Take a bespoke approach to your retirement plans

WHETHER it is the shift from final salary to defined contribution pension schemes or the growing disillusionment in the financial sector and the costs of traditional pensions, we are all choosing to take more control over our retirement planning. And rather than choosing a one-size-fits-all stakeholder pension, investors are increasingly opting for the made-to-measure self-invested personal pension (SIPP), which gives them the ultimate in a personalised pension scheme and the tax benefits to boot.

SIPPs have become one of the fastestselling financial products of the past five years. Although the first SIPPs were launched in 1990, in 2006, when it became possible to have both a personal pension and a SIPP, SIPP-holders numbered just 50,000. But today there are about 650,000 SIPPs, a 25 per cent increase on last year.

SIPPs have been considered an expensive alternative to a standard pension but research from Defaqto shows that costs have been falling over recent years. In May 2010, the average set-up fee for investments of £50,000 was £239.64 with an annual administration fee of £360.47.

However, low-cost SIPPs, provided by the likes of Hargreaves Lansdown, Alliance Trust and Killik & Co, will give you access to most investment products, including listed shares, investment trusts, bonds and exchange-traded funds (ETFs). The set-up fee can be between £100 and £200 but some providers will waive this if you start immediately so don’t be afraid to negotiate. The annual management fee can be as low as £75 but is more likely to be in the region of £150 to £200, says Dave Jeal, head of product management at Selftrade.

If you are putting shares, investment trusts and exchange-traded funds (ETFs) into your SIPP, you will have to pay a dealing fee, which varies depending on the provider. But if you want to invest in more exotic products such as commercial property and unquoted shares, then you will need to set up a full SIPP, which will have a substantial fixed annual administration charge and dealing fees.

But disillusionment would not have driven such a surge in popularity, especially since SIPPs have little cost advantage. Where SIPPs do well is in terms of choice, which is effectively unlimited through your SIPP compared to the limited number of options available through a stakeholder pension.

You also have far less need for another pension plan because you can get all the diversity you want within one framework, says Danny Cox, head of advice at Hargreaves Lansdown, a financial services provider. “A SIPP is a great consolidative vehicle because you can merge several old pensions into one,” he adds. However, while “frozen” company schemes can be put into a SIPP, those still active cannot. And you can’t include a defined benefit pension, warns Jeal.

Despite these features, should everybody be using a SIPP? Ian Price, divisional director of pensions at wealth management firm St James’s Place, says: “There is a clear market for SIPPs but it isn’t one for everybody because many of us simply don’t have the expertise or time to do it.” If you go down the SIPP route, Price says, then your pension is your responsibility and you need to set aside the time to manage it and understand the risks.

Bob Woods, executive chairman of Mattioli Woods, says: “A SIPP is right for anybody who is serious about pension planning and for those who aim to have generated £250,000 by retirement.” He adds that taking control is, on its own, not enough: “You need good advice to supplement the control – a SIPP without advice is a dangerous vehicle.”

Adrian Lowcock, senior investment adviser at BestInvest, says that however experienced you are, getting a second opinion is always good. For example, you might be an equity strategist but that doesn’t mean you know the ins and outs of the bond market.

For those who want to take control of their pensions and who also have both the time and expertise, SIPPs allow you to create a bespoke plan to meet your needs precisely.


Putting property into your SIPP is an extremely complex matter and one on which you should seek specialist advice. Investing directly in property is only available through a full SIPP.

You can include commercial property.

You can borrow up to 50 per cent of the net fund value of the SIPP for the purpose of buying a commercial property within a SIPP.

Investing in residential property is a minefield. You need a minimum £1m invested in three properties and no property can be worth more than 40 per cent of the SIPP value.


Whether you’re an investor with a conscience or simply after long-term sustainable returns, then forestry investments can be wrapped into your SIPP.

A number of forestry companies have sprung up, offering you the chance to invest in timber. For example, Ethical Forestry offers a 12-year investment in teak for a cost of £18,000. This is SIPP-able and investment in commercially-managed woodland is free of income tax.

Other forestry investment companies include Oxigen, Global Forestry Investments and Forestry Investment Management.


The market turmoil has seen more and more of us buy up gold coins and bars as a safe way to store wealth.

Only the highest grade (investment grade) gold bullion can be included in your SIPP and it must be stored with a third party. The gold in your SIPP cannot be used as an asset which has “pride of possession” such as jewellery – ie, that you get personal enjoyment from owning.

However, not every SIPP offering will allow gold bullion investment to be included so check with your trustee before you go and buy those bars.