SIPPs investments

So where can you invest with SIPPs?

The beauty of SIPPs (Self Invested Personal Pensions) is the variety and flexibility of investments:

Collective funds

These allow you to pool your SIPPs investment with other people's investments. A professional manager then manages the investment and you own a fixed proportion of the fund, irrespective of how it performs. The benefit of a collective fund is that with a larger pool of money the investments can be spread over a much wider range of holdings than an individual could realistically invest in, reducing the risk considerably. Collective funds include:

Unit trusts: You invest in units in a collective managed trust fund. A fund manager will typically charge you up to 5% of the investment, with an additional 1% annually.

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Investments trusts: As with unit trusts, although your SIPPs investment is pooled through a London Stock Exchange quoted company. As a shareholder, your investment may rise and fall in value, depending on the demand and supply of these shares, and the performance of the investment pool.

OEICs (open-ended investment companies): A bit of a hybrid. Like a unit trust, it is open-ended, but like an investment trust, it is structured as a company. The benefit of an OEIC is the far simpler pricing system.

Insurance company funds: These offer many of the same assets as the other collective funds.

Stocks and shares

SIPPs can be invested in stocks and shares around the world, although many investors choose to invest their SIPPs funds in companies listed on the London Stock exchange.

Gilts, or gilt-edged stock, are issued by the government to help fund its spending. They are also known as government bonds. People who invest in gilts then receive fixed-interest percentage payments twice a year - interest paid at a set rate.

SIPPs investors can also put their money into bonds issued by other governments and even companies such as building societies.

Also relevant for the SIPPs investor are CFDs (contacts for differences), futures and options.

Cash savings can also be invested in SIPPs, as well as traded endowments, with-profits savings policies and commercial property, one of the more popular investments for SIPPs savers.