A Self Invested Personal Pension (SIPP) is a scheme where you, and not the pension plan provider or trustees, determine the investment strategy. SIPP members are able to invest in any investments open to 'ordinary' personal pensions but may also be directed to a range of alternative investments such as stock market shares or commercial property.

In recent years there has been a vast increase in the number of people transferring an existing pension fund, or benefits from a salary-related pension scheme, to invest in overseas assets, such as overseas holiday accommodation, forestry and other alternative investments.

Some of these investments are unregulated and in addition, the 'adviser' may not be authorised by the Financial Conduct Authority (FCA), leaving little or no protection for the member of the SIPP if the unregulated investment defaults.

Pension Switches

The term 'pension switching' usually refers to a transfer from one personal pension to another (although it can also refer to transfers out of a 'money purchase' pension scheme provided by an employer).

You should note the term 'pension transfers' relates to transfers away from an employer-sponsored salary-related pension scheme. The two terms should not be confused.

A number of factors need to be taken into account in determining whether a pension switch is likely to be in the pension scheme member's best interests. The following 'tests' give an indication of the most important factors that might lead to a 'bad' pension switch:

Pension Transfers
The phrase pension transfer usually relates to a transfer out of an employer sponsored pension scheme.

The phrase pension switch usually relates to a transfer from one type of personal pension to another.

Salary-Related Pension
A salary-related pension is a scheme under which employee scheme members are promised a pension of a certain fraction of their final or career average salary for each year of service with the employer.

Transfers Out

Transferring your pension out of this type of arrangement, to an alternative pension scheme or plan, could potentially expose your pension fund to investment performance. In some cases, this could pose a higher risk to your retirement income.

This type of pension is not generally affected by investment performance; the member is promised a certain level of pension, at retirement.

If you were recommended to transfer out then sufficient information about the guaranteed benefits that will be given up, and the risks of any such transfer, should have been explained.

A transfer out might be in your best interests, but much will depend upon your individual personal circumstances, your attitude to accept risk and your ability to suffer loss.

A transfer may have been mis-sold if you were not properly informed of the consequences of the transfer and benefits you were giving up and if you did not know about, understand and accept the nature of the pension.

You may have also been mis-advised if there was never a possibility that better benefits could have been achieved from a different type of pension scheme when compared to the benefits being given up by transferring out of an employers pension scheme