SIPPs: Why engaging with your pension is now essential

by Jemma Jackson from interactive investor |

30 years on and SIPPs come into their own for a generation that's lost defined benefit pension schemes.

SIPPs are 30 years old this month. Once the preserve of the very well off, they have become a mainstream way for engaged, interested and active investors to save for their retirement. 

They have also become an essential part of the new reality, where many must provide for their own retirement after their parents’ generation had the luxury of defined benefit schemes. 

As SIPPs turn 30, interactive investor suggests that even if your pension planning doesn’t involve opening a SIPP, becoming more engaged with your pension is now essential.

Moira O'Neill, Head of Personal Finance, interactive investor says: "Thirty years ago when SIPPs were launched, most of us could legitimately close our eyes and leave our pensions problems to the company we worked for, but those of us who do that now risk a much poorer retirement. Even if your pension planning doesn't involve opening a SIPP, becoming more aware of what you have and what you need in retirement is essential.

"The seismic move over the past 30 years away from defined benefit schemes to defined contribution schemes, where individuals have to take on most, if not all, of the risk for their retirement, means that we have to fight harder for our financial independence."

SIPP Customers the most active

interactive investor's SIPP investors are the most engaged of all our customers, making an average 11 buys or sells in their portfolios per year. This compares to 6 for the average ISA customer. This high engagement with their investments is in stark contrast to the various studies across the past decade which have suggested that large numbers of people don't know where their pension is invested, what it is worth or how much it is likely to pay out on retirement. 

This perceived lack of engagement is perhaps most associated with group workplace pensions, where new employees may meet an adviser only once when they join a firm, invest in the default fund and then forget about it until they leave the company (and sometimes even beyond). Such rejection of opportunity should be a concern for all. 

Rebecca O’Keeffe, Head of Investment, interactive investor says: "Unless you're really lucky and have access to a defined benefit pension scheme, the likelihood is that you are one of the increasing number of people who are part of the new reality, where it is your responsibility to save and invest for your own retirement. That necessitates taking an active interest in your pension investments and regularly monitoring if you’re on track to achieve your desired retirement income.

"It is great to see that our SIPP investors are actively engaged with their pensions. Knowing how much you have, where you want to get to and having a plan of how you might get there will not mean that you become a millionaire overnight – but it is likely to mean that you will make far better decisions about your own financial future."

interactive investor customers

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