Sunday, February 16, 2020

Going For Growth With A SIPP

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Younger SIPP pension investors looking for value for money should consider opting for shares that offer attractive yields or have a track record of significant growth, urges an investment expert.

SIPPs are ideal for investors who want to take control by managing their retirement money, says Graham Spooner, investment research analyst at The Share Centre.

Tax tops on contributions and no capital gains tax on fund growth make them an ideal wrapper for holding stocks and shares.

“Savers who wish to build a bigger nest egg have a number of options. For those that want to combine the tax advantages of a pension while also being able to select their own investments, a Self-Invested Personal Pension, or ‘SIPP’, could be a suitable option,” said Spooner.

Attractive yields

“This type of pension account allows investors to take control of their retirement pot in order to help maximise returns and cut costs.

“A wide range of investments can be added to a SIPP, including individual company shares, unit trusts, investment trusts, exchange traded funds, gilts and corporate bonds, commercial property and cash. With such a big selection, choosing investments can be a daunting task.

“When considering investments for a pension, it is important to consider the time frame that you are investing over. Naturally, with this type of account, we can assume that most will be investing over the longer term.

“With this in mind, it is of my opinion that opting for investments that have attractive yields or track record of dividend growth could comfort longer term investors that they are getting value for money.”

Some shares to look for

Spooner highlights four shares for SIPP investors to look at:

  • Pharmaceutical giant GlaxoSmithKline – and average 4.8% dividend yield and a commitment to increasing dividends and buying back shares makes this share attractive
  • National Grid, the electricity and gas network operator, pays consistent dividends that grow in line with inflation with a yield of 4.5%
  • Unilever makes many household brands worldwide and plans to increase returns to shareholders. Dividend yields are around 3.2%
  • City of London Investment Trust has a 50-year track record of dividend growth with expectations of 4% – 5% yields
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