Types of SIPP: Which One Suits You Best?

Different types of SIPPs include low-cost SIPPs, which are limited in investment choice but have lower fees, and full SIPPs, offering a wide range of investments with higher fees.
  • Last Updated: 22 Mar 2024
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Francis Hui
Discover the Best SIPP Options Tailored to Your Needs. Compare Benefits, Assess Risks, and Confidently Make the Smartest Investment for Your Future.
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Key Takeaways
  • There are two main types of SIPP (Self-Invested Personal Pensions) available: standard SIPPs, offering a range of standard investments, and full SIPPs, offering wider investment options including commercial property.
  • Each type of SIPP works by allowing you to make contributions, which are then invested in a range of assets, the choice of which varies depending on whether it’s a standard or full SIPP.
  • The right SIPP for you depends on your investment knowledge and experience, your retirement goals, and your risk tolerance.
  • Risks associated with SIPPs include the potential for investment losses, especially with full SIPPs that include riskier assets like commercial property.
  • Funding your SIPP can be achieved through regular contributions, lump sum payments or transfers from other pension schemes, and it offers tax benefits such as tax relief on contributions and tax-free growth of investments.

Given that just 25% of individuals nearing or in retirement feel financially prepared for their futures, exploring the different types of SIPPs could be your key to a comfortable retirement.1

Self-invested personal pensions (SIPPs) are designed to cater to a wide range of individual preferences, offering suitable options for everyone, from high-risk takers to ethical investors.

In This Article, You Will Discover:

    Navigating the myriad of SIPP options can seem daunting but our Every Investor experts have meticulously researched this complex landscape to provide you with clear, actionable insights, simplifying your pension planning journey.

    What Are the Different Types of Self-Invested Personal Pensions (SIPP) Available in the UK?

    In the UK, two main types of Self-Invested Personal Pensions (SIPP) exist: Full SIPPs and Low-Cost SIPPs. Full SIPPs offer the widest range of investment options, including commercial property and directly held corporate bonds.

    However, they come with higher management costs, making them more appealing to experienced investors with significant pension pots. On the other hand, Low-Cost SIPPs provide access to a more limited selection of investments, mainly focused on funds, shares, and trusts.

    These SIPPs are designed for those preferring simplicity, lower fees, and a more hands-off investing approach. Although the investment options are narrower, they’re quite sufficient for most individual investors.

    What’s a SIPP?

    A Self-Invested Personal Pension (SIPP) is a flexible and tax-efficient retirement savings vehicle.

    It allows you to take control of your pension investments and make choices based on your financial goals and risk tolerance.

    The most common types are Full SIPPs and Low-Cost SIPPs. 

    Full SIPP 

    A Full SIPP offers the widest investment flexibility, allowing you to choose from a broad range of investments such as stocks, bonds, commercial property, and even private equity.

    Low-Cost SIPPs 

    Low-cost SIPPs tend to offer a smaller investment range, which simplifies management and lowers the cost.

    Bank SIPPS

    Beyond Full and Low-Cost SIPPs, there are also Hybrid SIPPs, Platform SIPPs, Robo-Advisory SIPPs, Bank SIPPs and more. 

    Let’s take a closer look. 

    Hybrid SIPPs

    Hybrid SIPPs strike a balance, mandating that you allocate a portion of your funds into the provider’s insured pension offerings while granting you the freedom to invest the remainder as you see fit. 

    In return for your commitment to their insured funds, you’ll benefit from lower fees.

    Platform SIPPs 

    These Platform SIPPs provide an intuitive online platform that enables you to take active control of your investments. 

    They feature a streamlined dashboard for immediate portfolio tracking and effortless management of your retirement savings.

    Robo-Advisory SIPPs

    Robo-Advisory SIPPs combine cutting-edge technology with automated portfolio management, offering you a user-friendly interface for a streamlined investment experience.

    What Are Specialised SIPPs?

    Specialised SIPPs cater to specific investment preferences, such as property SIPPs,2 gold SIPPs,3 or international SIPPs,4 allowing investors to focus on niche markets or assets.

    Group SIPPs

    Group SIPPs are generally workplace pensions offered by employers to their employees.

    They provide a convenient way for a group of individuals to save for retirement together.

    Ethical/Socially Responsible SIPPs

    Ethical/Socially Responsible SIPPs empower you to invest with integrity, targeting funds that prioritize sustainability and ethical practices or those dedicated to generating positive social impact.

    What Are The Full SIPP Benefits, Risks & Suitability?

    These are at the top end of the Self-Invested Person Pension market, offering a full suite of features and benefits for the discerning investor.

    They offer maximum flexibility and more diverse investment options, but with the potential for higher returns comes equally higher risks.

    This makes them ideal for experienced investors who want hands-on control over their pension funds. 

    What Are The Low-Cost SIPP Benefits, Risks & Suitability?

    These plans offer an economical alternative to traditional self-invested personal pensions, providing the essentials at a more accessible price point.

    Offering a gateway to hands-on retirement planning with the dual perks of affordability and ease, they are ideal for those starting out or preferring a no-frills pension approach.

    While they empower investors with smaller portfolios to manage their funds independently, the reduced costs may limit investment choices and access to bespoke advice. 

    Such SIPPs suit the cost-conscious, self-reliant investor ready to navigate their retirement savings without extensive financial advice.

    What Are The Hybrid SIPP Benefits, Risks & Suitability?

    Hybrid SIPPs offer the best of both worlds: the security of a standard personal pension and the adaptable investment freedom of a SIPP.

    The self-invested segment provides more control and potential for greater returns based on selected investments. 

    The trade-off includes limited investment options and the complexity of managing two investment types. 

    These are best suited for intermediate investors who want a mix of secure, provider-managed funds and the freedom to tailor part of their portfolio, offering a middle path between passive and active pension management.

    What Are The Platform SIPP Benefits, Risks & Suitability?

    These are digital investment services that offer investors a user-friendly online platform to manage a variety of pension investments in one centralised location.

    They provide a streamlined investment experience with the benefit of consolidating various pension assets on a single online platform, offering ease of access and portfolio management. 

    The intuitive interfaces and real-time control appeal to investors who value transparency and self-management. 

    However

    Risks include potential platform fees and the reliance on your own investment acumen, as well as the security risks inherent to digital platforms. 

    Such SIPPs are most suitable for the tech-savvy investor who is confident in making informed decisions and prefers the convenience of managing investments digitally.

    What Are The Robo-Advisory SIPP Benefits, Risks & Suitability?

    Robo-Advisory SIPPs are automated, technology-driven pension plans that use algorithms to manage your investments based on your risk preferences and financial goals.

    They offer the benefit of hands-off investment management, using advanced algorithms to optimise your pension portfolio based on a personalised risk profile. 

    This automated approach provides a low-cost, accessible entry into investing for beginners or those with limited time to manage their pensions. 

    However

    The main risks lie in the lack of human oversight, which may not fully account for nuanced market conditions or personal circumstances. 

    Consequently, these SIPPs are best suited for individuals comfortable with entrusting their investment strategies to technology, particularly those seeking a passive investment experience with minimal involvement.

    What Are The Group SIPPs Benefits, Risks & Suitability?

    Group SIPPs are designed for multiple members, typically employees, to pool their resources.

    The collective advantage of pooled resources, allows members to enjoy reduced management costs and potentially better investment terms through economies of scale. 

    They benefit from a unified management structure, simplifying the administrative burden for organisations. 

    However

    The risks involved mirror individual SIPPs, including market fluctuation and investment choice limitations within the group framework. 

    These plans are particularly suitable for companies or collectives looking to provide a structured, yet flexible, pension option to employees, combining the appeal of individual control with the strength of group bargaining.

    What Are The Ethical/Socially Responsible SIPP Benefits, Risks & Suitability?

    Ethical/Socially Responsible SIPPs focus on companies practising responsible business, prioritising sustainability, and promoting social welfare.

    These SIPPs cater to investors looking to align their retirement savings with their values, focusing on sustainable and socially conscious investments. 

    The benefits include fostering positive change through investment choices and potentially tapping into the robust performance of ethical sectors. 

    However

    These SIPPs may face risks such as limited diversification due to the exclusion of certain industries and the evolving definition of what constitutes an ‘ethical’ investment. 

    They are especially suitable for investors who prioritise ethical considerations as much as financial returns and are committed to supporting environmental, social, and governance (ESG) principles through their pension strategy.

    How To Choose the Right SIPP?

    Selecting the ideal SIPP requires careful consideration of your financial goals, investment preferences, and appetite for risk to ensure alignment with your long-term retirement strategy.

    Factors to Consider

    When selecting the right SIPP, you should evaluate a variety of factors to ensure it fits your retirement plan.

    Factors to consider include:

    • Investment options
    • Fees 
    • Flexibility
    • Access to financial advice
    • Platform functionality
    • Your own investment knowledge and experience
    • Customer service

    By carefully examining these factors, you can make an informed decision that aligns with your financial goals and personal investment style.

    Understanding Fees & Charges

    SIPPs come with various fees and charges, which can significantly affect returns, so it’s vital to understand these costs upfront.5

    Look out for: 

    • Annual management fees
    • Set-up fees
    • Trading charges
    • Transfer fees
    • Withdrawal charges
    • Penalty charges
    • Inactivity fees

    Understanding each of these fees and how they apply to your investment will help you choose a plan that offers a cost structure that aligns with your investment strategy and activity level.

    Role of Financial Advisors

    Financial advisors are key in navigating the SIPP landscape as they offer customised retirement strategies, assist with SIPP selection, and manage your portfolio to keep it aligned with your goals. 

    Their expertise in investment, tax efficiency, and regulatory changes ensures your retirement planning is both optimised and compliant, providing you with the comfort of professional oversight.

    How Are SIPPs Regulated?

    SIPPs are governed by strict financial services legislation and overseen by various regulatory bodies. 

    Current Legislation & Governance

    These plans are not only governed by strict financial services legislation but also by the overarching framework of the Pension Schemes Act 2015.6 

    This legislation, together with regulatory body oversight, fortifies the governance structure for SIPPs, ensuring adherence to precise operational and compliance standards.

    Potential Regulatory Changes

    The landscape of SIPP regulation is subject to change as financial markets evolve. 

    This includes adjustments in response to economic shifts, emerging investment products, or to close any regulatory gaps.

    A noteworthy shift is the increase in the normal minimum pension age from 55 to 57, slated for implementation in 2028.7

    Prospective adjustments signify an evolving regulatory environment aiming to adapt to changing economic and demographic landscapes.

    Role of the Financial Conduct Authority (FCA)

    The FCA’s8 role is multifaceted, focusing on the oversight of marketing standards, the qualification and conduct of financial advisors, and the regular monitoring of SIPP providers through mandatory reporting. 

    It ensures that SIPP management aligns with consumer interests, offering a layer of protection through the FSCS9 and maintaining a stable pension environment.

    Future of SIPPs in the UK

    Looking forward, SIPPs in the UK face both exciting opportunities and challenges. 

    Market trends may influence their direction, technological advancements will drive their growth, and legislative changes will form their framework.

    Market Trends & Predictions

    The digitisation trend is expected to surge, with Robo-Advisory and Platform SIPPs becoming increasingly popular.10 

    More investors are likely to seek SIPPs that match their ethical and social values, with ethical and socially responsible SIPPs set to continue growing in popularity.11

    The demand for personalised pension plans and flexible investments is also predicted to rise.12

    Impact of Brexit & Global Factors

    Global factors significantly shape SIPPs in the UK, with economic volatility, currency fluctuations, and international regulatory trends influencing investment outcomes. 

    Geopolitical events and health crises, exemplified by the COVID-19 pandemic, highlight the need for proactive risk management in SIPPs with global exposure.13

    Environmental, Social, and Governance (ESG) considerations are also becoming critical in investment decisions as the market trends towards sustainability. 

    These diverse global elements collectively impact the stability, regulation, and future orientation of SIPPs.

    Common Questions

    Are There Any Restrictions on the Types of Investments Allowed in a SIPP?

    Can I Transfer My Existing Pension into a SIPP?

    What Are the Tax Advantages of Investing in a SIPP?

    Can I Invest in Property with a SIPP?

    What Are Provider-Led SIPPs?

    How Do Family SIPPs Work?

    Which SIPP Type’s Best Suited to My Needs?

    What Factors Should I Consider When Choosing a SIPP?

    How Are SIPP Fees and Charges Structured?

    What is the Role of Financial Advisors in Choosing a SIPP?

    What Are the Different Types of SIPPs Available?

    How Does Each Type of SIPP Work?

    Which Type of SIPP Is Right for Me?

    Are There Any Risks Involved with Certain Types of SIPPs?

    How Can I Fund My SIPPs and What Are the Tax Benefits?

    In Conclusion

    The pension landscape is evolving swiftly, propelled by market trends, technological innovations, and regulatory changes. 

    Choosing the ideal plan hinges on a clear understanding of your financial objectives, risk appetite, and investment acumen.

    As you venture through this dynamic territory, stay informed about FCA regulations and watch for shifts that shape the future of these pension plans. 

    Explore the types of SIPPs available on the market to craft a retirement plan that aligns seamlessly with your financial aspirations.

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