How Could a SIPP Help You to Achieve Financial Freedom

How Could a SIPP Help You to Achieve Financial Freedom

Advancements in digital technology and the emergence of a raft of fintech companies means that there are more ways to invest than ever before and doing so is easy. So, if you are looking to secure financial freedom, exploring what is on offer is paramount.

Here we look at Self-Invested Personal Pensions, otherwise known as SIPPs.

What is s SIPP?

A SIPP is a personal pension scheme, that has been approved by the UK government and that is managed by the individual who sets up the scheme.

Companies who offer the service, such as Bestinvest provide a framework from which the customer can choose where the capital is invested and when to move the capital from one investment to another.

In essence, having a SIPP gives you control over where to invest, whether you want to invest in investment funds, trusts or company shares. The provider will act on your behalf to complete the technical process of the investment.

Where is the Capital Invested? 

When you invest using a SIPP, you have a wide range of options regarding where to invest. For example unit trusts, endowment policies or commercial property.

The range of investment opportunities will vary depending on the provider. However, you will find that almost all providers will list investments with varying exposure to risk. This is important because it allows the user to decide how much risk they want to be exposed to, which will affect the returns they receive.

Generally speaking, investments with more exposure to risk offer the potential for higher returns.

Financial Freedom?

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When considering the financial freedom that a SIPP may be able to offer, there are two things to bear in mind.

First, as a SIPP is managed by the customer, they have the freedom to put money in or take it out at will. They can also sculpt a bespoke portfolio, where risk is available to those who wish to speculate. An attractive option for those who, for instance, may be looking to retire early, know about investing and want control over their money.

SIPPs also allow access to investment instruments that have a high potential for large profits. And large profits are a way of acquiring financial freedom, should they be realized.

Used as part of a wider financial plan and entered into with a clear and sensible strategy for investment, SIPPs make for a really interesting alternative to other personal pensions and one where there is no need to hand over control of assets.

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