Answers · UK 2025/26
What is a personal pension (SIPP)?
A personal pension (often called a SIPP — Self-Invested Personal Pension) is a pension plan you open yourself, where you choose investments and receive tax relief at your marginal rate.
Full answer
A **Self-Invested Personal Pension (SIPP)** is a type of defined contribution pension that you manage yourself, choosing from a wide range of investments. **How a SIPP works:** 1. You contribute money to your SIPP 2. The SIPP provider claims **20% basic rate tax relief** from HMRC and adds it to your pot (relief at source) 3. Higher-rate taxpayers claim the additional 20% (or additional rate taxpayers the further 5%) via Self Assessment 4. Your money is invested and grows within the pension wrapper — free of income tax and CGT 5. From age **57** (rising from 55 in 2028), you can access your pot **Contribution limits (2026/27):** - **Annual Allowance: £60,000** (or 100% of your earnings if lower) - **Money Purchase Annual Allowance (MPAA): £10,000** — applies if you've accessed drawdown flexibly - No annual limit on contributions, but tax relief only applies up to 100% of earnings (minimum £3,600/year even if no earnings) **Tax-free cash:** You can take up to **25% of your pension pot tax-free**, subject to the **Lump Sum Allowance of £268,275** across all pensions. **Investment choices:** SIPPs typically offer: UK and international shares, ETFs and index funds, investment trusts, gilts, corporate bonds. Commercial property (not residential) can be held in a full SIPP. **At retirement — drawdown options:** - **Flexi-access drawdown:** Keep invested, draw income as needed (taxed as earned income) - **Annuity:** Exchange pot for guaranteed income for life - **Uncrystallised Fund Pension Lump Sum (UFPLS):** Take lump sums, 25% of each tax-free
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.