For those unfamiliar with the term, a SIPP or Self Invested Personal Pension is, in essence, a pension scheme holding the same tax advantages as other pension schemes, but that provides a higher level of control over how savings are invested. The tax benefits are the same as with the majority of pension plans.

Control
With a SIPP the individual has a whole array of investments to choose from, unlike conventional pension plans. There is therefore far more control over how the individual’s retirement money is invested.

Inbound transfers
With a SIPP there is the option to transfer in money from other pension funds. This makes it possible to consolidate retirement funds under one roof, which makes it much easier to administer and review than with conventional retirement plans.

Choices
A SIPP enables its members to invest in an array of options, usually including government bonds, shares, investment trusts, mutual investment funds, traded endowment policies, insurance company funds, national savings products, deposit accounts with banks and commercial and industrial real estate.

To offer such a wide array of choices is sometimes expensive. Special low-cost SIPPS aim to eliminate unnecessary choice to limit administrative costs. These schemes only allow their members to participate in investment funds, but they still offer a wider choice than conventional pension schemes.

Family SIPPS and Child SIPPS
This is a self-invested personal pension scheme set up as an autonomous trust. It has its own rules and trust deed, which has to be registered with HM Revenue and Customs.

A family SIPP enables groups of people, such as business partners or family members, to consolidate their pension funds into a single scheme. It allows for even more flexibility than other SIPPS, for example Scheme Pension. Anyone who is self-employed, employed, a carer, a pensioner, unemployed or even in full-time education can have a family SIPP.

A SIPP can be set up for a child below the age of 18 by his parents or a legal guardian. This is an excellent way to give a child a head start in life. According to data provided by HM Revenue and Customs, there are already more than 60,000 children under the age of 18 with their own SIPP in the UK.

The benefits of a child SIPP are enormous. For example, a £300 per month investment in such a fund from the child’s birth until he or she is 18 can build a retirement fund of up to £1.2m at 65 if we assume a 20 percent tax rebate. This is more than twice the amount the same child would have available at 65 if he or she started investing the same amount at 25.

An attractive feature of these funds is that the money cannot be accessed before the child is 55, eliminating the possibility that he or she might be tempted to squander the investment.

For the government there are also benefits, because more people will be able to provide for themselves after 65, therefore reducing pressure on the State Pension Scheme.