The first thing I would like to mention is that trading your pension (as with any other type of investment) carries substantial risk. Professional financial advice should always be taken before considering such a step, especially when it involves retirement investments. This article is a reflection of my own experiences, and does not constitute a recommendation or advice, in any way.
With the advent of online trading, access to the financial markets has never been so diverse. Within minutes it is possible to setup an account a start trading almost any commodity, stock, or asset. With this flexibility comes an increasing desire for individuals to manage their own portfolio. Certainly all trading should start very small until a reliable system and risk management structure is in place.
It is now possible to trade your pension, not only by choosing your own funds to invest in, but also via day trading futures and CFD’s as you would with a regular trading account. This type of thing is often only for sophisticated investors and it is likely your pension administrator will require confirmation that you have significant experience in this are, before they will allow you to link the pension account with a broker.
One popular broker that will allow you to trade a SIPP is Interactive Brokers (IB). They are one of the largest brokers around, and have a good service for UK clients (as well as globally). They offer one of the cheapest solutions to get a SIPP up and running to trade through them. In my research I found their recommended SIPP administrators would have the setup fee, and then charge around £300 in annual management fees. This is a fairly competitive price for any SIPP, especially as it gives you the flexibility to trade via a broker like IB.
The assets that can be traded in a SIPP via IG include :
- Any share purchase on a recognisable exchange
- Options (requires a ‘sophisticated trader’ declaration)
- Futures (requires a ‘sophisticated trader’ declaration)
In my research I discovered that margin trading or CFD’ are not allowed via SIPP. This is a very sensible approach as the last thing anyone should be considering is trading their retirement funds on margin.
The benefits of trading a pension fund are clearly tax free growth, whilst inside the wrapper. As the money is not accessible until at least the age of 55, and then requires additional documentation to make withdrawals, it forces the trader to take a longer term investment approach. This may help reduce the big day-to-day risk taking that some traders fall into, when they are trading for an immediate income.
As it is a retirement fund, it is certainly only a proportion of your pension that should be involved. A good balanced pension will have investments of varying risks, with the overall average risk level being something you are comfortable with long term. So perhaps 10% of a pension fund (for example) could be self-trader, whilst the rest is left in the hands of professional investment funds.