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  • Michael DiBartolomeo

Can I Take My Pension and Invest It Myself?

A pension is a common financial tool people use to save money for the future. There are many ways to manage pension funds, but most people opt for hiring a pension manager or letting their company handle everything (in the case of workplace pensions).

However, there’s a third option that some people aren’t even aware exists, and that is taking their pension and investing it themselves. While investing pension funds by oneself may seem scary at first, it can provide much more control and flexibility over the person’s funds.

The following article covers how investors can take their pension funds and invest them themselves successfully.

What Is the Difference Between Workplace Pensions and Individual Pensions?

What Is the Difference Between Workplace Pensions and Individual Pensions?

In essence, people can get workplace pensions if the company has that policy. Here, the money the person earns will be invested automatically in an asset on their behalf.

Many workplace pensions allow the user to choose among different funds if they aren’t happy with the one the company chose for them. These pensions are easy to have since they don’t involve any action from the investor.

Those who want more control over how their pension funds are managed may go for an individual pension. Here, the investor works with a pension manager to find the right investment option.

It’s vital to note that having an individual pension allows the user to have control over everything. However, it also means they must be extra careful with their money if they don’t want to invest it all in riskier assets. It is important to determine and understand what is a realistic return on investment.

Working with a Self-Invested Personal Pension (SIPPs)

SIPPs are the most popular option for those people who want to manage their funds themselves and be able to choose from a wider range of funds. Here, the value of the person’s pension, once they retire, depends on how their investments perform over the years.

While this type of personal pension is meant for the person to control, they may also choose to appoint a money manager. Some of the most common asset choices for this personal pension include shares, stocks, policies, trusts, and other funds.

One of the best things about SIPPs is that the person may pay into it if they stop working or change jobs, which is something that other pension types don’t allow. Moreover, the investor may talk to their employer so that they contribute to their SIPP; this makes SIPPs a flexible option for most people.

Once the person opens the SIPP, they must choose what they want to invest in before doing anything else. Still, they may decide to make a single transaction right away or make frequent transactions.

Other than that, SIPPs work similarly to other pensions. The government is going to provide tax relief to the person’s contributions, the investor may ask their employer to make contributions, and the SIPP’s value may increase or decrease depending on how the investments perform.

Should People Use SIPPs?

It mostly depends on what the person’s goals are. As mentioned before, some people enjoy having a pension manager do everything for them, making SIPPs a bit useless for them. On the other hand, people who prefer having more control may benefit from this pension type.

Regardless of the reason why, people must know a bit about investments and the market so that they can manage their SIPPs responsibly. Alternatively, they may choose to work with a money manager or financial advisor so that they can make better decisions.

Types of SIPPs

There are slightly different SIPPs depending on what the person’s pension pot is. People who have a significant pot may go for a full SIPP, which comes with a wider range of assets to choose from. However, these SIPPs come with higher fees.

On the other hand, lite SIPPs have lower fees but don’t offer such a wide range of asset options. In the end, people may choose the option that fits their needs the best.

People need to choose investment assets according to their goals, financial circumstances, risk tolerance, and overall investment experience. That way, they can ensure safer outcomes for their money in the future.

Bottom Line

Generally speaking, yes, a person can take their pension and invest it themself. However, that process involves going for personal pensions, which are more challenging to manage.

The best way to go around this process is to contact a financial consultant in Pittsburgh PA or money manager to ensure the person is making the right investment choices in the long run. They can help with financial-related matters, such as helping you understand what is the new fiduciary rule and more.

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