I am interested in starting a self-managed pension/investment fund and am interested to hear some views on how to go about it.

There seem to be many ways of going about this. Either going for a SIPP, a share dealing account or a maxi/share ISA. I'm not sure whether these are completely separate types of account or whether each one incorporates some benefits of the others e.g. is the dividend return on shares in a share dealing account tax free? Also, I have heard that there are lots of extra fees associated with SIPPs - is this true?

I really welcome any views on the best ways of going about this. I only really got interested in it after Dr Bubb mentioned it on a thread in the main hous price forum and it sounds like a good idea.

A share dealing account, is just like a bank account, but which can hold shares as well as cash. These are often low-cost products, with minimal fees, they offer no protection from the taxman. If you buy shares, and they pay a dividend, the company pays tax on the dividend, and you (if a higher rate tax payer) pay an additional tax to take it up to 40%. If you buy shares, and sell them for a profit, they are potentially taxable under capital gains tax.

An maxi ISA is an account into which you can put various types of equity. These accounts are often more restricted than a simple share dealing account, and may also require payment of modest management and annual fees. However, they are shelted from the taxman. You can pay in up to £7k per year, but once it's in the account, there is no tax to pay - no income tax, no CGT. If dividends are reinvested, then they are done so tax free. Some banks offer 'self select ISAs'. In these, you choose what equities to invest in. Some stockbrokers will allow you to manage a self-select ISA in the same way as a normal share dealing account.

A SIPP is basically like a self-select ISA, but it's a pension. You choose the equities, and they are protected from tax. Again, there are higher fees (but like the ISA, they will be small compared to the tax savings). In the case of the SIPP, you get even more tax benefits than an ISA, because investments are made income-tax free. If you pay higher rate tax, if you want to invest £600 in an ISA, then you have to earn £1000. In the case of a SIPP, if you want to invest £600 you have to earn £600. Additionally, you can invest a max of £225k per year, up to £1.6 million - which means you can build up a much larger fund than you ever could with an ISA. The other catch, is that because it is a pension, 75% of the investment must be taken as an annuity, and not as a lump sum. Again, because a SIPP involves self-trading of equities (like the s-s ISA), online stockbrokers may allow you to manage the account in the same way as a standard account (subject to its limitations).

I've opened a SIPP with Hargreaves Lansdown. They're cheap, and have excellent customer support. The new website is pretty nice as well. I haven't actually invested my SIPP money yet, I transferred a closed pension from my previous employer as cash and I'm waiting for some hefty stockmarket falls before I invest (30 years 'till I retire, so there's no rush!)

I transferred pension money in, so I had to put it in a SIPP. But if I had taxed income to invest I think I would put it in an ISA instead, as it's untaxed in retirement and you can do what you like with it. This would only work if you were good with money though, and could resist spending it.

Hargreaves Lansdown are a good choice. I have all three kinds of fund with them - SIPP, ISA and fund/share dealing account. Charges are low and service is friendly and personable whether I choose to deal online or by phone. I've just opened an HL SIPP pension fund for each of my sons too, to help them get the habit early in their working lives.

I used to have an additional fund with Fidelity but have recently transfered it to HL for simplicity of online checking (plus the fact that Fidelity don't have a cash holding facility, which is vital I think when trading through shares in an ISA).

Thanks for the advice.

What are you able to put into a SIPP? Are you able to track indexes as a whole (eg FTSE) or do you have to select specific shares to put into it?

Anything that the SIPP provider covers and probably some other stuff too (not residential property except as part of a pooled investment though). I'll give Hargreaves Lansdown a recommendation too - using them you can put just about any UK unit trust or investment trust in there (e.g. a FTSE tracker if that's what you're after) or individual shares that you pick yourself (you could pick a FTSE tracking ETF for an even cheaper way of tracking the index).

yeah im about to open ISA and SIPP

even if you sit on cash for a while till you are ready to make decisions you get a 5%+ return

Seems ideal for me - being a high rate tax payer