Are you planning to invest long-term? Before jumping right in, it is always recommended to have a good knowledge on the matter, because otherwise you would be risking your money. Making the right choices is the key for a good investment and for having safer returns. It is never late to start a long-term investment, either for after your retirement or for eventual future needs. There are different options available to be considered. This way you will understand what is right for you and what is your investor’s profile. A piece of advice: always have some funds in an emergency fund for any urgency you may have to face in the future. Aside that, it is advisable to find accounts that let you to have access to your money at all time. While making your research and reading through some materials, most likely you are going to find these two options, so let’s see the difference between SIPP and ISA.

What is a Self-Invested Personal Pension

SIPP is an acronym that stands for self-invested personal pension. It is a specific type of pension that let you to assume responsibility for your retirement savings. You can choose if investing in stocks and shares, UK government bonds, bonds issued by other governments), offshore funds, commercial properties, unit trusts, ETFs, and much more. This is a very valuable option since you will get a tax relief on contributions up to 100% of your annual income. It is applied up to a limit that for the current tax year 2021/2022 is £40,000. SIPPs are a modest, adaptable and direct method for putting some money aside for your retirement. It’s the perfect option for people who are willing to manage their funds for retirement. If you are one of them, or you are gathering information to become a wise investor, opening a SIPP might be a good choice. This way you will have control on your money and manage it your own way, or with the help of a financial advisor you choose. Self-invested personal pension will provide some benefits according to the sum paid up to that moment. It considers how long it has been invested, the returns and the charges applied.

What is a Lifetime ISA (LISA)

Lifetime ISA (LISA) is one of the types of Individual Savings Account existing. Ideally, it’s meant to be the option for adults (age 18-39) who are planning to have a retirement saving account or to buy the first house. Investing money in a Lifetime ISA has some benefits for the investors, that’s because LISA owners will receive an extra of the 25% of the deposits up to £4,000 from the UK government. On an annual basis if you deposit £4,000 you get £1,000. Of course, you can deposit more, but the bonus is calculated on this amount. Another advantage of this ISA is that withdrawals are tax-free. Although, there might be some penalties depending on the situation.

What is a Stocks and shares ISA

The other valuable option we go through is the stocks and shares ISA. It represents a tax-efficient way of investing your income and save your money at the same time. The investors can allocate their money choosing fonds, investment trusts, shares, stocks, investment funds and much more. This type of Individual Savings Account is recommended if you are willing to face the volatility of the markets and you have a more aggressive approach to investments. In fact, the money is at risk because the capital could grow as well as go down.

By Sumeet Manhas

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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