Why Are Sipps So Popular

Why Are SIPPs So Popular?

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Why Are SIPPs So Popular?

SIPPs are not some magical plan which are wildly different from traditional pensions. Like stakeholder or personal pensions, you still have retirement options, limits on how much can be invested as well as a set amount of tax relief. The whole point of a pension is to invest a certain amount in the account and allow the interest to pile up. Pensions usually benefit from a reasonably high rate of tax relief which also helps your money to grow. Once you reach 55, it is possible to access this cash which will hopefully be large enough to enable you to retire.

Personal Pension Fees
SIPPs are exactly the same, so why are they special? For starters, SIPPs offer a far greater range of investments to choose from when compared to traditional pension funds. The other main choices are personal and stakeholder pensions. Personal pensions are similar to SIPPs insofar as they offer hundreds of investment choices. However, they have much higher charges than SIPPs which eat into your savings. The charges on stakeholder pensions are much smaller but so is the choice of funds.

A big problem with these two types of pensions is the fact that insurance companies are usually in control and only offer funds that their organisation oversees rather than the best value funds on the market. As one company cannot possibly be experts in all fund types, investors will find their choices limited. For example, one company may be an expert in North American funds while another organisation may specialise in European affairs.

SIPPs Give You Freedom
SIPPs on the other hand allow investors to choose from all sorts of funds. With SIPPs, it is possible to choose funds and fund managers from as far apart as America and Japan. The best SIPPs will allow you an almost limitless choice of funds. Personal pensions may also have hundreds of choices but it is unlikely that these funds will all be the best on the market. Instead, you will be investing in funds which relate to the provider. SIPPs give you the kind of freedom that traditional pension funds cannot. Choose between shares, futures, property and bonds amongst others. Thanks to SIPPs, your pension has suddenly become much more exciting and there is an increased level of tax relief to boot!