SIPP Investment Ideas
Make the most of your SIPP investments with our helpful guide.
We’re living longer, staying active longer and that means a different way of planning for, and funding, our retirement.
The ii SIPP helps you to take control of your plans, and the investment decisions you make can have a big impact on your eventual return, and your quality of life in retirement.
SIPP Investment Best Practice
SIPPs put you in charge of your pension planning, but it's important to make the most of the advantages open to you. Find out more about how to maximise the value of your pension pot with our handy guide.
1) Pay in as much as you can: You might be tempted to start small, and increase your contributions later in your career, but increasing your investments now can make a big impact thanks to compound interest. Free regular investing in your SIPP is a great way to build up your pension pot, and our dividend reinvestment service is another useful tool for boosting your capital.
2) Take full advantage of tax relief options: Tax relief on SIPP contributions mean that you can put £10 in your pension for a cost of only £8 – an immediate return of 25%! For higher rate tax payers, the return is even greater. You can also maximise returns by signing up for salary sacrifice contributions. This means that you will not pay National Insurance on the income being used to make contributions, leaving you with more money to invest.
3) Increase contributions in line with earnings: It’s a good idea to increase your SIPP contributions as you progress in your career, and pay-rises and bonuses represent a great opportunity to do this without seeing a reduction in your take home pay.
4) Compare the full costs of holding a SIPP: Self-invested personal pensions tend to attract higher costs than other forms of investment, because they are complex products to administer. It is important, when opening your pension, to compare the full costs and think about the future. Percentage-based fees may save money now, but over the course of a long-term investment might end up costing significantly more than a fixed fee. And high exit fees can mean that you’re trapped in a pricier SIPP.
5) Build a diverse portfolio: SIPPs give you the opportunity to invest in a wider set of stocks and shares than traditional pensions, and you should make the most of this flexibility. By building a diverse portfolio, you have the ability to manage your level of risk and adapt to changing circumstances, in your own life and in the market. Use the resources available to you to research and stay on top of current trends.
6) Take benefits from your SIPP options: You can decide how you take retirement benefits from your SIPP, and choose how to use this to your advantage. From the age of 55, you can withdraw up to 25% of the value of your SIPP tax-free – but you don’t have to do it in one go. It’s also no longer a requirement for you to purchase an annuity with this cash. Investigate which of the pension drawdown options will be the best for you.
Things to avoid
1) Don’t breach your lifetime allowance: The current pension lifetime allowance is £1,073,100. This applies to all pension contributions, and it may be reduced if you have a high income or you have flexibly accessed your pension. If you go over the lifetime allowance, you may be subject to charges from HMRC. If you’ve used up your SIPP allowance, consider other forms of tax efficient investing.
2) Don’t breach your annual allowance: Again, it’s important to be aware of the annual SIPP allowance (currently £40,000 gross including employer contributions and tax relief). The only time you are able to exceed this figure is if you qualify for Carry Forward.
3) Don’t withdraw too much from your pension in one tax year: After your initial tax-free lump sum, any income drawn down from your pension will be subject to income tax. If you withdraw too much in the tax year, you may find yourself liable for higher rate income tax.
It’s a relief to finally be in control of my own money. Making the switch was very easy – I should have done it ages ago.
Read Richard's story »
Open a SIPP by 31 December and pay no SIPP fee until July 2021.
This means your service plan fee of £9.99 covers you for all of your investment accounts. Following the offer period, the ii SIPP fee is only £10 a month more, and could save thousands compared to other pension providers who charge a percentage fee. Terms apply