Pensions guide
SIPPs explained
Capital at risk. The value of investments can fall as well as rise, and you may get back less than you put in. Past performance is not a guide to future returns.
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A SIPP — self-invested personal pension — is a personal pension where you choose how the money is invested. It gets the same tax relief as other pensions, but the investment decisions are yours. Here’s how SIPPs work and what to check.
Capital at risk. The value of investments can fall as well as rise, and you may get back less than you put in.
Good to know: This is general information, not personal advice. Pensions are long-term investments.
The value can go down as well as up, so you could get back less than has been paid in. Capital at risk.
For free, impartial guidance, use MoneyHelper. If you’re 50 or over with a defined contribution pension, you can book a free Pension Wise appointment.
What is a SIPP?
A SIPP is a type of personal pension. Like any defined contribution pension, the money you and the government put in is invested, and what you end up with depends on how much goes in, the charges and how the investments perform.
The difference is control. With a workplace pension, the scheme usually chooses a default fund for you.
With a SIPP, you pick the investments yourself from what the provider offers — often funds, shares, investment trusts and exchange-traded funds (ETFs). Some SIPPs offer ready-made portfolios for people who want some choice without picking everything.
That control comes with responsibility. If your investments do badly, your pension is worth less. Our investments hub covers the basics of investing and risk.
Tax relief on SIPP contributions
SIPPs use relief at source. You pay in from your take-home pay and the provider claims basic-rate tax relief of 20% from the government and adds it to your pot. So an £80 payment becomes £100 in your SIPP.
If you pay Income Tax at a higher rate in England, Wales or Northern Ireland, you can claim extra relief through Self Assessment:
- 40% taxpayers: a further 20% on contributions, up to the income you paid 40% tax on.
- 45% taxpayers: a further 25% on contributions, up to the income you paid 45% tax on.
Scotland has different rates.
You can get tax relief on contributions worth up to 100% of your annual earnings. If you have no earnings, you can still get basic-rate relief on contributions of up to £2,880 a year, which relief tops up to £3,600. Our pension tax relief guide goes into more detail.
How much can you pay in?
The annual allowance is the most that can be paid into all your pensions in a tax year before a tax charge applies. It’s £60,000 for the current tax year, and it includes contributions from you, your employer and tax relief across every pension you have, not just your SIPP.
Your annual allowance may be lower if you’ve already started taking money flexibly from a pension (the money purchase annual allowance), or if you have a high income — the allowance is tapered if your threshold income is over £200,000 and your adjusted income is over £260,000. You may be able to carry forward unused allowance from the previous three tax years.
When can you take the money?
You can usually take money from a personal pension from age 55, rising to 57 from 6 April 2028, unless you’re retiring early because of ill health or have a protected pension age. Be wary of anyone offering to help you access your pension earlier — it could be an unauthorised payment taxed at up to 55%, or a scam.
You can usually take up to 25% of your pension as a tax-free lump sum, up to a maximum of £268,275. The rest is taxed as income when you take it, whether as a regular income (for example through drawdown or an annuity) or as lump sums.
Charges to look at
SIPP costs can add up from several places, and the cheapest set-up depends on how much you hold and how you invest. Look at:
- Platform or account charges — a percentage of your pot or a flat fee.
- Fund charges — the ongoing charge on each fund you hold.
- Dealing charges — for buying and selling shares, ETFs or investment trusts.
- Drawdown or exit charges — for taking income or transferring out.
Percentage fees grow with your pot, while flat fees can be expensive on small pots. Our Stocks and Shares ISA fees guide explains similar charges for ISAs.
SIPP or workplace pension?
For most employees, the workplace pension comes first, because it usually comes with an employer contribution that a SIPP doesn’t. Some people use a SIPP alongside it — for example if they’re self-employed, want more investment choice, or want to bring old pensions together in one place.
Before transferring a workplace pension into a SIPP, check for exit fees, guaranteed benefits you could lose and whether your employer would stop contributing. Defined benefit pensions have their own transfer rules and guarantees, so check with the scheme first. See our workplace pensions guide.
Things to check
- That the provider is authorised by the FCA, and how the FSCS would apply if it failed.
- All the charges on the platform, funds and dealing, compared at your pot size.
- Whether you’re comfortable choosing and reviewing investments yourself.
- Your total pension contributions against the annual allowance.
FAQ
Is a SIPP riskier than a workplace pension?
Not necessarily — risk depends on what you invest in. The main difference is that you make the investment choices, so you take responsibility for them.
Can I have a SIPP and a workplace pension?
Yes. Many people do. The annual allowance of £60,000 applies across all your pensions together.
How does tax relief work on a SIPP?
The provider claims 20% basic-rate relief and adds it to your pot. Higher and additional-rate taxpayers can claim more through Self Assessment.
When can I take money from a SIPP?
See When can you take the money? above.
Can I transfer old pensions into a SIPP?
Often, yes, but check exit fees and any guarantees or benefits you’d lose first. Defined benefit transfers have extra rules.
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Sources
Figures checked on 3 October 2026. Rules and rates change, so check the latest on GOV.UK.