“A SIPP is a Self-Invested Personal Pension. It’s a type of pension that gives you more control over your pension fund by allowing you to choose which assets to invest in, combine all your pensions into one pot and see the value of your savings in a single place. SIPPs tend to have fixed fees making them more cost-effective provided you don’t withdraw too often. Anyone can open a SIPP and benefit from elevated levels of control that they provide.”

Frazer Fearnhead, founder of The House Crowd and author of The Alternative Guide To Property Investment. 

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In this guide, we’ll look at:

  • What is a SIPP?
  • What are the benefits of a SIPP?
  • What can a SIPP invest in?
  • How do I go about setting up a SIPP?
  • How many SIPPs can I have?
  • How do I use my SIPP to invest in property?
  • Is it time to retire my traditional pension for a property focused SIPP?

What is a SIPP?

SIPP stands for Self-Invested Personal Pension.

It’s a type of pension that gives you more control over your pension fund by allowing you to choose which assets to invest in from a wide range of HMRC approved choices. SIPPs tend to have fixed fees making them a more cost-

effective pension option provided you don’t withdraw your funds too often.

They work in the same way as personal pensions in that the government pays an additional 20% in tax relief whenever you add to your pot.

SIPPs also enable you to combine all your existing pensions into one pot and see the value of your savings in a single place. Anyone can open a SIPP and benefit from elevated levels of control that they provide.

What are the benefits of a SIPP?

what is a SIPP

While traditional pensions have been designed to help save for the future, they just don’t offer the same flexibility in doing so as Self-Invested Personal Pensions. The main advantages of a SIPP are:

  • They provide investors with the authority to take charge of their money and invest it where they see fit
  • They are often cheaper than traditional pensions because
  • They often have fixed fees instead of a percentage-based fee
  • They allow you to combine all pensions into one thereby reducing fees
  • No investment advice is being provided so you don’t need to pay for it

Be careful however, while not receiving investment advice does give you more control over your pension strategy it could also be riskier.

What can a SIPP invest in?

There are many SIPP-allowable investments to choose from. With a SIPP, you can invest in:

  • Unit trusts
  • Investment trusts
  • Stocks and shares
  • Government bonds
  • Exchange traded funds
  • Gilts and bonds
  • Offshore funds
  • Peer to peer lending

Each SIPP is likely to have its own minimum investment thresholds.

With peer to peer lending, individuals can benefit from much higher interest rates than they would if their money was idly sat in a bank account. Whilst accompanied with a degree of risk, peer to peer lending has quickly cemented itself as a viable alternative to the typical pension scheme. In fact, according to the SIPP club, the government is actively backing investing pensions through peer to peer lending, advocating it to diminish the banks’ monopoly.

The House Crowd’s SIPP helps people who have been unable to invest in UK residential property via their pension to do so via peer to peer property lending, and earns up to 10% a year tax free.

How do I go about setting up a SIPP?

Once you’ve decided that you want to start setting up a SIPP, you should review your current pensions and decide which you want to move. Most company and personal pensions can be moved, but not your state pension.

Then, you can start identifying how you want to invest your funds and look for platforms that provide the investment you want. If you’re not sure exactly what you want to invest in, you should speak to a financial advisor for some guidance.

How many SIPPS can I have?

There is no limit to the number of SIPPs you can have, just as there is no limit on the number of pensions or pension types you can have.

How do I use my SIPP to invest in property?

If you want to invest in property via your SIPP, you can do so with a P2P property development company offering property investment opportunities.

Read our full guide to transferring your pension into property here.

Is it time to retire my traditional pension for a property focused SIPP?

Where do you picture yourself in 20 years? Sunning yourself in the tropics, cocktail in hand? Lounging around your dream house, surrounded by all the comforts and luxuries that you have come to expect in your retirement? If you’re like most people, you’re bound to have an optimistic outlook for your future. Who can blame you? You’ve worked hard all of your life and now you want to the reap rewards.

This is where a modern pension should come in handy.

However, the PLSA (Pensions and Lifetime Savings Association) recently reported that up to 80% of people aren’t confident that they are putting enough money to see them through their later years (let alone that Mediterranean cruise). This equates to roughly 30.4 million people of working age across the UK. The reality of retirement for many can be bleak. 19 million pensioners in the UK currently live in poverty, whilst a further 14 million are on the brink.

As it stands, the traditional state pension is failing, and more people are looking for alternative ways to invest their capital. Many are turning to peer to peer property investments as a way to invest their pensions and earn profitable, consistent returns. The reason why is simple: property for a long time now, has proven to be an effective way of supplementing pension funds. It’s a comparatively stable asset when compared to the likes of stocks and shares and with the ever-increasing demand for property in the UK, rental and purchase prices are only ever on the rise.

For years, UK investors have invested their pensions into property through a combination of collective funds, unit trusts and investment trusts. Investments like these allow a portion of your pension to be invested across hundreds of properties on behalf of an insurance company or platform provider. These days, there’s a growing trend to operate in a similar manner but on a much smaller scale. This is where taking control of your pension via peer to peer lending and SIPPs comes in to play.

Hopefully this guide has answered all of your questions, starting with What is a SIPP?. If you’d like to learn more about or peer to peer property investment, get in touch or register for an account.

Capital is at risk and rates are not guaranteed. Withdrawals may be restricted due to illiquidity. Investments are not covered by the Financial Services Compensation Scheme (FSCS). Please read our full risk warning.