension is a long term investment. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

The value of your investment and income from it is not guaranteed it can go down as well as up due to fluctuations in investment markets, and you may not get back the full amount invested.

Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor