There are numerous reasons why we fail to save, from a lack of disposable income to gaps in knowledge that prevent us from appreciating the true value of building wealth.
Sadly, there is also a tendency to blame personal and economic circumstances for the failure to save, and while these may be contributing factors we must take individual responsibility for our financial future overall.
This is where pension plans come into play, as they provide a simple and economic vehicle through which to build wealth for your future. They also come in numerous different guises, with SIPPs (self-invested personal pensions) increasingly popular in the UK and capable of delivering financial flexibility and freedom once you have retired.
The core benefits of a SIPP: taking control of your financial destiny.
With this in mind, let’s drill down deeper into the concept of a SIPP and understand its primary benefits.
1. Choose your own Investments
The main advantage of a SIPP is that it offers you access to a huge and diverse range of investment markets, which in turn enables you to create a portfolio that reflects your outlook and appetite for risk as an investors.
Companies like Bestinvest have ensured that the current generation of savers have access a large selection of investment opportunities, which they can manage independently through their SIPP and optimise their earnings over time.
A SIPP also enables you to consolidate all individual pension pots in a single space, making the task of building wealth easier than ever.
2. Access huge tax benefits
As with other pension types, SIPPs offer considerable tax benefits to those who are savvy enough to capitalise on them.
As a general rule, every £8,000 that you pay in to your SIPP triggers a government contribution of £2,000, while those on a higher tax rate can claim even greater tax relief.
Even if you’re not earning, you can contribute up to £2,880 net each year while also claiming tax relief, which underlines the accessibility of a typical SIPP and it has the potential to help you make the most of your hard-earned income.
3. Enjoy flexible returns and use your Pension fund as you see fit
While traditional pension plans are relatively rigid in terms of when and how you can access your funds, SIPPs offer far greater degrees of flexibility to clients.
You can usually access your pension fund from the age of 55, for example, while you also have the choice of determining how you can use the total amount accrued.
This is alongside traditional pension features such as being able to purchase an annuity or the ability to access 25% of your total fund as a tax free lump sum. This sense of flexibility can empower you to get the most from your savings.