02: SIPPs defined

A SIPP is a special form of personal pension which allows the pension scheme member to choose and control the investments within their pension plan. SIPPs are offered by most of the major insurance groups and a range of specialist providers.

The benefits that you can draw from a SIPP and the contributions that can be made are subject to exactly the same rules as an insured personal pension. The major difference between the two types of personal pension is that the SIPP has a much wider investment choice. If you were dissatisfied with the investment performance of the fund manager of a traditional insurance company personal pension policy, there was nothing much you could do except transfer to a new provider. With a SIPP you can simply switch funds – and fund managers – often at the click of a mouse.

Since October 2008 SIPPs have been able to receive transfers of protected rights or other contracted out benefits and/or be used to contract out of the State Second Pension (S2P). Not all SIPP providers offer these contracting out features, partly because personal pension contracting out is likely to disappear from 2012.Last Updated