What makes a pension a SIPP?

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Hugh_Mungus
Hugh_Mungus Posts: 17 Forumite
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in Pensions, annuities & retirement planning
Probably a stupid question, apart from the obvious name, what makes the pension identifiable as a SIPP?

I started to contribute into my old workplace pension a few months ago, its from a former employer, with L&G.

I am investing myself and its getting the added tax to it. I am able to chop and change what funds etc its invested in, but is there something different to this 'workplace pension' vs a SIPP?

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  • drumtochty
    drumtochty Posts: 440 Forumite
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    Your existing pension lets you invest in different funds but the pension company has done their homework to pre qualify those funds, not saying that is better or worse.


    While some SIPP's are restricted to an extent, the idea is that you do not pick from a prequalified list of funds but you can chose to pick what investments or cash instruments to an extent etc you want accross the whole market.


    That is what makes it a Self Invested Personal Pension.
  • Marcon
    Marcon Posts: 10,691 Forumite
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    Hugh_Mungus wrote: »
    Probably a stupid question, apart from the obvious name, what makes the pension identifiable as a SIPP?

    I started to contribute into my old workplace pension a few months ago, its from a former employer, with L&G.

    I am investing myself and its getting the added tax to it. I am able to chop and change what funds etc its invested in, but is there something different to this 'workplace pension' vs a SIPP?

    It's not a stupid question at all, but simply googling on 'what is a SIPP' gets you the answer immediately (and more comprehensively than anyone here is likely to have the time to give) - e.g. https://www.hl.co.uk/pensions/sipp/what-is-a-sipp
    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
  • Aretnap
    Aretnap Posts: 5,215 Forumite
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    The phrase SIPP is probably over-used. It can refer to a number of different types of pension, ranging from

    (A) Something that is likely very similar to your workplace/personal pension, just with a choice of a few hundred funds instead of a few dozen (eg the Fidelity SIPP)

    (B) A wider fund range like (A), but also with the option of investing in individual shares listed on major exchanges like the London Stock Exchange (eg a Hargreaves Lansdown SIPP), or

    (C) a pension which let you hold any eligible type of investment, including things like unlisted shares and commercial property. If you want to use your pension to buy a shop in your local high street, or a car park to rent out spaces in, you can.

    Historically "SIPP" refered to type (C), but increasingly it is used to refer to (B), or even (A), and that's what people on this board usually mean when they speak of SIPPs.
  • Albermarle
    Albermarle Posts: 22,179 Forumite
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    (A) Something that is likely very similar to your workplace/personal pension, just with a choice of a few hundred funds instead of a few dozen (eg the Fidelity SIPP)
    It's a good explanation but a bad example . Fidelity SIPP has over 3000 fund options + shares. So it is an example of B)
    A better example of A) would be the forthcoming Vanguard SIPP

    Another difference is that workplace/personal pensions will automatically invest your money in their default /average risk fund , if you do not instruct them otherwise. With a SIPP your contributions will just sit in the cash account awaiting instructions. So for the majority of people , who have no clue about pensions or investments the SIPP is not suitable.

    For charges a typical workplace pension will cost between 0.4 %and 1 %. Some SIPPS can be operated very cheaply but it also very easy to end up with higher charges if you are not careful.
  • grnglide
    grnglide Posts: 171 Forumite
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    A) would be the forthcoming Vanguard SIPP
    But the forthcoming pension isn't a SIPP, isn't it? Isn't it going to be a Personal Pension?
  • DavidT67
    DavidT67 Posts: 390 Forumite
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    Vanguard Personal Pension (SIPP)
    https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/personal-pension-account
    It’s a Self Invested Personal Pension – so you have control over how you want your money to be invested.
  • gm0
    gm0 Posts: 864 Forumite
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    The other salient difference between many workplace scheme pensions and the "retail" SIPP is that scheme pension funds are protected (to 90% value) and SIPP's aren't ~ 85k. Sophisticated investor you see.

    The actual rules are a tad more complex than I have stated - involving old rules about life insurance companies and the specific types of trust but the first port of call is that occupational schemes are generally protected by the government and SIPPs aren't.

    Platform risk is widely ignored as your investments in funds underneath *should* be nice and separate and not seriously at risk from platform failure. Provided you don't mind being locked out of them for a year during an administration/IT failure scenario. Implication shop carefully for a mainstream platform or even consider splitting (spouse, or ISA/SIPP according to circumstances)
  • Albermarle
    Albermarle Posts: 22,179 Forumite
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    But the forthcoming pension isn't a SIPP, isn't it? Isn't it going to be a Personal Pension?
    It's being promoted as both at the same time !
    Vanguard Personal Pension (SIPP)
  • SonOf
    SonOf Posts: 2,631 Forumite
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    grnglide wrote: »
    But the forthcoming pension isn't a SIPP, isn't it? Isn't it going to be a Personal Pension?

    Its neither a SIPP or a personal pension. We dont know enough yet but it could be a master trust scheme (like many workplace schemes). Master trust schemes are lower cost to administer compared to personal pensions (which are insured contracts) and SIPPs.

    What we do know is that FNZ has a SIPP coded in its software. Vanguard turned that SIPP down and wanted FNZ to code its own pension. So, until we see the technical details we wont know. Although in reality, it wont make a lot of difference (apart from FSCS protection). I doubt anyone will really care.
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