Understanding the risks.

The main aim of any pension scheme is to provide you with an income during retirement. There are three areas in which your decisions will affect the benefits you are able to receive from your SIPP:

We have set out below the risks most closely associated with these three areas. When deciding whether a SIPP is right for you, you should also consider risk factors that are beyond your control, such as changes to tax laws, inflation, interest rates, annuity rates and charges, and the effect these may have on your pension plans. For further information see www.moneyadviceservice.org.uk/


Payments to the SIPP

By transferring benefits into your SIPP from another pension provider, you may give up the right to guarantees over the kind of benefits, the amount you will receive and the level of increases that will be applied to your pension in future. Your existing pension provider may apply a penalty, or other reduction in the value of your benefits, if it is transferred. There is no guarantee that you will be able to match the benefits that you give up by transferring into a SIPP.

If you are in any doubt about the benefit of transferring, we recommend that you take advice from a suitably qualified, professional adviser before arranging the transfer.

Your benefits will be affected by the level of contributions paid to your SIPP now and in the future. You may benefit less from investment growth if you delay the payment of contributions to your SIPP.

If you have a smaller SIPP, it’s important to be aware that administration fees may result in costs being disproportionate to the value of your SIPP.


Investments within the SIPP

Most experts will tell you not to keep all your eggs in one basket, this is good advice as it’ll help you to reduce your risk. You'll be able to deal in a range of investments each of which carries a different type and level of risk.

All investments involve a degree of risk. The value of the investments in your SIPP can fall as well as rise and you may not get back the full amount that you invested.

It's extremely important to fully research stocks using sites such as Halifax Marketwatch which gives trading news and recent trade values/amounts. Whilst research is important, do remember that past performance is no guarantee of future results.


Withdrawals from the SIPP

If you start to take benefits earlier than you originally intended, the level of the benefits you can take may be lower than expected and may not meet your needs in retirement.

Your SIPP may be subject to additional tax charges at the point you withdraw funds if your pension is valued at more than the Lifetime Allowance (the maximum amount you can build up in a SIPP without facing tax charges). If you take income withdrawals this may erode the capital value of your fund. If investment returns are poor and a high level of income is taken this will result in your SIPP falling in value and could result in a lower income than anticipated in the future.

If you choose an annuity to provide your benefits, the level of income you receive is based upon the average life expectancy of someone of your age. When fixing annuity rates, providers take into account the fact that some people will die earlier than expected, effectively subsidising those who live longer. Income withdrawals paid from the SIPP do not have the benefit of such a subsidy.

There is no guarantee that annuity rates will improve in the future. If you choose to purchase an annuity, the level of pension you receive when you purchase the annuity may be less or greater than the pension previously being paid under income withdrawal and/or the annuity you could have purchased previously.

Having considered these risks, if you have any doubts about the suitability of the Halifax Share Dealing SIPP or you need advice, you must seek advice from a suitably qualified professional adviser.

For more information about SIPPs, please read the Key Features Guide.