Many of us are feeling the pinch due to the ongoing credit crunch. Now a government rule change could give savers a glimmer of hope.
Plans to free up to £50 billion worth of pension money could spell good news for savers who have arranged their finances into private pensions and life insurance policies.
From October, savers will have the opportunity to transfer final-salary pensions into what are known as SIPP schemes (Self-invested personal pension), rather than having to be held in life insurance policies.
SIPP schemes allow the opportunity to store assets in a variety of forms – from stocks and shares to investment trusts – which until now were not freely available due to legislation known as ‘protected rights’.
Protected rights meant that final-salary schemes were stored in pension funds run by life insurance providers. However, the new changes will allow savers the chance to pick and choose between the many different financial services available.
There are three terms used in the financial industry to describe types of SIPP:
- Deferred – this scheme involves holding pension assets in insured funds (rather like pension plans with built in SIPPs) with the option of freeing up some of your finances at a later date
- Hybrid – a scheme which allows a sort of ‘half-and-half’ option, in which some assets must be held in insured pension funds, with the decision of where to put the rest resting with the policyholder – allowing for a level of ‘self-investment’ into a range of plans.
- Pure – offers unrestricted access to a range of investment classes.
SIPP schemes are not ideal for all situations though, and it’s best to do some research before committing to a plan or switching your policy, for the future of your funds could be on the line if it goes pear-shaped.
The ongoing credit crunch has led to uncertainty in the financial world, and making the right decision is paramount when it comes to your finances. It is advisable to seek assistance from a financial advisor in order to ensure that your decisions are the right ones.
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