SIPPs explained: self-invested personal pensions

A self-invested personal pension (SIPP) is a type of pension you can set up yourself. It lets you save up over a number of years to give you money to live on when you’re older.

You’re able to choose the pension provider and can often decide:

• how much and how often to pay in

• how your money is invested – including if you want to manage it yourself.

You can usually start a SIPP from age 18, or open one on behalf of someone younger – often for a child or grandchild. 

You normally cannot start and pay into a SIPP after you reach age 75, unless you’re transferring across an existing pension.

You can have both a workplace pension from your employer and a SIPP – or any number of different pension types.  

If you have an employer, paying into their workplace pension is usually better than a self-invested personal pension – unless you want a separate pension alongside that one. 

This is because you’ll usually get extra contributions from your employer and charges are often lower. Your employer might even pay more into the scheme if you do. This is called contribution matching. 

Find out more in our guide about workplace pension schemes.  

You can have as many pension schemes as you like, but you’ll typically pay charges to each pension provider. 

Choosing your own investments for a SIPP can be complex, so make sure you have the time and expertise to manage multiple schemes before deciding to open more than one.

A SIPP is a type of defined contribution pension. This means the amount it will pay you depends on:

• how much is paid in

• how well your invested money performs

• the fees your provider charges 

• how and when you take your pension money.

If you pay into a pension, the government usually adds a top-up payment called tax relief. This is the money you’d otherwise pay in Income Tax. 

Most personal pension providers will claim tax relief automatically for you, at a fixed rate of 20%. This means a £100 contribution to your pension will cost you £80.

If you pay Income Tax above 20%, you can claim the extra tax relief by contacting HMRCOpens in a new window or completing a Self Assessment tax return. If you pay Income Tax at 40%, this means a £100 pension contribution will cost you £60.

Each tax year until you're 75, you can usually get tax relief on all your pension contributions as long as: 

• you don’t pay in more than you earn and

• all payments in are less than the annual allowance – £60,000 for most. 

If you earn under £3,600, you can get tax relief on up to £2,880 of your pension contributions. 

For more information, see our guides: 

• What are the benefits of a pension scheme?

• How tax relief boosts your pension savings.

Your pension money is invested so it should grow over many years. Investment growth is one of the biggest ways your pension can increase, but it’s not guaranteed. 

Most SIPP providers will manage your money and pick the investments for you, unless you want to choose yourself.  

Your pension provider will likely take charges from your pension pot to cover the cost of investing. This normally includes an annual management fee and charges if you want to change your investments.  

The earliest you can take your pension is usually age 55 (57 from April 2028), unless you need to retire early due to poor health. But many schemes are designed to start paying from around age 65. 

When you’re ready, you can choose how to use your money. This includes taking up to 25% as tax-free cash and: 

• leaving the rest invested until you need it  

• converting the rest into guaranteed income

• setting up a flexible income that you can stop or change at any time

• taking the rest as one or more lump sums. 

For all your options, see our guide about taking a defined contribution pension.  

If you’re 50 or over, you can also get a free Pension Wise appointment. This will help you understand the different ways you can take your pension.    

A SIPP offers a wider choice of investment options to choose from. But if you don’t want to actively manage your pension, there are other types of personal pension to consider:

• standard personal pensions – these offer a range of ready-made investment funds so you can decide where your money is invested

• stakeholder pensions – these have capped charges, lower minimum payments, fee-free transfers and usually offer a range of investment funds to choose from.

Which is best will often depend on how much each provider will charge you and the range of investment options they offer. 

Many SIPP providers will manage your money for you by default, so you don’t have to choose your own investments unless you want to. 

You can select and change your SIPP investments by logging in to your provider’s online platform, mobile app or by calling them. Your options will depend on what your provider offers, but you can typically choose to invest in:  

• funds – groups of investments, often chosen and managed by professionals

• company shares – where you buy a portion of a company  

• government or corporate bonds – where organisations pay to borrow your money  

• commercial property and land – where you buy a property yourself or collectively with others.

As you’re in control, you can change your investments as often as you want – but you’ll usually pay fees each time. 

For more information, see our guides:  

• How to choose your own pension investment options 

• Pension scheme fees and charges explained.

Before deciding to choose your own pension investments, make sure you’re comfortable with the concept of investing and how involved you might need to be. 

There are many things you need to consider when investing, including:

• the level of risk you’re willing to take – lower risk investments might be less likely to fall in value but your money will typically grow at a slower rate

• how best to spread your money between different types of investments or risk levels 

• how the charges you’ll pay to invest will affect your savings.  

All investments can rise and fall, so there’s always a risk you could get back less than you pay in.

A regulated financial adviser can help you select and manage your pension investment options. You must be told how much this will cost before you commit to anything. 

Our tool can help you find a retirement adviser or see our guide Choosing a financial adviser for more information. 

If you pay for advice and it turns out to be unsuitable, you might be able to claim compensation if you’ve lost money. For more information, see our guide How to claim compensation for a pension problem or poor advice.   

Your SIPP provider might have a minimum amount you must pay in each month to keep it active, but you typically need to save much more than this for a comfortable retirement. 

Our Pension calculator will show you: 

• how much you might need in retirement 

• how much your pension might pay you 

• how much extra you could get by changing your contributions. 

The Retirement Living StandardsOpens in a new window also shows you how much you might need to have a: 

• 'minimum' lifestyle - enough money to live on, plus entertainment and a holiday 

• 'moderate' lifestyle - extra security and money for more holidays and entertainment, or 

• 'comfortable' lifestyle - enough money so you can cover most things you want to do.  

A pension typically grows faster than other types of savings or investments as tax relief boosts your contributions. Plus, fees and charges are generally lower than other investment products. 

But as the money is locked away until you’re at least 55 (57 after April 2028), it’s a good idea to have other savings you can access.  

For more information, see our saving and investment guides.  

The main differences between SIPP providers are their charges and the range of investments they offer, so always shop around before choosing a product.

Typically, ‘low cost SIPPs’ will offer fewer investment options and ‘full SIPPs’ will offer more complicated investment options with higher charges.

Comparison sites covering the whole pensions market don’t exist, so you’ll either need to:

• manually search and compare your options – many insurance companies, banks and building societies offer SIPPs

• pay a financial adviser to recommend a provider and product for you – you can also pay them to choose and manage your investments.

MoneySavingExpert’s Cheapest SIPPs guideOpens in a new window lists cheap SIPP providers, so this might be a good place to start your research.  

For step-by-step help, see our guide How to start your own pension. 

Be careful before transferring your existing pensions, you might lose valuable benefits by leaving your current provider.   

For more information, see our guide about transferring pensions. 

Your pension provider will ask you to complete an expression of wish form. This tells them who you’d like to receive your pension after you die, so make sure to keep it updated. 

For more information, including how much would be taxed, see our guide What happens to my pension when I die?