PimCo Trustees has introduced a self-invested personal pension plan (Sipp) that is aimed at the sophisticated end of the market.
The essential Sipp is a full Sipp that has a set-up fee of £425 and an annual fee of £375. Investors can choose any type of investment that the Inland Revenue allows to be held in a Sipp. Examples include stocks and shares, unit trusts, investment trusts, open-ended investment companies, futures and options and commercial property.
The essential Sipp does not restrict investment choice by specifying any fund links of fund management groups the way some full Sipps, such as the Jupiter Sipp, do. The Jupiter Sipp enables investors to choose their investments only when they have invested at least £10,000 in Jupiter funds. But it does have a lower set-up charge of £150 and a lower annual charge of £250 compared to the Pimco Sipp.
An interesting feature of the essential Sipp is that a mortgage can be taken out under the Sipp for investment into commercial property - a facility which is not available under the Jupiter Sipp. There are two other full Sipps that offer this facility - the Jardine Lloyd Thompson's Sipp and the Smith & Williamson Investment management Sipp fund.
The maximum loan is higher at 75 per cent of valuation with the PimCo Sipp compared to a maximum of 70 per cent of valuation with the Smith & Williamson Sipp.
Rental income through the subsequent letting of the property would ideally cover the mortgage repayments. The value of the pension fund would be boosted if the property was to rise in value.
However, investing in property is not without risks and the mortgage would still need to be paid from the pension fund during periods when the property is empty.