Article CFD SIPPS ? A Summary

T2W Bot

Staff member
1,459 60
The CFD market has expanded rapidly over the last few years and a number of innovative new products have resulted from the strong following that CFDs now have. One of those developments is CFD SIPPs. For those of you not familiar with SIPPs, they are Self Invested Personal Pension Plans which basically represent your pension fund, but instead of handing the management of those funds over to a pension fund company, you are able to manage it yourself. The range of investments available to you is very broad, including commercial property and of course stocks and shares. Recently the legislation has changed and you can now use CFDs as a means of trading equities within your SIPP. Now before I go any further, I hasten to add that I am not a pension adviser and you should always seek professional advice, especially before considering the use of a derivative instrument as part of your pension strategy.
The benefits of using CFDs in a SIPP are significant in that you have the ability to...
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freestyle

Junior member
21 0
Sippdeal is mentioned in the article. I have a Sipp with them (not CFD's). No complaints,
but it is important to factor in how much of a cut they take from the interest on your cash account with BOS when comparing costs with other Sipp providers.
 

Halzeigler99

Newbie
7 1
I regularly trade CFD's and spread bet financials but would not advise that one trades these high risk instruments with your pension funds. The difference between say owning your own commercial property or other property (which would be my first choice for SIPP funds) is that the investment property is a long term investment and can provide rental income etc if the property market turns down. CFD's need a high degree of continuous vigilence which in my experience most businessmen/women who have SIPPS do not have since they are too busy running their own business. Of course, if their business is spread trading maybe!!!
I should add here that my daytime job is as a self employed IFA/mortgage broker!!
 

bsheena

Newbie
1 0
CFDs certainly have their benefits, but this guy sounds too keen to plug them with several half-truths e.g.

"Low commission costs of around 0.2% which compares very favourably to traditional stock brokers that normally charge between 1% and 2% on both sides of the transaction. On a £10,000 trade this can save you several hundred pounds just in commission costs"

Not true, most of the major brokers charge a flat rate of around £12

"You can have access to the Level 2 system giving you the ability to trade on the order book. A traditional stockbroker will always quote you the market spread which is far more costly."

Not necessarily - if you want to get filled on the current bid/offer (except for large quantities) on all SETS names you will get the same price on Level 1 and Level 2 obviously

"Flexibility: SIPPs provide full transparency in that you know exactly what you are invested in at any one time. There are not many pension fund companies that will be able to give you a detailed breakdown of how your funds are invested at any one time."

My pensions at both of the companies I've worked for have allowed me to choose where exactly I want to allocate my funds - I can't believe this is the exception.
 

crabbydog

Junior member
35 1
CFDs certainly have their benefits, but this guy sounds too keen to plug them with several half-truths e.g.

"Low commission costs of around 0.2% which compares very favourably to traditional stock brokers that normally charge between 1% and 2% on both sides of the transaction. On a £10,000 trade this can save you several hundred pounds just in commission costs"

Additionally AIUI the CFD fee is on the leveraged amount, so if you pay 100 for the CFD on a typical 10-1 leveraged UK stock, the trade is considered to be 1,000 and your commission is on the 1,000 (each side of the trade) . They also charge interest for the leveraged amount, typically a couple % above libor. Holding a CFD for several months could be very pricey. If you work out how much you pay in interest and commission on any trade, and remember that you pay that win or lose on the trade, the % of your profits given over to commissions and interest can be very high.

if you are going to trade CFDs you need to anlayse in detail the probable costs against your expectations of trade profits, because you can take a significant hit.

It can be a good way to enhance profits or hedge risk but take much care to analyse costs and risks properly.
 

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