A Self Invested Personal Pension (SIPP) is a pension plan set up through a pension provider rather than your employer.  It is a personal pension held in your name and invested on your behalf.  You can pay into it until you reach age 75, in order to build up a pension fund for your retirement.

SIPPs can be quite complicated. You need to take an active role in managing your pension funds to get the full benefits from one, and therefore need to have a good working knowledge of investing.

When you retire, you can normally take up to 25% of the value of your fund as a tax free lump sum. The rest of the fund may be used to provide an income.

Pros

• You can invest directly in Commercial Property and Shares.
• You will have access to a wide variety of investment options.
• You can take benefits from the plan from the age of 50 if you reach this age before 6 April 2010 (the minimum age will be 55 after this date).
• You can have your pension payable to your widow, widower, civil partner or other dependant(s) in the event of your death.
• You may have a lump sum, usually tax-free, payable to your widow, widower, civil partner or other dependant(s), if you die before retirement.

Cons

• SIPPs are only suitable for those who have a sufficient degree of financial expertise to be able to manage their own investments.
• They are suited to larger pension funds only.
• Charges are generally higher than for any other type of pension plan.

If you are aware of the risks and returns of different investments, and have the time to take control of your pensions, then this could be a good option for you.

A Self Invested Personal Pension is available through financial advisers or direct from pension providers via the telephone or internet.  If you are unsure, get advice before buying a personal pension direct from a pension provider.

If unsure get advice - If you are unsure about any aspects of pensions or what may be suitable for you, it is best that you speak to a financial adviser, who will be able to assess your needs and recommend the most suitable products.

Act sooner rather than later - The earlier you start to pay into a pension plan the greater the income you may receive when you retire.