SIPP Guide: Self-Invested Personal Pensions Explained
What Is a SIPP?
A Self-Invested Personal Pension (SIPP) is a pension wrapper that gives you full control over your investment choices. Unlike workplace pensions that typically offer a limited selection of funds, a SIPP lets you invest in individual stocks, bonds, funds, ETFs, investment trusts, and commercial property.
Tax Benefits
SIPPs receive the same generous tax relief as other pensions:
- Basic rate (20%): Contribute £80, the government adds £20
- Higher rate (40%): Claim an extra £20 back via Self Assessment
- Additional rate (45%): Claim an extra £25 back
Your investments grow free of income tax and capital gains tax inside the SIPP. The annual allowance is £60,000.
Who Should Use a SIPP?
SIPPs are ideal for: self-employed people without a workplace pension, experienced investors wanting more control, higher earners maximising tax relief, and anyone consolidating multiple old pensions.
Costs
SIPP platform fees range from 0.15-0.45% per year. Popular platforms include AJ Bell (0.25%), Hargreaves Lansdown (0.45%), and Interactive Investor (flat fee £11.99/month). For larger pots, flat-fee platforms become better value.
Accessing Your SIPP
From age 55 (rising to 57 in 2028): take 25% as a tax-free lump sum, then drawdown, annuity, or a combination. You can also take smaller lump sums, each 25% tax-free.
Risks
With greater control comes greater responsibility. Poor investment choices can reduce your retirement income. If you are not confident investing, consider a ready-made portfolio or seek financial advice.
Related Calculators
Frequently Asked Questions
What is the difference between a SIPP and a workplace pension?
A SIPP gives you full control over investment choices (stocks, funds, ETFs), while workplace pensions offer a limited fund selection. SIPPs also lack employer contributions unless you arrange them.
Can I transfer my workplace pension to a SIPP?
Usually yes. You can transfer most defined contribution pensions to a SIPP. Check for exit fees and whether you'd lose any valuable benefits (like guaranteed annuity rates) before transferring.