What Is a SIPP? How to Get One and How It Works

A SIPP — Self-Invested Personal Pension — is a pension you control. Unlike a workplace pension where your employer picks the provider and the default fund, a SIPP lets you choose your own investments, your own provider, and manage it yourself.

How a SIPP Works

The Basics

A SIPP works like any other pension in terms of tax:

• Contributions get tax relief — pay in £80 and HMRC tops it up to £100 (basic rate). Higher-rate taxpayers can claim another £20 back via self-assessment.
• Investments grow tax-free — no capital gains tax or dividend tax inside the pension wrapper.
• You can access it from age 55 (rising to 57 in 2028) — 25% tax-free, rest taxed as income.
• Annual allowance applies — up to £60,000/year (or your earnings, if lower).

The difference is you choose what to invest in.

What Can You Invest In?

Most SIPP providers offer:

• Index funds and ETFs — the most popular choice. Low cost, diversified. A global tracker fund like Vanguard FTSE Global All Cap gives you exposure to thousands of companies worldwide for fees around 0.2%.
• Individual shares — buy shares in specific companies. Higher risk, more work.
• Bonds — government and corporate bonds for lower-risk income.
• Investment trusts — similar to funds but traded on the stock exchange.
• Cash — yes, you can hold cash in a SIPP, though it's rarely the best long-term strategy.

Some SIPPs also allow commercial property, but that's more advanced territory.

Who Should Get a SIPP?

Good Reasons to Open a SIPP

You want lower fees. Many workplace pension default funds charge 0.5-0.75%. A SIPP with a global index tracker might cost 0.15-0.25% in fund fees plus a small platform charge. Over 30 years on a £200,000 pot, a 0.3% fee difference can mean £30,000+ more at retirement.

You want more investment choice. Workplace pensions typically offer 10-20 funds. A SIPP gives you access to thousands of funds, plus individual shares and bonds.

You're consolidating old pensions. If you have multiple small pension pots from previous jobs, transferring them into one SIPP simplifies everything — one login, one set of fees, one investment strategy.

You're self-employed. No employer pension means you need to sort your own. A SIPP is the standard choice for self-employed pension saving.

You want to make extra contributions beyond your workplace pension. You can have a workplace pension AND a SIPP. Some people max out their employer match at work, then put additional savings into a SIPP where they have more control.

When a SIPP Might Not Be Right

You're not interested in investing. If you don't want to think about funds and investments, a workplace pension with a decent default fund is simpler. SIPPs require at least some engagement.

Your workplace pension has good employer matching. If your employer matches up to 10%, that's free money. Max out the match before considering a SIPP for extra contributions.

You have valuable guarantees on an old pension. Some older pensions have guaranteed annuity rates or other benefits. Transferring to a SIPP would lose these. Check before you switch.

How to Open a SIPP

Step 1: Choose a Provider

The main UK SIPP providers:

Key decision: percentage-based fees (Vanguard, AJ Bell, HL) are cheaper for small pots. Flat-fee platforms (Interactive Investor) are cheaper once your pot grows above roughly £50,000-£100,000.

Step 2: Open the Account

It's online, takes about 15 minutes. You'll need:

• National Insurance number
• Bank details
• Employment details
• ID verification (passport or driving licence)

Step 3: Fund It

Three ways to get money into your SIPP:

Regular contributions: Set up a direct debit. HMRC adds basic-rate tax relief automatically (pay £80, SIPP receives £100).

Lump sum: Transfer cash in from your bank account. Same tax relief applies.

Transfer from another pension: Move an old workplace pension or another SIPP into your new one. This is usually free and done by the providers — you fill in a form and they handle the transfer. Takes 4-8 weeks typically.

Step 4: Choose Your Investments

If you're not sure where to start:

The simple approach: Put everything in a single global equity index fund. Something like:

• Vanguard FTSE Global All Cap Index Fund
• HSBC FTSE All-World Index Fund
• Fidelity Index World Fund

These give you exposure to thousands of companies worldwide for very low fees. You can get more sophisticated later if you want.

The slightly less simple approach: Split between:

• 80% global equity fund (growth)
• 20% bond fund (stability)

Adjust the split as you get closer to retirement (more bonds, less equity).

Step 5: Leave It Alone (Mostly)

The biggest mistake SIPP investors make is tinkering. Markets go up and down. The urge to sell during a crash or chase the latest trend is strong. Resist it.

Check in once or twice a year:

• Is your investment still appropriate for your age?
• Are fees still competitive?
• Do you need to rebalance?

That's it.

SIPP vs Workplace Pension: Can You Have Both?

Yes. Many people do exactly this:

1. Contribute enough to your workplace pension to get the full employer match — this is free money, never leave it on the table 2. Put any additional pension savings into a SIPP — where you control the investments and fees

Your combined contributions across all pensions count toward the £60,000 annual allowance.

Tax Relief: How It Actually Works

Basic Rate (20%)

You contribute £80 from your bank account. Your SIPP provider claims £20 from HMRC and adds it to your pot. Total in pension: £100. This happens automatically.

Higher Rate (40%)

Same £80 contribution, same £20 added by HMRC. But you can claim another £20 back via your self-assessment tax return (or by calling HMRC to adjust your tax code). Effective cost to you: £60 for £100 in your pension.

Additional Rate (45%)

You can claim 45% relief total, meaning £100 in your pension costs you £55. The extra relief comes through self-assessment.

Salary Sacrifice Note

If your employer offers salary sacrifice through their workplace pension, that's usually better than a SIPP for contributions — because you save National Insurance too (an extra 13.25% on earnings up to £50,270). Only use a SIPP for additional contributions beyond what you can salary sacrifice.

Common SIPP Questions

Is my money safe? SIPP providers are regulated by the FCA. Your investments are protected up to £85,000 per provider under the FSCS if the provider goes bust. The underlying investments (funds, shares) are held separately from the provider's own assets.

Can I withdraw before 55? Generally no, except in cases of serious ill health. Be very wary of anyone who tells you they can help you access your pension early — it's almost certainly a scam.

What happens when I die? SIPP pots can be inherited. If you die before 75, beneficiaries can take the money tax-free. After 75, they pay income tax on withdrawals. This makes SIPPs very tax-efficient for inheritance planning compared to other assets.

Can I transfer my workplace pension into a SIPP while still employed? Some employers allow "partial transfers" of your workplace pension while you're still contributing. Check with your HR department. Many don't allow it until you leave.

Want to see how your SIPP fits into your overall retirement picture? Model it in our calculator alongside your other pensions and savings.