We’ve all been told more than once that ‘it’s never too early to start planning your retirement’. As overstated as this tip is, it rings true. The average person’s retirement will last well over two decades, and if we want to have any say over how it looks, then we need to take action now.
Looking ahead, many of us have it all mapped out: holidays spent walking along sandy beaches, new hobbies, spa days, time spent spoiling our families. If we want this golden retirement, however, we need to put the work in. A state pension will deliver nothing but a life of frugality, and that’s why a growing number of people are taking matters into their own hands.
One increasingly popular move is to take out a self-invested personal pension plan, commonly referred to as a SIPP. If you’re beginning to evaluate your options, here are just three of the things that you ought to know about them…
SIPPs are Flexible
One of the most appealing of SIPPs’ traits is their flexibility. Unlike standard personal pensions, they offer a far wider range of funds to invest in, and you have a much greater say over where your money goes. In addition, you also have much more influence over when to take your capital, and how to spend it.
SIPPs Place You in Control
This flexibility means that those who invest in SIPPs are able to shape their own futures. It is down to you to decide exactly where your money goes, and as a result you set your own risk threshold, make your own investment choices, and are solely responsible for the amount of capital that you’re able to accumulate. Invest wisely, and you’re the sole beneficiary.
Perhaps the most appealing benefit of SIPPs is the numerous tax advantages that are attached to them, foremost amongst them tax relief. For basic rate taxpayers, this is set at 20 per cent, meaning that if you invest £8,000, the government will add an additional £2,000 to your total. For higher and additional rate taxpayers this is even more generous, at 40 and 45 per cent respectively. On top of this, you’re not obliged to pay income or capital gains tax on your fund, and your heirs may inherit tax-free if anything happens to you.
If you’re ready to prepare for your future, could a SIPP be the ideal pension option for you?