Navigating the world of Self-Invested Personal Pensions (SIPPs) can be a bit daunting, so creating a good SIPP investment strategy is key to having peace of mind that your investments are well-positioned for retirement.

What should I invest my SIPP in?

First things first, there’s no one-size-fits-all answer.

It’s important to consider your personal financial goals, risk tolerance, and investment timeline.

That said, here are some popular investment options for SIPPs, with a brief explanation of each:

Stocks and shares

When you buy shares of a company, you’re essentially purchasing a small piece of ownership in that company.

Stocks can provide capital appreciation and dividend income. Individual stocks are higher risk than funds, that spread your investments across lots of companies, so keep that in mind.

Bonds and gilts

Bonds are fixed-income investments issued by governments, corporations, and other entities. Gilts are bonds issued by the UK government.

They’re essentially loans to a government or corporation that you earn interest on, and you get typically your capital back at maturity. These are lower risk investments.

Mutual funds

These are pooled investment vehicles that collect money from multiple investors and use the funds to purchase a diversified portfolio of assets.

Mutual funds can be actively or passively managed and come in various types.

They usually invest in a particular sector or region, so investing in multiple funds is a good way to diversify your portfolio.

Investment trusts

These are publicly listed companies that invest in a diversified portfolio of assets.

They’re similar to managed funds, but they have a fixed number of shares which are bought and sold on a stock exchange.

Exchange-Traded Funds (ETFs)

ETFs are investment funds that trade like stocks on a stock exchange.

They typically track an index, a commodity, or a basket of assets and provide diversification at a lower cost compared to mutual funds.

As they’re not managed, costs are lower than investment trusts and mutual funds, but there is no manual selection from a professional fund manager.


Investing in property can be done directly (buying a physical property) or indirectly (investing in Real Estate Investment Trusts (REITs) or property funds). Property investments can provide rental income and potential capital gains.

Ready-made portfolios

Ready-made portfolios are created and managed by professionals with the goal of providing a diversified and balanced investment portfolio based on your risk level.

They’re a great solution for less confident investors who want a portfolio made for them. They’re cheaper than getting financial advice, and you still benefit from expert portfolio management – although the costs are higher than choosing your own investments.

You can also get managed SIPP portfolios which are similar, but benefit from active management that’s tailored to your risk profile – they’re also more expensive.

Here’s a table with some pros and cons of each investment:

Investment TypeWhat is it?ProsCons
Stocks and SharesOwnership in individual companiesPotential for high returns, growthRisk of losing money, market ups and downs
FundsCollection of stocks, bonds, or other investmentsSpreads risk, professional managementFees, performance depends on fund manager
Investment TrustsClosed-ended funds that invest in various assetsSpreads risk, potential for income/growthFees, price can be above or below asset value
ETFs and Index FundsFunds that track a market indexLow fees, spreads risk, easy to buy/sellTied to overall market performance
Ready-made SIPP PortfoliosPre-selected mix of investments for your SIPPEasy to start, diversified, low effortLess control, performance depends on selection
Managed SIPP PortfoliosInvestments chosen by a professional managerExpert management, tailored to your goalsHigher fees, depends on manager’s performance
PropertyReal estate investments, e.g., commercial propertySpreads risk, potential income, inflation hedgeLess liquidity, tied to property market

What’s a good investment strategy for my SIPP?

A sound SIPP investment strategy will typically involve:

  1. Setting clear financial goals
  2. Diversifying your investments
  3. Regularly reviewing your portfolio
  4. Managing risk
  5. Rebalancing your portfolio

Let’s break these down:

Setting clear financial goals

Figure out what you want to achieve with your SIPP.

Are you aiming for long-term growth, or do you want to protect what you’ve already built up? Or, a mixture of both?

Diversifying your investments

Don’t put all your eggs in one basket! Spreading your investments across different asset classes, sectors, and geographical regions can help reduce risk – it means if one company, sector, fund, or geographical region takes a dip, it won’t affect your total portfolio too negatively.

Regularly reviewing your portfolio

Keep an eye on your investments and make adjustments when needed. Life’s unpredictable, and your financial goals and risk tolerance might change over time. Regular reviews can help you stay on track.

Some people tend to have riskier investments when they’re younger and have more time for them to grow through any short periods of volatility while switching to safer investments when they get older and need to retain what they have.

Managing risk

To do this effectively, evaluate your risk tolerance and make sure your investments align with your risk profile.

You can complete a risk questionnaire to help you get an idea of how well you tolerate risk.

The result might involve choosing a mix of high-risk, high-reward investments and lower-risk, more stable assets.

Rebalancing your portfolio

Over time, your portfolio’s asset allocation may drift from your target due to market fluctuations.

Periodic rebalancing helps to realign your portfolio with your original asset allocation and risk tolerance.

It generally involves taking money out of your best-performing assets and moving them to the worst-performing ones, as they will be disproportionately weighted.

That might sound counter-intuitive, but remember, just because an asset has performed well previously doesn’t mean it will do in the future, and without rebalancing, you’ll be over-exposed to that one investment.

Should my SIPP be high or low risk?

It depends on your individual circumstances, such as your age, financial goals, and risk tolerance.

Generally, younger investors can afford to take on more risk, as they have more time to recover from market fluctuations. As you get closer to retirement, it’s usually a good idea to move towards a lower-risk portfolio to preserve your capital.

Here are some factors to consider when determining the risk level of your SIPP:

Age and time horizon

Younger investors with a longer time horizon can afford to take on more risk, while older investors nearing retirement should prioritize capital preservation.

Risk tolerance

Assess your personal risk tolerance, which depends on factors like your financial situation, investment knowledge, and emotional comfort with market fluctuations.

For example, if the thought of your investments falling in value makes you very anxious, you may want to choose a lower risk profile.

How do you diversify a SIPP?

Diversification is key to managing risk and ensuring your SIPP is resilient to market fluctuations. Here’s how you do it:

Invest in a mix of asset classes

Stocks, bonds, property, and other assets have different risk and return profiles. By including a variety of asset classes in your SIPP, you can create a more balanced portfolio.

Choose investments from different sectors and industries

Companies in different sectors and industries are affected by different economic factors.

Investing across various sectors can help protect your portfolio from industry-specific downturns.

Spread your investments across different geographical regions

Global markets can react differently to economic events.

By investing in assets from various regions, you can benefit from the growth of international markets and reduce the impact of local economic downturns.

By diversifying your SIPP, you’ll decrease the likelihood that a single underperforming investment will significantly impact your portfolio.

Should I make my SIPP lower risk as I get older?

Generally, yes. As you approach retirement, it’s wise to shift your portfolio towards lower-risk investments to protect your capital.

You might want to consider moving from high-growth assets, like stocks, to more stable options, such as bonds.

Here are some strategies to help you lower the risk of your SIPP as you get older:

Adopt a more conservative asset allocation

Gradually reduce your exposure to riskier assets like stocks and increase your allocation to more stable assets like bonds, cash, or annuities, or lower risk managed funds.

Ladder your bond investments

You can create a bond ladder by purchasing bonds with varying maturities. This approach can help you manage interest rate risk and provide a steady income stream in retirement. If you’re unsure how to do this, a financial adviser might be able to help.

Consider target-date funds

These are mutual funds that automatically adjust their asset allocation based on your target retirement date. As the target date approaches, the fund’s allocation becomes more conservative to protect your capital.

Reassess your risk tolerance

As you get older, your risk tolerance might change. Regularly reassessing your risk tolerance can help you make adjustments to your SIPP portfolio accordingly.

How do I know how much I need to retire?

It’s a common question, and the answer varies depending on your lifestyle, life expectancy, and financial goals.

A common rule of thumb is to aim for a retirement income of around 70% of your pre-retirement salary.

To work out how much you need to save, consider the following steps:

Estimate your annual retirement expenses

Calculate your anticipated living expenses during retirement, including housing, healthcare, travel, and hobbies.

Factor in other income sources

Consider any other income you’ll receive during retirement, such as state pensions, rental income, or part-time work.

Determine your desired retirement income

Subtract your other income sources from your estimated retirement expenses to calculate the income you’ll need from your SIPP and other savings.

Calculate your required retirement savings

Use an online retirement calculator to estimate the amount you need to save to generate your desired retirement income, considering factors like inflation, investment returns, and life expectancy (although that last one can be tricky!).

Set savings goals

Based on your required retirement savings, set annual savings goals and adjust your SIPP contributions accordingly.

It’s essential to review these calculations regularly, as your circumstances and goals might change over time.

What are the risks of SIPPs?

Like any investment, SIPPs come with risks. Here are some common risks associated with SIPPs:

Investment risk

The value of your investments can go up or down, and there’s no guarantee that you’ll achieve your desired returns.

Inflation risk

Inflation can erode the purchasing power of your savings over time, making it crucial to invest in assets that can outpace inflation.

Interest rate risk 

Changes in interest rates can affect the value of bonds and other interest-sensitive investments in your SIPP.

Currency risk

If you’re investing in assets denominated in foreign currencies, fluctuations in exchange rates can impact your investment returns.

Liquidity risk

Some investments, such as property or alternative assets, can be challenging to sell quickly at a fair price, which could impact your ability to access your funds when needed.

The Bottom Line…

Remember, there’s no one-size-fits-all solution, so it’s essential to consider your unique circumstances when making investment decisions.

If you’re unsure about anything, don’t hesitate to seek professional guidance to help you navigate the world of SIPPs and retirement planning.

Make sure to diversify your investments and adjust your portfolio as you approach retirement.

What is a SIPP (Self-Invested Personal Pension)?

A SIPP is a type of personal pension plan that allows you to make your own investment decisions from a wide range of investment options.

SIPPs provide greater control and flexibility compared to standard pensions.

How do I create an effective SIPP investment strategy?

Creating an effective SIPP investment strategy involves several key steps:
– Assess your risk tolerance
– Diversify your investments
– Review and adjust regularly
– Consider professional advice

Can I hold property within a SIPP?

Yes, you can hold commercial property within a SIPP, such as offices, warehouses, or retail units.

This can provide a source of rental income and potential capital growth for your pension portfolio.

However, property is slow to sell, can be expensive to invest in, and you also have maintenance costs and potential periods of vacancy.

Note that residential property cannot be held directly within a SIPP.

What are the tax benefits of investing in a SIPP?

SIPPs offer several tax benefits, including:
– Tax relief on contributions
– Tax-free growth
– Tax-free lump sum (you can withdraw up to 25% of your SIPP as a tax-free lump sum)
– Flexible income options

Are there any restrictions or limits on SIPP investments?

While SIPPs offer a wide range of investment options, there are some restrictions and limits:

– Annual contribution limits: The maximum amount you can contribute to a SIPP (and receive tax relief) is limited to 100% of your annual earnings or £60,000 (whichever is lower) for the tax year.

– Higher responsibility for making your own investment decisions – this can be higher-risk. Consult a financial adviser or pension expert to ensure you’re fully informed about SIPP investment strategies and any relevant restrictions or limits specific to you.