SIPP investment ideas for your retirement

The investments in your pension can have a huge impact on the money you’ll end up with in retirement. With a self-invested personal pension (SIPP), this choice doesn’t just sit with a pension provider. Instead, you’ll have more freedom over where to put your money.  

You can invest in stocks and shares, bonds, commercial property, commodities or even art, depending on the provider. If this seems a little daunting, don’t worry. We’re here to break down your options, so you can find the right blend of SIPP investments and build a pension that suits you.  

It’s important to remember that pension investments can fall as well as rise and you may get back less than you’ve paid in. It’s also worth noting that different investments will come with different charges, and the investments available in a pension also will vary between providers.

One easy way to build your pension is to use ready-made groups of investments called funds. These funds are managed on behalf of investors, meaning you’re not relying on the performance of one or two investments; instead, things are spread across dozens. There’s a wide range of SIPP fund types available. Here are the main ones.

You can explore the full range of investment funds you can use with an Aviva SIPP here.

Equity Funds

These invest in company shares and have the potential for high long-term returns. The downside is that they’re high risk. Returns can be volatile as they’re linked to the ups and downs of the financial markets. Therefore, they’re not recommended for the bulk of your pension if you’re close to retirement age.

Bond Funds

Bonds are loans to companies or governments that pay interest over a fixed time. They tend to offer a more reliable return on your investment, making them a good option if you’re looking for something with less risk. The drawback is that returns can be lower than stocks and shares over the long term. They may also lose value if interest rates change.

Property funds

You can also invest in commercial property through a REIT (Real Estate Investment Trust), which generates returns based on buying, selling, and managing commercial or residential properties. These can be a good investment when property prices are rising, and the rent on properties can provide regular income from the fund.

Commodities funds

Rather than investing in companies, these funds trade raw materials like gold or oil. They have a similar level of risk as equities, as demand goes up and down based on the global market.

Multi-asset funds 

These use a mix of different investment types like equities and bonds, which can help manage risk across the fund by combining high-risk investments with safer ones.

There are also different ways you can invest in the fund types above. This changes how they’re run and affects things such as the charges you’ll pay.

Index or tracker funds

These funds aim to follow an industry benchmark like the FTSE 100 to deliver returns.

There are index tracker funds that invest in company shares and some that invest in bonds. They’re generally lower cost, so you’ll keep more of any gains but they are still subject to volatility and moves down in markets.

Actively managed funds 

These rely on a fund manager to choose the contents of the fund with the aim of getting high returns, but also come with higher charges.

Exchange-traded funds (ETFs) 

ETFs are bought and sold at any time markets are open, rather than once a day like investment funds. 

Income or accumulation funds

Funds can also be income-focused, where dividends are paid out to you regularly, or growth-focused, where they’re re-invested. 

If there are particular companies you’d like to invest in, a SIPP lets you buy and sell shares within your pension. Individual shares can have big gains if the company you invest in is successful. However, they also come with significant risks, as their value is affected by company performance, market conditions, and wider global events. Relying on a small number of companies means there’s a chance you could lose a large amount of your pension pot if they perform poorly.

Bonds and other fixed income investments can offer safer returns in a pension. They give you the opportunity to balance any riskier investments you may have. This could give you a buffer against poor stock market performance, but the trade-off is lower returns over the long term. It can be a good idea to have a higher percentage of bonds in your pension the closer you are to retirement, so some of its value is protected against things like stock market crashes.

With some SIPPs, it’s possible to buy commercial property like business premises, factories, offices or shops, without using a REIT. To do this, you use the money in your pension to buy the property outright, or you can borrow up to 50% of the value of your pension. You can also pool your money with other SIPP holders.

You’ll get the benefit of rental payments, which can provide a steady stream of income and any rise the value of the properties. Owning commercial property can be complicated though, with downsides like maintenance costs or unpaid rent. It can be harder to access your money quickly, as properties will need be to sold first, which can take months. Not every pension provider allows property investment, so you’ll need to check with yours.

Certain SIPPs might let you have the freedom to use a wide range of alternative investments. These can often be higher risk and may have less regulation which means there’s a chance of losing everything you’ve put in. Along with commodities, these include peer-to-peer lending, art, hedge funds, private equity and even funding infrastructure projects. This kind of investing isn’t for beginners, you’ll need to know exactly what you’re getting into and be ready for losses. Again, which investments you can add to your pension will depend on your provider.

A pension is meant to be a long-term investment and if you start young, you could be saving into one for over 40 years. Managing your risk over that time can make a big difference to the size of your final pension pot. 

When you’re looking for SIPP investment ideas, it’s important to bear this in mind. By spreading your pension over different types of investments with varying risk levels, you can aim to weather any downturns by having some stable performers in your mix.

The blend of investments should also reflect how long you have until retirement. Earlier in life, you can afford to be more adventurous, as you’ll have longer to make up for any losses. Closer to retirement, you’ll want safer investments to preserve the value of your pension pot. Having some cash investments in your pension may also be a good idea, so you have any urgent expenses covered.

Over the years, it’s important to check your SIPP investments based on your financial goals and how far you are from retirement. 

Be prepared to rebalance your investments, by selling some assets and buying others so you aren’t exposed to too much risk. As you near retirement, you may want to shift from growth-focused investments like equities to bonds or cash.

Many providers offer Self-Invested Personal Pensions (SIPPs) with funds that automatically adjust the balance of your investments as you approach retirement. At Aviva, our SIPP includes the Universal Retirement Fund, which provides this feature.

You should also keep an eye on things like changing market trends and tax rules, as they can affect the value of your pension or how you can take it. For example, the minimum pension age for withdrawals is increasing from 55 to 57 from April 2028. 

It is recommended to speak to a financial adviser to make sure you’re on the right track with your retirement plans. If you don’t have one already, you can find one at Unbiased – there may be a charge for advice, but there are often a number of ways to pay.