What Is a SIPP?

Last updated: July 2026 · 5 min read

A SIPP, or self-invested personal pension, is a pension you open and run yourself. It gets exactly the same tax relief as a workplace pension. The difference is who is in charge: instead of your employer's scheme choosing a default fund for you, you pick the investments, the platform and the pace.

How a SIPP works

You open a SIPP with an investment platform, pay money in, and choose what to invest it in. The provider claims 20% basic-rate tax relief from HMRC and adds it to your pot automatically, so £80 in becomes £100 invested. Higher and additional-rate taxpayers can claim more through Self Assessment, as we cover in our tax relief guide.

Inside the wrapper your investments grow free of UK income tax and capital gains tax. The trade-off is the same as every pension: the money is locked away until the normal minimum pension age, currently 55 and rising to 57 from 6 April 2028. From that point you can usually take 25% tax free and draw the rest as taxable income.

What you can invest in

This is where SIPPs earn the "self-invested" name. A typical platform SIPP offers funds, index trackers, ETFs, investment trusts and individual shares. Full SIPPs from specialist providers go further, allowing things like commercial property, which is how some business owners hold their premises. Most people need none of that: a simple global tracker fund inside a low-cost SIPP is a perfectly respectable strategy.

What a SIPP costs

Two layers of charges matter: the platform fee and the cost of the investments you hold. Platform fees come in two shapes, a percentage of your pot or a flat monthly fee. As a rule of thumb, percentage fees favour smaller pots and flat fees favour larger ones, so compare using your own numbers. The funds themselves then charge their own annual fee, with simple index trackers at the cheap end. For comparison, workplace pension default funds are capped at 0.75% a year, and a cost-conscious SIPP setup can come in well under that.

Who a SIPP suits

• The self-employed. No employer means no workplace scheme, so a SIPP (or a simpler personal pension) is the standard way to save. Contributions also reduce your taxable profits through tax relief.
• People consolidating old pots. A SIPP is a common destination for combining old workplace pensions into one place you control.
• Savers who have maxed their employer match. Once you have banked every pound of matching in your workplace pension, extra saving is a fair contest between your scheme and a SIPP.
• Hands-on investors. If you want specific funds, regions or strategies your workplace scheme does not offer.

Who should think twice

If you are employed and not yet contributing enough to get your full employer match, a SIPP is the wrong first move; no SIPP feature beats free employer money. And if you would rather never think about investments, a workplace default fund does the job without homework. A SIPP rewards a little engagement; it punishes total neglect no worse than any pension, but you lose the point of having one.

SIPPs and tax when you take the money

At retirement a SIPP behaves like any other defined contribution pension. You can usually take 25% tax free (capped at £268,275 across all your pensions), and the rest is taxed as income as you draw it. Most platforms offer flexi-access drawdown, letting you take income directly from the SIPP while the remainder stays invested. Once you take taxable income flexibly, the Money Purchase Annual Allowance cuts what you can pay in from then on to £10,000 a year, which catches out people who dip in early while still working.

Opening one: what to check

• Compare total costs (platform fee plus fund fees) on your pot size, not headline rates.
• Check the provider is FCA-regulated and covered by the Financial Services Compensation Scheme.
• If transferring old pensions in, check for exit fees and valuable guarantees you might lose.
• Set up a regular monthly contribution; drip-feeding beats waiting for the perfect moment.

This article is for general information only and does not constitute financial advice. Figures relate to the 2026/27 tax year and are correct as of July 2026. The value of investments can go down as well as up and you may get back less than you put in. For advice tailored to you, speak to a financial adviser regulated by the Financial Conduct Authority (FCA), or get free guidance from MoneyHelper.