What is a SIPP and how does it differ from a workplace pension?

Full answer

A Self-Invested Personal Pension, or SIPP, is a type of defined contribution pension wrapper that you open and manage yourself (or with an adviser), rather than one arranged automatically by an employer. The key difference from a typical workplace pension is investment choice: a workplace pension scheme usually offers a small, curated list of funds selected by the scheme's trustees or provider, often built around a default lifestyle or target-date fund, whereas a SIPP typically allows access to a much wider range of investments, including individual company shares, investment trusts, exchange-traded funds, commercial property in some cases, and a broader universe of managed funds. Tax relief works the same way for both: contributions receive tax relief at your marginal rate, up to the £60,000 Annual Allowance for 2026/27 (tapered down to a minimum of £10,000 for very high earners with adjusted income above £260,000), and both are subject to the same rules on accessing money from age 55 (rising to 57 from 2028), with 25% normally available tax-free up to the Lump Sum Allowance of £268,275. SIPPs generally carry different, and sometimes higher, charges than workplace pensions, since workplace schemes often benefit from negotiated bulk discounts, so a SIPP is usually most cost-effective for people who genuinely want more investment control, are consolidating old pensions, or are self-employed and have no workplace scheme to contribute to at all. Many people end up holding both: a workplace pension for the employer contribution and a SIPP alongside it for additional, more flexible saving.

Try the calculator