A SIPP, or Self Invested Personal Pension, is something that self-employed individuals should consider as part of their retirement provisions.
What is a SIPP?
Self-employed individuals don’t receive employer pension contributions and are entirely responsible for funding their retirement. A SIPP is one of many options available to them, allowing them to benefit from flexible contributions, control over investments and tax-efficiency benefits.
How does a SIPP work?
While you should discuss your specific circumstances with Swindon accountants such as https://www.randall-payne.co.uk/services/accountancy/swindon-accountants/ to ensure that a SIPP is the right product for your needs, here is a brief explanation of how SIPPs work.
Every tax year, you can invest up to 100% of your earnings or £60,000, whichever is lower, into a SIPP, investing your money across a diverse portfolio to spread the risk and hopefully achieve long-term growth and excellent returns.
You can choose how much and how often to pay into your SIPP, with many opting to invest a percentage of their annual profits and beginning to access their funds at the age of 55, where they can withdraw up to 25% tax-free, leaving the rest invested to draw down on as needed.
Things to consider
There are various fees associated with SIPPs, including platform fees, trading fees and withdrawal fees and it is important to understand how these will affect you over the long term.
If you have a private or previously employed pension, you can combine this with a SIPP, but always check whether you will incur exit fees or lose any benefits if you do so.
