Other Pension Investments Options

Set up a Cash Deposit Account

If you are transferring funds from several pension investments or waiting to purchase property, a cash deposit account is an excellent way of earning interest without tax being deducted or taking any risk. In times of stock market volatility it can also prove to be a safe haven for your pension funds.

As an investment, cash can be 'king' and can be a low risk complement to bonds and shares.

Each SIPP has its own bank account. The account is used to pay for the expenses of running the SIPP, making investments, collecting investment income and making mortgage payments (where applicable).

Investing in Bonds

Corporate bonds and Gilts provide a fixed interest payment and are therefore ideal when planning for income. As investments they provide a lower risk complement to an investment in shares.

You can invest your pension by directly investing in bonds or buying a collective investment fund where your money is pooled together and managed by an investment company. Collective investments can help to diversify the risk by holding many different investments, but performance may also be diluted.

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Equities for Long-Term Growth

For many years equities have been the main investment holding of pension funds. Equities have long been recognised as the primary source of real long-term growth - that is, growth above inflation.

A SIPP will give you the opportunity to trade shares in your own account, buy collective investment funds or employ discretionary managers to manage your portfolio. You may choose any combination of the above or indeed avoid equities all together.

You can trade in any stocks and shares listed or deal on any Inland Revenue recognised stock exchange (this includes AIM but excludes OFEX).

Making the Most of Investment Opportunities with your personal pensions and occupational pensions

Many personal pensions and money purchase occupational pensions are shackled to a narrow range of mediocre investment funds. By using a SIPP you can break free of pension provider funds and access the best unit and investment trust managers, as well as individuals stocks and, post A Day, residential property and collectibles. Careful investment selection within a SIPP can enhance your investment prospects versus the more traditional approach of holding funds offered by your pension provider.

Diversity and Asset Allocation

The performance of different asset types and markets can vary markedly over time, often with little correlation between each other. Spreading your pension across a range of asset types and markets can protect you from risk.

Beware Market Timing

Trying to predict short-term market movement is a dangerous game. In the 10 years up to the end of 2004 the FTSE 100 index overall produced a capital return of +23%, but if you had missed the 10 best days in that period then you would have incurred an overall loss of 24%.

Investment Management

How well your pension fund is managed could have the single biggest impact on your quality of life in retirement. Although a SIPP gives you access to higher quality investments, the benefits will be lost without careful investment choice and asset allocation.