Self-Invested Personal Pensions (SIPPs) explained
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Quick answer: A SIPP is a personal pension that lets you choose your own investments instead of being limited to a workplace pension's default fund.
A SIPP is a personal pension that lets you choose your own investments instead of being limited to a workplace pension's default fund. You get the same tax relief and tax-free growth as any other pension, plus a much wider menu of funds, shares, investment trusts and ETFs — at the cost of more responsibility and, sometimes, higher charges.
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Content updated: 4 min read
Primary source: www.gov.uk/tax-on-your-private-pension
How a SIPP differs from a workplace pension
Both are 'defined contribution' pots: what you get out depends on what you put in and how the investments do. The difference is choice. A workplace pension picks the investments for you (the default fund is usually a low-cost diversified fund). A SIPP lets you choose from a wide universe — funds, investment trusts, ETFs, individual shares, gilts, corporate bonds and (in some 'full' SIPPs) commercial property.
If you are auto-enrolled, do not turn off your workplace pension to start a SIPP — you would lose the employer contribution, which is the single biggest reason workplace pensions are usually a better first port of call. A SIPP works best as a supplement, or to consolidate old pots after you leave a job.
Tax relief — how it actually arrives
Personal contributions are paid net of basic-rate tax. If you pay in £80, the provider claims £20 back from HMRC and £100 lands in your pot, regardless of your income tax band.
Higher-rate (40%) and additional-rate (45%) taxpayers claim the extra relief themselves, either through Self Assessment or by writing to HMRC. That extra goes into your bank account, not your pension. A £100 gross contribution costs a 40% taxpayer £60 net once relief is claimed; a 45% taxpayer £55.
Employer contributions (including bonus sacrificed into your SIPP) come out of pre-tax money and are not subject to National Insurance.
Annual and lifetime limits
Annual allowance: £60,000 of total contributions (your own + employer + tax relief) across all your pensions in 2026/27. Above-threshold income earners (broadly £200,000+ gross) face a taper that can reduce the allowance to as little as £10,000.
Unused annual allowance from the previous three tax years can be carried forward, provided you had a pension scheme open in each of those years. Carry-forward is the main way larger one-off contributions get made tax-efficiently.
The lifetime allowance was abolished from 6 April 2024 and replaced by two new limits: the Lump Sum Allowance (£268,275 of tax-free cash across all pensions) and the Lump Sum and Death Benefit Allowance (£1,073,100). Investment growth inside the pension is not capped.
Charges and what they really cost
Most platforms charge either a percentage of assets (typically 0.15–0.45% a year, sometimes capped) or a flat fee (often £10–£15 a month). Flat-fee platforms become much cheaper once the pot is into the high tens of thousands.
On top, you pay the fund's ongoing charges figure (OCF) — typically 0.05–0.30% for global trackers, 0.50–1.00% for active funds. Dealing charges apply for individual share or ETF trades on some platforms.
A 1% annual drag over 30 years removes roughly a quarter of the pot. The single biggest decision is usually picking a low-cost, well-diversified core fund rather than chasing investments.
Common questions
Can I open a SIPP if I'm already in a workplace pension?
Yes. You can pay into multiple pensions in the same tax year as long as your total contributions stay within the £60,000 annual allowance and your earnings. Most people who use a SIPP also still pay into a workplace pension to keep the employer match.
Can I move old workplace pensions into a SIPP?
Usually yes for defined contribution (money purchase) pots. Defined benefit pensions worth over £30,000 require sign-off from an FCA-authorised pension transfer specialist before transferring out — and for most people, transferring out of a DB scheme is a poor decision.
What is the MPAA?
Once you flexibly access taxable income from a defined contribution pension — for example, taking taxable drawdown — the Money Purchase Annual Allowance permanently reduces the amount you can pay into pensions to £10,000 a year. Taking just the 25% tax-free cash does not normally trigger the MPAA.
Are SIPPs protected if the platform fails?
Yes — eligible SIPPs are covered by the Financial Services Compensation Scheme up to £85,000 per person, per FCA-authorised provider. The assets are held in trust separately from the platform, so insolvency of the platform does not usually mean loss of the investments themselves.