Best SIPP Providers 2023

Yes. Investing with a regulated SIPP provider is generally very safe as UK regulators require SIPP providers to keep clients’ assets separate from their own money. This means that the assets cannot be taken by creditors if the firm goes bust. A SIPP trustee is an organisation that holds assets in a trust for the beneficiaries of the account. They are responsible for ensuring that the account holder’s investments are secure. A SIPP Administrator is an entity that is responsible for ensuring that a SIPP is run properly.

If a regulated SIPP provider fails, you will be covered by the Financial Services Compensation Scheme (FSCS). This protects up to £85,000 of your investment deposit per person per provider.

It’s important to understand, however, that investments within a SIPP come with risk. The FSCS won’t protect you if your SIPP if the  investments fall in value.

Further reading: Can you switch SIPP administrators?

To open and pay into a SIPP, you must be aged between 18 and 75 and either a UK resident or a Crown employee (or married to or in a civil partnership with a Crown employee). Those under the age of 18 are eligible for a Junior SIPP.

You can have a SIPP alongside other pension accounts such as workplace pension schemes as well as other investment accounts such as ISAs. You’re allowed to have multiple SIPP accounts if you wish to.

If you want to generate good returns from your SIPP, there are three things you need to do:

• Choose superior investments. Of course, this is easier said than done. No one knows how an investment will perform in the future and past performance is not an indicator of future performance. By spending some time on research, however, it may be possible to identify investments with strong long-term growth potential.
• Manage risk carefully. Avoiding big losses is one of the keys to investment success. It’s important to build a diversified portfolio that contains many different assets. This will reduce the risk of suffering big losses.

• Minimise fees. Over time, fees can have a large negative impact on investment returns. You can reduce fees by selecting products with low fees and not trading excessively.

There is no limit on the amount that you can contribute to a SIPP every year, however, there is a limit on the amount you can contribute and receive tax relief on. This is known as the annual allowance and it’s usually 100% of your taxable earnings or £40,000, whichever is lower. This annual allowance applies across all of your pension accounts and includes the value of any tax relief that is added to the contributions. Once you have made a taxable withdrawal from your SIPP, the annual allowance goes down to £4,000. This is known as the money purchase annual allowance. For higher earners, the rules around pension contributions are different. Higher earners face a tapered annual allowance. With a Junior SIPP, you can contribute up to £2,880 per year. Contributions into a SIPP pension can come from yourself, an employer, or someone else such as a relative or friend.

SIPPs require a certain amount of investment knowledge and time commitment. Investors must be willing to research the asset classes in which they invest and make important decisions about how to allocate their money, or they will need an adviser who can do so on their behalf. Markets can be volatile and making the wrong decision at the wrong time can wipe out a pension pot just as the saver reaches retirement. Savers must be sure they have the appropriate risk appetite and a full understanding of SIPPs before investing. If you already have a company pension, it may make more sense to increase contributions to that instead of setting up a SIPP. If you are a confident investor, who wants to take control of your retirement savings and consolidate other plans, a SIPP could be suitable.

The best investments to buy for your SIPP are funds and large cap stocks. However, the best SIPP investments for you will depend on your personal financial goals, your risk tolerance, and the amount of time you have to devote to investment research. SIPP investment opportunities are broad and varied and include things like commercial property, shares, funds and ETFs. Here’s a rundown of considerations to think about when investing in a SIPP.

Further reading: Most popular investments for UK investors

Those who have time for investment research may want to consider investing in individual shares. This approach to investing has two main advantages. Firstly, you can potentially outperform the broader stock market if you pick the right stocks. Secondly, you can potentially save on fees. Generally speaking, over the long term, it’s cheaper to own a portfolio of individual shares than a portfolio of funds. On the downside, however, this approach is riskier than investing in funds or ETFs. When you invest in individual shares, you face stock-specific risk. It’s important to build a diversified portfolio to minimise these risks.

Those that do not have time for investment research or would prefer to outsource investment management to others may want to consider equity funds. Funds offer diversified exposure to the stock market which means that they are less risky than investing in individual shares. One example of a fund is the Fundsmith Equity fund. This is a global equity fund. This particular fund has been one of the most popular funds in the UK for many years now due to its strong performance track record. Past performance is not an indicator of future performance, however.

Another option to consider is investment trusts. These are like funds in that they provide diversified exposure to stocks. However, unlike regular funds, they are traded on the stock market. This means you can buy and sell them like regular shares. Two of the most popular investment trusts include the City of London Investment Trust, which aims to provide long-term growth in income and capital, and Scottish Mortgage Investment Trust, which aims to provide long-term growth.

Of course, there are many other investment options to consider. Most SIPPs enable you to invest in shares, funds, ETFs, commodities, bonds, and more. The key is to build a portfolio that is suited to your requirements and risk profile.

You can hold cash with most SIPP providers, however, as with a regular bank account, the returns on cash are likely to be low. Those looking for low-risk investments may want to consider cautious funds such as Vanguard’s LifeStrategy 20% Equity fund.

Many people are often interested in finding out which SIPPs offer the best returns. Comparing the performance of different SIPP accounts is difficult, however. This is because most SIPPs offer a wide range of investments and you are in charge of investing your money. Additionally, the returns from investments within a SIPP such as shares, funds, and ETFs are uncertain and past performance is not an indicator of future performance.

If your goal is to generate high returns from your SIPP, the key is to focus on the range of investments offered by the SIPP, as well as the fee structure, as these factors are the main determinants of a SIPP’s return potential.

Tax relief is a reward from the government for saving for retirement. When you contribute to a SIPP, some of your money that would have gone to the government as tax goes to your pension instead.

Tax relief is paid on your pension contributions at the highest rate of income tax you pay.

• Read the full guide: SIPP tax relief explained

Tax relief on SIPP withdrawals

There are rules around making a tax-free withdrawal from your SIPP and then making a contribution into the SIPP with that money to claim tax relief. This is known as ‘pension recycling.’ The rules – which are designed to stop the systematic exploitation of pension tax rules to generate artificially high amounts of tax relief – are quite complex. To decide whether your contributions have been significantly increased, HMRC will examine how much you might have contributed to your SIPP if tax-free cash from withdrawals had not been received and compare this to your actual contributions. You can find more information on pension recycling rules.

When you die, the remaining value of your SIPP can be passed on to your nominated beneficiaries. You can nominate SIPP beneficiaries by completing a SIPP beneficiary or ‘expression of wishes’ form with your SIPP provider.

Money in a SIPP can normally be passed on free of Inheritance Tax. Any withdrawals the beneficiaries make will usually be tax free if you die before the age of 75. If you die aged 75 or older, any withdrawals made by beneficiaries will be taxed as income.

Yes, with a Junior SIPP. SIPPs are available to those aged between 18 and 75. For those under the age of 18, Junior SIPPs are available. With a Junior SIPP, you can contribute up to £2,880 per year and contributions are subject to 20% tax relief. The money is tied up until retirement age.

Another investment option for those under the age of 18 is the Junior stocks and shares ISA. In this account, all investment gains and income are tax-free. The Junior ISA has an annual allowance of £9,000.