Take a look at how Sipps work

These investment wrappers suit the self-employed and anyone keen to sidestep inheritance tax liability

If you have ever hetet an In. (individual savings account), you will probably understand the basic principles of a Self-invested personal pension).

Like an Isa. a Sipp is a wrapper for your investments and savings. While your money is in it, you get tax advantages. Like an Isa as long as your money stays in a Sipp you can pick a wide range of investments to hold in it. buying and selling them as you wish.

But unlike an Isa, the Investments In your Sipp are designed for use when you retire. At present, you can access your Sipp at 55. But while your access is restricted, you benefit from tax relief on your contributions, which can bump up your savings pot.

Basic and higher-rate taxpayers can put up to £40.000 a year into a Sipp and receive tax relief on the entire amount. Basic-rate taxpayers, who pay tax at 20pc, will have 20pc extra added Into their Sipp by the taxman; higher-rate taxpayers, who pay 40pc tax, will have 20pc added to their pension pot. They can claim the further 20pc cent of tax paid through a self-assessment tax return. This tax relief can make a huge difference to your retirement wealth, so these products are something that everyone should consider. Even if you have a work pension with contributions from your employer, it is unlikely to provide enough for you to retire on comfortably. A Sipp allows you to choose the funds and shares you invest in, and can also have lower fees than other types of pension.

For the self-employed, a Sipp is even more important. Without employer contributions, you must ensure your pension savings work as effectively as possible. Sipps also suit the new "part-time retirees" as even non-earners can contribute to a Sipp (up to £ 3,600 a year.)

These pensions are also outside the taxman's net for inheritance tax, so even if you do not touch your Sipp, it can be a very efficient way to pass money down to your children and beyond.

Moneyfarm is a wealth managing offering Isas as well as general investments. It provides restricted advice based on circumstances. Moneyfarm is authorised and regulated by the Financial conduct Authority no. 629539.