15

OCT
2018

A wisely-invested SIPP could grow your pension pot more than a normal pension could

This blog was published on 08/07/18 and does not constitute advice,  nor should it be seen as a personal recommendation from Societe Generale.  Information quoted within may be out of date at the time of your reading this blog.

Retirement planning is an increasingly important focus for many of us

And sophisticated investors, often used to running their own business and managing their finances, want the same control over their pensions.


When investors turn their backs on some traditional pensions that may not have performed as well as they would have liked, they look to take matters into their own hands and decide where our pensions are invested, and a SIPP provides such an opportunity, as a type of personal pension, where the rules on how you can contribute and take your pension are no different.


One of the attractions of a SIPP is that it facilitates investment across a whole spectrum of investment opportunities

Including some which you may not have considered to be part of your pension plan, providing additional flexibility or investment choice. This includes the ability to gain leveraged exposure within your SIPP, helping to make your money work harder for you.


For some, this may be a surprise, as Spreadbets are not allowable in a SIPP, nor an ISA, and whilst CFDs are eligible (although not in an ISA), not all SIPP managers will support them - and you would need to look at applying features such as guaranteed stops that come at a price, something that doesn’t sit well with most professional traders who are always looking to keep their trading costs down. 


However SIPPs support the use of warrants and short and long leveraged Exchange traded products, giving savvy investors the ability to gain leverage and invest in more tactical investment solutions. 


The benefits here are two way, not only does the ETP get tax relief (there is also no income on dividends or capital gains tax inside a SIPP and ETPs don’t pay any stamp duty, unlike some other products), but with both warrants and short and long leveraged Exchange traded products, you cannot lose more than you invest.  


This latter part is a key point to consider, because whilst many investors will have their sights set on maximising their pension pot, you've also got to be comfortable with the risks you are taking, and this is never truer than with your pension, especially as older investors typically take on less risk.


Leveraged products typically work best during times of volatility (who said Brexit?) when markets can suddenly rise or fall

By using a long or short leverage ETP you can take advantage of these movements and maximise returns. It is - on a very small scale – effectively what hedge funds do through futures, but because long and short leverage ETPs traded on exchange, retail investors can have transparent and easy access.

 

The UK Self-Invested Personal Pension (SIPP) market is flourishing 

The market has grown significantly with an estimated one million people have a SIPP; there is no sign of demand slowing. Global Data’s latest report: ‘UK Self-Invested Personal Pensions 2018’ highlights that the UK SIPP market was worth £2.4bn and set to grow by £1.9bn yearly to 2020.


With over 2.8bn of short and leveraged exchange ETPs traded on the LSE in 2017, this asset class is a popular way to gain leverage, and with the tax free returns available within a SIPP, makes them a valuable tool to the sophisticated investor who wishes to take an alternative approach to their pension pot.

 

A SIPP is only for you if you are a sophisticated, seasoned investor and you really understand what you are doing. You've also got to be comfortable with the risks you are taking, so if in doubt, seek advice. 

 

For more information on Societe Generale’s range of SIPP eligible leveraged products, visit www.sgetp.co.uk   

Post by: Zak de Mariveles, Head of UK Exchange Traded Products


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Risk Warning: Short & Long Leveraged ETPs are suitable for sophisticated retail investors. Both gains and losses will be accelerated in comparison to a direct investment in the underlying asset.
 
Any statement in relation to tax, where made, is generic and non-exhaustive and is based on our understanding of the laws and practice in force as of the date of this document and is subject to any changes in law and practice and the interpretation and application thereof, which changes could be made with retroactive effect. Any such statement must not be construed as tax advice and must not be relied upon. The tax treatment of investments will, amongst other things, depend on an individual's circumstances. Investors must consult with an appropriate professional tax adviser to ascertain for themselves the taxation consequences of acquiring, holding and / or disposing of any investments mentioned in this news.