SIPP stands for self-invested personal pension, a type of pension that grants you increased control over where your capital is invested.
With other types of employee or personal pension, you’ll typically choose between a set number of funds offered by your provider. With a SIPP, you can invest in anything you wish to provided it is permitted by your provider. This typically can include (but isn’t limited to):
- Stocks and shares listed on a recognised exchange
- Futures and options
- UCITS funds, including ETFs and unit trusts
- Commercial property
For UK residents, the tax benefits of a SIPP are identical to those for other types of pension. That means that any contributions into a SIPP will be ‘topped up’ with 20% tax relief, and that higher rate taxpayers can reclaim a further 20% or 25% in the form of a rebate.
There is an ‘annual allowance’ of 100% of annual earned income for contributions into a SIPP, up to a maximum of £40,000. Please note, though, that individual tax circumstances may differ and tax laws can change.