The process for setting up a SIPP pension explained

Britons are increasingly using SIPPs (self-invested personal pensions) to save up for their retirement as people want more flexibility about how their pensions work.

Rajan Lakhani, money expert at smart money app Plum, told “More and more people are turning to SIPPs to save for their retirement in a tax-efficient and flexible way.

“In general, there is a growing awareness that the state pension will not be enough to fund a comfortable retirement, which, along with the success of workplace pension auto-enrolment, is encouraging people to take control of their pension prospects.”

Pension savers can choose how much they save and how often, or people can contribute a lump sum.

Another benefit is the individual can choose which funds they invest in, by doing this themself or through a financial advisor.

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Mr Lakhani said Britons are increasingly choosing SIPPs because of changes to employment as people have several jobs throughout their careers.

He explained: “More people are also choosing self-employment or flexible contracts for part or all of their career, which means no automatic workplace pension.

“A SIPP is a good choice to consolidate different pensions to be managed in one place, with only one set of fees to be paid.”

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He said the other key driver for the trend is changes to technology as people can now manage a SIPP on their own with DIY investment apps.

The expert said the process for creating a SIPP depends on the particular provider. He said: “At Plum, it’s similar to opening up a regular investment account, though there are a few extra steps.

“To create a pension plan on the Plum app, you need to state the age you’d like to retire, then choose from a range of funds according to your risk appetite.

“You then need to enter some details, including your National Insurance number, employer status and who your beneficiaries are. Then you’ll be ready to start transferring money into your new SIPP.”

A person can transfer over other pensions into their SIPP. Mr Lakhani urged people to read through the terms and conditions and legal information about a SIPP before setting one up.

A SIPP pension can include a variety of investments, such as listed and unlisted stocks and shares, gold bullion or commercial property.

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