TL;DR
A Self-Invested Personal Pension offers greater investment choice than a workplace pension but requires active management. Tax relief is claimed at your marginal rate but total contributions are capped at the annual allowance of £60,000 or 100% of earnings, whichever is lower
Last reviewed: June 2026 | Sources: Pensions
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Pensions Key Facts: SIPPs Annual allowance: £60,000 or 100% of earningsTax relief: claimed at marginal rateMinimum access age: 55 (57 from 2028)Investment choice: much wider than standard pensionRegulator: FCA |
What a SIPP is and how it differs from a standard pension
A Self-Invested Personal Pension is a pension wrapper that allows the holder to choose their own investments from a wide range of options including individual shares, investment trusts, ETFs, commercial property and more. Standard workplace pensions typically offer a limited range of funds managed by the scheme. SIPPs are appropriate for people who want active control over their pension investments and who have the knowledge to manage a portfolio.
The risks most people do not check
Active management requires knowledge and time. A SIPP does not manage itself. Choosing inappropriate investments, failing to rebalance the portfolio or making poor decisions under market stress can significantly reduce retirement savings. Consider whether a low-cost diversified workplace pension or personal pension with a default fund may be more appropriate.
The annual allowance tapers for high earners. For those with adjusted income over £260,000, the annual allowance tapers to a minimum of £10,000. Exceeding the annual allowance triggers a tax charge equal to the marginal rate of tax on the excess. Carry forward allows unused allowance from the previous three years to be used in the current year.
The Money Purchase Annual Allowance limits future contributions once drawdown begins. Once flexible income is taken from a SIPP in drawdown, the annual allowance for future money purchase contributions is reduced from £60,000 to £10,000. This restricts the ability to rebuild a pension pot after starting to draw income.
Platform charges vary significantly. SIPP platform charges range from flat fees to percentage-based charges. For smaller pots, percentage-based charges are typically cheaper; for larger pots, flat fees are usually more economical. Compare total annual costs including platform fee, fund charges and dealing costs.
What to verify before opening a SIPP
Confirm your annual allowance and any carry forward available. Compare platform charges for your expected pot size. Assess whether your investment knowledge is adequate for self-management or whether a managed fund option would be more appropriate.
Where to complain
SIPP provider complaints go to the Financial Ombudsman Service. Investment fraud within a SIPP goes to Action Fraud and the FCA.
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Disclaimer This article is for information only and does not constitute regulated financial advice. Always verify current terms with relevant providers and seek regulated advice for your specific circumstances. Kael Tripton Ltd is an independent editorial publisher and is not regulated by the FCA. |
Frequently asked questions
What can I invest in through a SIPP?
Most SIPPs allow investment in UK and international shares, investment trusts, ETFs, unit trusts, gilts and bonds, and some allow commercial property. Direct residential property cannot be held in a SIPP. Exotic or illiquid investments in SIPPs have historically been associated with pension scams.
How does tax relief work on SIPP contributions?
Basic rate taxpayers get 20 percent tax relief added to contributions by the SIPP provider (relief at source). Higher and additional rate taxpayers claim the additional relief through self-assessment. The net cost of a £1,000 contribution is £800 at basic rate, £600 at higher rate and £550 at additional rate.
Can I have a SIPP alongside a workplace pension?
Yes. Contributions to both count towards the annual allowance of £60,000. Total contributions across all pension arrangements in a tax year cannot exceed the annual allowance without triggering a tax charge.
What is carry forward and how does it work?
Carry forward allows unused annual allowance from the previous three tax years to be used in the current year, subject to having been a pension scheme member in those years. It allows larger one-off contributions, particularly useful for those who receive irregular income such as bonuses or sale proceeds.
Is a SIPP safe if the platform goes bust?
SIPP assets are held separately from the platform's own assets and are not available to creditors in an insolvency. The Financial Services Compensation Scheme provides protection of up to £85,000 for uninvested cash held within a SIPP.
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Sources FCA: SIPPs Consumer Information |
