It’s A Fact - No SIPP Has Ever Performed Badly!
Before you rush out and buy a SIPP, safe in the knowledge there’s never, ever been a poorly performing one, just stop and think about this for a moment or two
Have you ever heard a friend or relative or work colleague say “don’t put your money into pensions, mine’s done terribly” or “pensions are a total waste of time”, or words to that effect? It’s a common complaint levied by people with all sorts of pensions.
But guess what. They’re all wrong.
It’s not just SIPPs that have never performed badly. It’s every type of pension, including personal pensions and stakeholder pensions too. Despite the bad publicity, and let’s face it, even Max Clifford would have his work cut out persuading us pensions are a great investment, not one of them has ever delivered a poor return.
Confused? Well don’t be.
You see, a pension isn’t a product. And if it isn’t a product, it can’t have performed badly. A pension is simply a tax wrapper. A clever piece of legal documentation that allows you to claim tax relief on money you put inside the tax wrapper. And once your money is safe and sound inside, it pretty much grows free of all tax too, hidden away from the ravenous clutches of the tax man.
This tax wrapper isn’t an investment. So it can’t have performed badly. It’s what you do with the money inside the tax wrapper that matters. And that’s a whole different ball game.
One of the big reasons people up and down the land have become disillusioned with pensions is because the investments they've selected within their tax wrappers have not always done well. Quite frankly, some have done appallingly. And some investments have completely gone up in smoke, as a consequence of many business failures of recent years.
Those who suffered the most are arguably the millions who put their money into ‘With Profits’ investment. 'With Profits'? That’s turned out to be a very black joke. At the beginning of this century, when the financial institutions struggled to make the massive profits they pocketed during the nineties, they simply stopped paying bonuses. Money stagnated for years, being devalued by inflation. Some people lost fortunes in collapses like Equitable Life. And to add insult to injury, if you decided you wanted to put a stop to the rot and move your money into a different investment, they hit you again with a ‘market value adjustment factor’. Basically, a penalty, because they got it wrong with your money.
Whilst the financial institutions’ failures are an easy target, actually, you need to look closer to home.
If you’ve ever complained about your pension, then arguably, you’re partly to blame too.
The fact is millions of people blindly entrusted their money to big financial institutions, effectively giving them the right to do as they wished with the money. And all these people did a couple of times a year was look at their pension statements and moan. Incredbly, hardly anyone took control of the money within their tax wrapper and when they stop work, they will definitely pay the price for their complacency.
Thankfully, the world has changed. The 2008 financial crisis saw to that. It focused our attention on the greedy bankers. And those hugely profitable insurance companies, all of which had been coining it for years and years and years. As a result, many more people are now taking control of their money in every part of their lives.
Hundreds of millions of pounds are being lent from person to person, through organisations like Zopa, Funding Circle and Rebuilding Society. Cutting out banks and sharing the spoils that banks used to regard as their own.
When it comes to pensions, people have realised that having control of the money inside their tax wrappers is vital. Whilst £100 billion has been invested in SIPPs, people are slowly waking up to the fact that ‘self-investment’ is so much more than leaving the money on the stockmarket, where it often languishes in the funds of those same financial institutions who have their own agendas. Suffering the bumpy ride of the world’s stockmarkets and average paltry returns of under 5% for all that worry.
SIPPclub members lend the money in their SIPPs directly to property professionals and business owners. Securing returns of 10% or more, and often with less risk than stockmarket investment.
It’s all points to one simple question.
Who’s better placed to make decisions about your money than you?
It’s certainly not a faceless fund manager, focused on their bonus payment, rather than your specific aims. And it’s for this reason that the SIPP market has mushroomed in recent years, with tens of billions now effectively directly controlled by the owners of those valuable tax wrappers.
So stop blaming poor performing pensions. They are not the culprits. It’s the poor choice of investments within the pensions where the problem lies.
If you really want to make a difference to your financial future, take control of the money within your tax wrapper. If you haven’t yet got one, consider creating a SIPP by combining the money in your former company pensions, your individual pensions and new contributions. Then select investments for your SIPP that interest you, and that’ll provide you with the prospect of a decent income when you decide to hang up your boots and retire.
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AJ Bell Is Often The Best Value SIPP For Stockmarket Assets
Over time, charges can wipe out a huge part of your fund. We like AJ Bell because there are no set-up costs. If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund. And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment). However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.
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As SIPPclub neither advises on, nor arranges, nor recommends specific investments or strategies, we're unable to say whether a SIPP or SSAS or any investment within it is right for you. Ultimately, it’s your money and your decision, and you should only proceed once you're satisfied you've undertaken sufficient due diligence. If you need advice, you should speak to your trusted adviser, or you could find a local adviser from Unbiased.co.uk. Alternatively, we'd be pleased to introduce to a suitably qualified independent financial adviser.
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