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Sipps: Vital statistics for a SIPP investor's IPS

Created:
5 March 2008
Written by:
Dominic Picarda

Your profile

• Your age and desired retirement date

• Your desired income in retirement

• The current size of your pension pot

• The necessary pension pot at retirement

• Your monthly contribution ability

• Preference between annuity purchase and income drawdown

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Objectives

1. Risk Tolerance

• Ability Determined by your existing levels of wealth and your stage of life. Risk-taking ability is positively related to the size of your net worth, and inversely related to your age.

• Willingness Determined by your emotional comfort levels with risk taking. Advisors should respect willingness ahead of ability.

2. Return requirement

• Determined by the current size of your pension pot and your ultimate target

• It is essential to consider inflation and take a total return approach here

Constraints

• Time horizons: the stages of your path to retirement. This could include periods of paying education costs, other major expenses, semi-retirement and so on.

• Liquidity requirements. Includes any current spending requirements that will affect your contributions, any large significant expenditures in the future.

• Taxation. Your current tax bracket and your expected bracket in retirement.

Unique circumstances

• Restrictions on holding certain investments on the grounds of personal beliefs.

• Likely developments that could affect your savings and wealth levels.

Assets outside of SIPP

• Your SIPP plan should take full account of your entire personal wealth.

• Other significant assets and liabilities outside of the SIPP should be considered. These might include ISAs, other pensions, your primary and secondary residences, assets held in trust.

• Next scheduled IPS review date.

MORE INVESTMENT GUIDES:

Click on the links below to read other articles written on Sipps:

Your designer pensions

Confessions of a Sipp investor

Dress your Sipp differently

High-definition returns

Gear up your Sipp

For more investment guides, see www.investorschronicle.co.uk/InvestmentGuides

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