DIY Pension Investing – Early Retirement Or Road To Ruin?

Passing Pension Onto Loved Ones

Thanks to technological advancements and the panoply of online stockbrokers available today, managing our own investments has never been easier. With just a few taps of a smartphone, we can choose to invest in virtually anything our minds can imagine. The advent of online stockbrokers and the products they provide means that many now offer their own pension solutions, typically in the form of a Self-Invested Personal Pension (SIPP).

What are the benefits of a Self-Invested Personal Pension?

A SIPP enables anybody to take control of their pension savings and invest it in a far broader array of investment opportunities in comparison to a typical Occupational or Workplace Scheme, whilst still receiving the same tax-efficient advantages that make pensions such a valuable tool for retirement planning. But does managing your own investments, especially within arguably the most important portion of your portfolio, lead to good long-term financial outcomes?

SIPPs, with their extensive investment options, can be a double-edged sword. Whilst the idea of steering your own investment ship is appealing, the reality is that financial markets can be turbulent and unpredictable. They are intricate ecosystems, and successful investing demands a nuanced understanding of various asset classes, global markets, and complex geo-political situations. It can be all too easy to be enticed by the promise of high returns without fully comprehending the inherent risks that come with managing one’s own investment portfolio.

Therefore, when it comes to saving for your retirement, having a definable long-term strategic plan with clearly definable future goals is essential. The choices made in managing your SIPP can have profound implications on your retirement. Inadequate risk management, poor investment decisions, and lack of diversification may lead to diminished returns which can potentially jeopardise your long-term financial security and ultimately lead to a lower quality of life in your twilight years.

Keep in mind the potential downsides of getting an investment strategy wrong, as it can, in the most extreme of cases, be disastrous. As happened with this investor, a lifetime of hard-earned savings can be lost, and in the frantic rush to recoup losses, even riskier investment decisions can be made.

Seeking the counsel of a seasoned financial planner is not a sign of weakness, but a prudent investment in one’s own financial future, and having an experienced guide by your side can make the crucial difference between achieving long-term financial success or not.

Additionally, a planner can guide you through the unseen factors that one may not fully grapple with, or even be aware of, when it comes to pensions. Tax reliefs and allowances are complex matters, and so too is the drawing of benefits from your pension. Many people who arrange the taking of income for themselves end up paying more tax than they need because, understandably, they do not have a full grasp on the mechanics of the UK’s complex Income Tax system.


Here at Nelsons, our financial planners have the expert knowledge to help whilst also adopting a holistic approach when it comes to assisting you in achieving your long-term financial aims, of which your pension is a cornerstone. They will consider all asset classes available in the market and select a strategy that sets you on the path to achieving your goals, but importantly, do so in a way that matches your inclination to investment risk, meaning that you are less likely to be discouraged by the nature of an invested asset’s performance characteristics.

Having the wrong investment strategy can have knock-on effects. Assets of a volatile nature can cause the value of a pension pot to rise and fall dramatically, causing worry for many investors. The net result of this is a build-up of stress and worry which may lead to pulling out of the market altogether, retreating to the perceived safety of cash-based investments. This can lead to a multitude of problems, the main one being an increased chance of their pension pots being eroded by inflation, the headwind that blows against us all on the journey to retirement.

Enlisting a professional planner will help to form a course of action that suits you and your circumstances, and importantly they will help to keep your long-term goals at the forefront of your mind, serving as motivation as you continue on the long and winding path to financial freedom.

How can we help?Self-Invested Personal Pension

Dan Freestone is a Paraplanner in our expert Investment Management team. Dan provides support to the team, researches products and funds and produces technical reports detailing our Advisers’ recommendations for clients.

If you would like to discuss the above subject in further detail, feel free to contact Dan or another member of the team in DerbyLeicester, or Nottingham on 0800 024 1976 or via our online form.

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Please note that the value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

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