5 minute read
Financial Matters
from SE23 October 2021
by SE Magazines
With Akwasi Duodu | akwasi@sterlingandlaw.com | www.sterlingandlaw.com
Is a SIPP better than a personal pension?
Self-Invested Personal Pensions (SIPPs) have become a popular alternative to your traditional personal or stakeholder pension, but why? Are they better? Many people are under the impression that a SIPP would provide better returns than a personal pension, but how true is that? SIPPs certainly sound sexier than personal pensions, but what’s the best option for you?
SIPP v Personal Pensions
A SIPP is a type of personal pension that offers more investment options. This and the way they charge are the two main differences between them. There is also a third consideration which is whether your employer would be willing or able to contribute to your SIPP, as not all SIPPs would allow employer contributions.
Investment Options
From an investment perspective, most modern personal pensions offer a wide range of investment funds to choose from and this should be adequate for most people. Some workplace stakeholder pensions however, do have a narrower range of funds available than personal pensions. This is primarily to ensure that they remain cheap and accessible for inexperienced investors who would typically need to join quickly without the need for financial advice.
Experience
The more experienced investor who wanted more control over their finances may find that the SIPP would be the better option. The SIPP investor would be able to use their SIPP to invest in individual shares, investment trusts, gold bullion and commercial property amongst other qualifying assets. Having these investments under the roof of a SIPP would shelter any investment gains from tax.
Charges
The added complexity of a SIPP means you’d almost certainly need a financial adviser to help you manage it. This would be an added cost and one would need to weigh up the cost benefit of that. Charges imposed on SIPP investments tend to be higher that those of personal pensions, however some SIPPs charge a fixed annual fee as opposed to a percentage of your pot, which could be beneficial for those with larger pots.
Worst Case Scenario
What would happen if your personal pension or SIPP company went bust? Well, the Financial Services Compensation Scheme (FSCS) would step in. Personal pensions that are run by life insurance companies would normally cover up to 100% of the value of your pension pot if the pension company went bust. A SIPP provider, on the other hand, would be covered up to £85,000 per pension scheme member. This is an important differentiator and one worth checking before you took the plunge one way or another.
Which Is Best?
Frustratingly, there’s no simple answer. The more experienced investor looking to invest in interesting or esoteric assets such as commercial property, individual shares and commodities such as gold and silver may prefer the SIPP route. Anyone who simply wanted to plan for their retirement in as simple a way as possible may be better off with a personal pension. The good thing is that SIPPs and personal pensions are easily transferred from one to the other, although it’s more popular to transfer a personal pension to a SIPP than the other way round. The worst case (and sadly quite common) is the investor who liked the sound of a SIPP and bought one, paying for the privilege without using any of the many options available. We see this every day and it’s a complete waste of money. Don’t fall into that trap.
Sunday 17 October: Draw with Rob! 3pm-4pm
Village Books and Alleyn’s School Enterprises are delighted to be welcoming award-winning and record-breaking author and illustrator Rob Biddulph to Dulwich! Tickets from £8.
https://mct.alleyns.org.uk/wazzon.aspx. MCT at Alleyn’s, Alleyn’s School, Townley Road, East Dulwich SE22 8SU
Monday 18 October: EC Local Meeting: Dulwich
6pm-8pm. (Registration from 5.30pm). Join your fellow Dulwich business owners at The Lordship Pub, 211 Lordship Lane, East Dulwich, SE22 8HA (Upstairs).
The EC Local Meeting is a new type of Networking and Business Growth Meeting that's guaranteed to help your business grow... because as well as good old networking, our meetings always have a featured content session where we share a practical marketing tactic or strategy that you can use in your business to get more customers and make more sales! You'll get more customers IN the meetings through networking and referrals PLUS you'll also leave with actionable ideas to market your business once you get home too. NB: this event is exclusively for Members of Entrepreneurs Circle so you'll either need to sign up (for free) at the event, or at the link: https:// eclocal.co.uk/Dulwich/join/. Already a member? Register at: https://eclocal.co.uk/Dulwich/
To get your listing here contact: angela@semagazines.co.uk
Wednesday 20 - Saturday 23 October: Steel Magnolias By Robert Harling @8pm
The Dulwich Players are delighted to announce that our next production will feature an allfemale cast performing the touching and comic Steel Magnolias. Originally planned for 2020, but delayed due to Covid-19, the challenges in this play epitomise much of the last year and the struggles we have faced as a theatre group. The title refers to its characters, who exhibit the delicate characteristics of magnolias, but are often called upon to be as tough as steel. Steel Magnolias charts a path though the life of Shelby Eaterton, from her wedding day to less happier events. It takes place within the walls of Truvy’s hair and beauty emporium in the American deep south – what better place to throw shade on everyone in the local community and further. Tickets: £12 available online via:
www.dulwichplayers.org
The Edward Alleyn Theatre, Dulwich College, Dulwich Common SE21 7LD
Wednesday 27 October: Cooking with Scissors
6.45pm. We are back to in-person meetings! An opportunity for local business professionals to meet, make new contacts and gain new business. The last Wednesday of every month. Free Admission. To find out more or register your interest www.cookingwithscissors.co.uk.
