Can SIPPs Ensure a Comfortable Retirement?

Those in their early 30s and 40s must brace themselves for bad news about state pensions. The age which people are now expected to work to looks set to rise to 68, and the triple lock safety system may be withdrawn next parliament. SIPPs may be an option to consider in light of this, so here is some useful information about them.

State Pensions

The state pension age may rise in 2039 as opposed to 2046, which was previously proposed. People currently under 30 may have to work until they are 70, which is no doubt both unexpected and disappointing for those looking forward to retirement at 65, as they will have to spend yet more of their life working.

This could cause many to start to review their pension plans to see if they can make more money for (possibly early) retirement. With the prospect of rising state pension age becoming a regular occurrence, people may be looking for pension schemes which can potentially offer higher returns.     

Since state pensions may not be enough of an income for some, SIPPs are one option which you could benefit from.

SIPPs

Standing for Self-Invested Personal Pension, these schemes could be the answer to those who want to be more involved with pension investment. Offered by companies such as Bestinvest, these schemes involve investing your pension money into virtually anything of your choosing, from property to shares, and have the potential to create a decent retirement fund if investments are successful.

They offer tax relief which can save a great deal of money, and the higher your Income Tax band the more tax relief is given. The Government adds 20% to pension contributions automatically, and those in the 40% and 45% tax bands can claim back another 20% or 25% respectively, and thus your money can potentially go a lot further than in other types of accounts.  

Compared to standard pensions, this option offers flexibility to those who prefer to have a say in where their money goes. This does, however, mean that the investment must be regularly checked and managed to make sure it is actually profitable. The scheme does not come without risk, and there is a chance that investments may not be successful.

Therefore, this option could certainly help you to retire early, but with greater chance of reward comes greater chance of risk, so researching what to invest in is paramount to making the best possible choice. Although a comfortable retirement (and profit) are not guaranteed, those who do profit from this scheme will have a good chance of living comfortably come retirement. With luck, investments may bear enough fruit to offer an early retirement, and counteract the rising state pension age.

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