SIPP vs Personal Pension

resilie

I want to invest about 35k as a lump sum into a pension this tax year with smaller lump sums to follow in the next few years...

I have seen an IFA for an initial consultation about all sorts of things (incl life insurance etc) and told him I am thinking of putting money into a SIPP. He told me he thinks a personal pension would be more appropriate but did not elaborate. The cynic in me thinks it might be more appropriate as he gets a commission but am I missing something? I am happy to pick my own investments and manage them over the next 25years...

So what are the pros and cons of a SIPP vs a PP?

Marcon

A SIPP is a personal pension: a Self Invested Personal Pension.

If the IFA didn't elaborate, ask him to do so and explain his recommendation.

MEM62

resilie wrote: »

The cynic in me thinks it might be more appropriate as he gets a commission but am I missing something?

Yes you are. IFA's no longer get commission for selling products and have not done so for a while.

cloud_dog

There's way too little information in here to start IFA bashing just yet. Perhaps the IFA had identified the possibility of a SIPP being too high risk for th OP's investment experience etc etc.... Additionally, personal pensions are more than adequate for the vast majority of people. Let's not jump to conclusions just yet.

dunstonh

He told me he thinks a personal pension would be more appropriate but did not elaborate.

SIPPs are generically more expensive and more advanced. Are you intending to use more advanced investment options? Are you looking to pay more in charges?

The cynic in me thinks it might be more appropriate as he gets a commission but am I missing something?

What makes you think he gets a commission? IFAs are banned from getting commission.

I am happy to pick my own investments and manage them over the next 25years...

So, why are you asking an IFA to do it?

So what are the pros and cons of a SIPP vs a PP?

Generically.....
PPP is likely to be cheaper (although some platform SIPPs can be close and in some cases cheaper).
PPPs have FSCS protection of 100% of value with no upper limit when using insured funds. SIPP gets 50k (rising to 85k shortly).
PPPs have due diligence carried out on the investment funds. SIPPs do not
SIPPs have a wider investment choice (30,000 odd options vs a couple of hundred to a thousand or two)
Some SIPPs offer personal pension/stakeholder pension funds which makes them like a personal pension but called SIPP.

I wouldn't be too hung up on the differences.

Albermarle

The differences have also become blurred . SIPPS may have thousands of investment choices but they also offer portfolio/lifestyle funds just like Personal pensions ( and usually more expensive)
On the other hand many PPs offer hundreds of funds , which is enough for probably 99% of investors.
Regarding charges when I looked into it I had the impression that :
A SIPP was cheaper than a PP , if you were buying a new one direct .
However if you had a PP that was an ex workplace pensionw ith discounts , or you had a decent sized fund attracting a discount then there was little in it either way .
I think also IFA's have access to lower charges still on PP's

resilie

thank you all for the replies so far...the reason for the charges suggested by the IFA is that his company would manage the personal pension and take an initial % fee for investment advice... the % quoted seems to be higher than most SIPPs hence the question...
I definitely do not need thousands of investment products so a PP would work as long as I can find one with reasonable running costs that are ok with occasional lump sums..

dunstonh

thank you all for the replies so far...the reason for the charges suggested by the IFA is that his company would manage the personal pension and take an initial % fee for investment advice... the % quoted seems to be higher than most SIPPs hence the question...

SIPPs, personal pensions and stakeholder pensions dont have initial charges. They also do not provide advice. The adviser charge is not about the product but the cost of advice.

So, whether the advice is to go into an SHP, PPP or SIPP, the cost will be the same.

nrsql

Quite possibly he is right about the advice but I would be concerned that he didn't explain why.
Maybe he thought you were better off not knowing and expected you to believe him without any explanation - and you didn't question it so he probably thought/hoped you didn't want to know why (I would be concerned about this).

Given what's happened you might want to find another IFA who would give more information without prompting or educate your current IFA about what you need and also check he understands why he is suggesting things.

Albermarle

so a PP would work as long as I can find one with reasonable running costs that are ok with occasional lump sums..

As in all aspects of life there is never usually a problem to pay into anything. So paying in irregular lump sums to a pension would normally be no issue.

Tardigrade1

OK:
1) Do not pay the IFA for investment advice
2) Whilst a SIPP is a personal pension, it is common in the industry to differentiate between the complexity of pension products, and also between trust and contract products. Products like NEST, or B&CE's "Peoples Pension" are options that you would not call a SIPP.
3) If you want an EXTREMELY hands off approach, you can do much worse than chucking it in the people's pension. If you want to do some research, a SIPP with an even lower fee may be appropriate, alongside some cheap index tracking fund selections of your own. Paying an IFA to put your money in funds for you is a bad, bad, bad value idea, 99% of the time.
4) I'm not authorised to provide advice, this is not advice, etc etc.