Self-invested personal pensions

Relaxation of rules gives an increased appetite for longer-term saving

The biggest winner from more generous pension allowances are self-invested personal pensions (SIPPs), as many investors increasingly want greater control over their pension assets.

It is not just sophisticated investors looking to include derivatives and commercial property in their pension portfolios who are taking advantage of SIPPs, but mainstream investors looking to have a hand in the placement of their retirement savings.

SIPPs were introduced in 1990 as tax-efficient wrappers, but they only began to catch the public’s imagination two years ago. They allow investors to hold a variety of asset classes in a pension fund, including stocks and shares, cash, bonds, commercial property and gilts. Investors can choose whether they want to manage their SIPP alone or with the advice of a provider. Some 150,000 investors are estimated to have already opened a SIPP in the UK, and the sum of money invested is around £30bn so far.

Following “A-Day” last year, when Gordon Brown, changed the rules for contributions to pension schemes, demand for SIPPs increased considerably. The investment choice on offer widened and individuals were suddenly able to save up to 100 per cent of their annual income in a tax-free environment, subject to a cap of £225,000 for the 2007/2008 tax year.

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