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What to consider when building your SIPP
A Self-Invested Personal Pension (SIPP) allows you to build your own pension, your way. It offers you the control to pick investments that suit your own pension objectives.
However, selecting the right investments for your SIPP requires careful consideration. We can’t offer advice but here are some key factors to keep in mind when you are choosing.
1. Investment Goals
Define Your Goals
Are you looking for growth, income, or a combination of both? The answer to this may change dependent on the stage you’re at in your journey towards retirement. You can change the proportion of growth-focused and income-generating investments as your needs change.
What kind of retirement are you looking for?
Find out how much you might need for your retirement with our pension calculator.
2. Time Horizon
The length of time until you retire will influence your risk tolerance. Longer horizons can potentially allow a greater tolerance for risk. The longer you invest for the more time you have for your investments to ride out market fluctuations. Shorter horizons may need more conservative choices.
3. Risk Tolerance
Understand your comfort level with market fluctuations. Higher-risk investments can offer greater returns over the longer term but come with increased volatility. There are different ways you can mitigate investment risk, you can find out more in our risk explained article.
5. Our Full Range of Investment Types
We offer five broad asset types for you to choose from:
6. Investment shortlists to help selection
- Select List of funds
Selected by the experts at FE Fundinfo, the Select List provides a range of options, whether you’re looking for growth, income or both, you can choose funds to create the right balance for you. Mitigating your risk by choosing a specific fund type, be it funds made up of equities (shares) or bonds. You can also control your risk by targeting particular countries from developed or emerging markets. This list helps you find funds to suit your objectives and risk tolerance. - ETF Quicklist
We've worked with iShares by BlackRock to bring you a shortlist of Exchange-Traded Funds (ETFs) covering different countries and themes
7. SIPP Start-Up Fund
If you don’t know what to invest in, we also offer a Start-Up Fund. This is a target-dated fund (TDF) provided by BlackRock. Your money is invested into a mix of different types of stocks, bonds and other investments, targeting the year you plan to access your money
8. Holding Cash
You should consider how much cash you need to hold in your SIPP. This should be at least enough to cover account fees and any income requirements. Holding cash is also particularly useful if you want to secure your annual allowance before making investment decisions. Our SIPP offers interest on cash holdings during this period. You can find the current interest rates on our SIPP Explained page.
9. Combining your pension pots
Combining old pensions is another way to grow your pension pot. And could be more cost-effective and make managing your pensions easier. Find out more about combining your pensions here.
10. Regular and lump sum investing
- Automate your contributions to your SIPP with a Direct Debit and set up a Regular Investment Plan for the investments you’ve chosen. This can help you to keep discipline around regularly contributing to your pension. You can change this amount to suit your circumstances, increasing or reducing whenever you need to.
- You can also top up your SIPP with lump sums whenever you have extra money to contribute.
11. Charges
In addition to your SIPP administration charge, there are dealing charges for buying and selling investments (unless you are purchasing shares through a Regular Investment Plan or buying international investments).
You can find all our dealing charges detailed on our charges page.
If you invest in a fund or ETF, you may also incur ongoing charges and transaction costs paid to the fund manager, based on the value of your fund. These charges cover the management of the fund, including buying and selling the assets within it and are detailed on the Key Investor Information document for the individual fund. These fees are deducted from the fund's value.
For international shares, trades are in the share’s local currency, requiring a currency conversion. A foreign exchange charge will apply to those trades. They may also be subject to local taxes.
Visit our charges page for more detailed information.
12. Regularly Review
It’s a good idea to regularly review your pension and investment choices to make sure they align with your retirement goals. As your financial situation changes you may look to change your contributions and investment choices accordingly.
Are you on track? It’s also worth checking that you’re on track for the retirement you’d like using our Pension calculator. Find out how making changes to your contributions could make a difference to your overall pension pot. Plus, discover how changing your retirement date could impact how much money you have in the future.
13. What happens at retirement
There are several options for you to choose from when you reach retirement.
Take a look at our SIPP Retirement Guide (PDF, 303KB).
Conclusion
Selecting the right investments for your Self-Invested Personal Pension (SIPP) is essential for building a strong retirement portfolio. By considering your investment goals, time horizon, risk tolerance, and the importance of diversification, you can make informed decisions that align to the retirement you have in mind.
This article should not be considered as advice. It is provided to prompt thought into different aspects of investing for retirement.
Pensions are a long-term investment. The benefits you receive depend on a number of factors, including the value of your pension pot when you choose to claim any benefits. That value isn't guaranteed and can go down as well as up. It could fall below the amount paid in. Any tax treatment depends on your personal circumstances and may change in the future.
Planning for your retirement is an important step towards your future.
You get free help and guidance through Pension Wise. If you're over 50, you'll also benefit from a free 60-minute appointment.
If you’re not sure which option is right for you, we recommend you speak with a financial adviser. They'll charge you for this service. You can visit Unbiased or Vouched for to find a financial adviser near you.
Alternatively, our partners Schroders Personal Wealth could also help. Fees and charges may apply.
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SIPP explained
Find out more about Self-Invested Personal Pensions with Lloyds.
Your money is protected
Investments totalling up to £85,000 are protected by the Financial Services Compensation Scheme. This limit applies to the combined total of stocks or cash holdings in these brands that we administer.
This is in addition to any savings you hold across Lloyds Banking Group.
Important legal information
The Lloyds Bank Direct Investments Service is operated by Halifax Share Dealing Limited. Registered Office: Trinity Road, Halifax, West Yorkshire, HX1 2RG. Registered in England and Wales no. 3195646. Halifax Share Dealing Limited is authorised and regulated by the Financial Conduct Authority under registration number 183332. A Member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager.