News & Insights

The Three SIPPs

And chances are that when you come to discuss the issue with your expat financial services specialist, the issue of a SIPP will raise its head.

However, the idea of a SIPP is often not well understood – particularly the distinctions between the three major types of account. Here we take a look at the three types of SIPP and examine why the schemes might be a tax-efficient way to help you save for retirement.

Full SIPPs

A full SIPP provides the greatest flexibility and the broadest range of investment opportunity, but it may also have higher charges. It is important to understand that a full SIPP should never be entered into without full comprehension of the fact that – unless you ask a professional to manage the fund on your account – you will have to manage it yourself, which, to the lay investor, bears all the risks of high stakes pensions roulette.

Also, be aware that a full SIPP is only suitable for larger sums. The average amount invested in a SIPP is between £150,000 and £450,000

Full SIPP fees can be charged at a flat rate or as a percentage of the value of the investment. Full SIPPs also come with a creation fee, an annual management charge and may sometimes require a minimum monthly contribution.

Low-Cost SIPPs

A low-cost SIPP is usually “execution only” meaning that unless you are a seasoned and confident investor who is fully appraised of all the risks you will be learning on the job. Your SIPP provider will not be offering you advice; therefore, you will be responsible for all the choices you make.

Furthermore, although a low-cost SIPP offers a wide range of investment choices, these cannot include offshore funds, unquoted shares or direct property ownership. This is not to say that a low-cost SIPP is unsuitable for everyone; those with smaller pension pots and clear investment ideas may still find this type of pension plan is a suitable retirement savings vehicle.

One benefit of the execution-only nature of a low-cost SIPP is lower charges. There is no annual charge, online trades cost around £15 a time and telephone trades are charged at around 1%.

‘Hybrid’ SIPPs

These are essentially insurance products. In a sense they negate one of the main selling points of a SIPP in that unless you have already invested heavily in the insurance companies, you will have little to no control of how your money is invested.

A Hybrid SIPP usually comes with a creation fee and a capped annual management fee, although there are not likely to be any trading fees.

Expat Pensions Advice from Expat Financial Services Professionals

If you are a British expat in Europe and want to protect and grow your pension pot in a way that allows you to pursue your long-term goals while maintaining your present cashflow needs, Blacktower FM can help you find the international pension transfer strategy and products that are right for you.

For more information, contact your local office today.

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