SIPPs v ISAs
SIPPs have the same generous tax benefits as other pensions but the key difference between a SIPP and other pensions is that you get much greater control and freedom over choosing how to invest your retirement savings and manage them over time.
Investments in SIPPs grow free from Capital Gains Tax and Income Tax. You also receive tax relief on pension contributions, which means that money you invest gets an automatic boost from the taxman. Generally you benefit from tax relief up to your highest marginal rate up to a limit that the Govenment sets. No other mainstream investment gives you tax breaks like this.The contribution limit, currently £40,000, is under review as part of the austerity savings measures and most commentators expect the limit to be reduced over time – so act without delay if you are considering setting up a SIPP
You also need to decide whether to go for an ’execution only’ SIPP provider (also known as ‘low-cost SIPP’) or a ‘full’ SIPP where the investment decisions are made for you by the managers. In a low-cost SIPP there is no advice – you make the investment decisions and the costs are correspondingly lower (depending on how often you trade and the cost per trade). Fees for full service SIPPs are understandably higher and can reach 3% per year! In the UK Pensions Blog we hope to bring some clarity to the market so that you can see the relative merits, features and prices of the different providers.
It is a competitive market, and will become more so as more of the population enter retirement and are able to access their pension pots – so fees should continue to come down and the level of services offered should improve. We will keep you up to date with all the changes as they happen, so that UKPB will be the most up to date source of information about providers. We will do this through a variety of comparison charts in the main blog and crucially, through the Forum Topics, where you will be able to share your experiences of dealing with providers. Through our collective contributions we will be able to build up a good impression of the customer service levels of each provider.