What is a SIPP? Self-invested personal pensions explained

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A self-invested personal pension (SIPP) is a type of UK pension plan that puts you in control of how your retirement savings are invested. Unlike a traditional pension, choosing a SIPP means you have access to a much wider range of investment options. On this page, we discuss how SIPPs work, the benefits they offer, and who they might be right for.

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SIPP stands for self-invested personal pension, and it is a type of personal pension scheme in the UK. SIPPs are designed to give greater control over how your pension contributions are invested. You get to choose the investments that make up your pension fund, the provider, how much you want to contribute (up to certain limits for tax relief), and how often.

There are several features that define a SIPP:

• A variety of investment options. Because it is a pension scheme approved by the UK government, SIPP account holders can only choose from approved investments, including everything from stocks and investment funds to commercial property.

• Tax benefits. Any growth within a SIPP pension fund is free of income tax and capital gains tax, and the contributions made can qualify for tax relief.

• Flexible withdrawals. When accessing your funds on retirement, you typically won’t pay tax on the first 25% of the amount withdrawn.

Any UK resident between the ages of 18 and 75 can hold a SIPP account. SIPPs are available to both employed and self-employed people.

If you are a non-UK resident, you can’t usually start a new SIPP unless you have an existing UK workplace or personal pension. If you do already have a pension pot, you may be able to move that money into a SIPP (but there can be penalties for doing so). What’s considered equally important is that you have done your research and are comfortable choosing your own investments.

There is also a special option for children, known as a Junior SIPP, which adults can open for a child or dependent.

If you want to open a self-invested personal pension plan, you firstly choose the provider, which could be an investment platform or pension company. You can often do this online. They will manage the account, but you get to pick the investments. Alternatively, you can leave the decision-making to your provider.

The investment options are virtually unlimited with a SIPP. You may be able to invest in:

• Company stocks and shares listed on stock exchanges

• Government bonds (gilts) and corporate bonds

• Collective investments such as real estate investment trusts (REITs) and exchange-traded funds (ETFs)

• Commercial property, including offices, retail units, and hotels (note: not all providers allow this). This doesn’t include residential property.

• Cash and deposit accounts with UK-authorised financial institutions

Because the exact options can vary depending on the particular provider, it’s important to compare offerings among providers before you get started.

You can contribute on a regular basis or as and when you like. Thanks to its flexibility, you are also free to decide how much to pay in. Some people might contribute a few hundred pounds a month or make lump sum payments when they can. That’s why they are often considered a suitable pension for the self-employed, whose income may fluctuate from month to month.

When it comes to accessing your funds on retirement, from age 55 (rising to 57 in 2028), you can usually take 25% of your pot tax-free. The rest can be drawn as income or used to buy a pension annuity.

Yes, depending on the level of management you choose, SIPPs come with several types of fees:

• Platform fees – These are regular charges for managing your account, either as a flat fee or a percentage of your balance.

• Trading fees – As with a typical investment, this is a charge incurred each time you buy or sell investments.

• Fund management fees – If you invest in funds, there’s an annual charge based on a small percentage of your investment in each fund.

• Transfer-out fees – Some providers charge if you move your SIPP to another provider.

• Income drawdown fees – Not only could your chosen platform charge setup fees, you may also be charged for taking money out of a SIPP.

Fees can also vary depending on the type of investments you hold, so it’s important to compare costs before jumping in.

You don’t pay tax on any money or investment growth held inside a SIPP. As long as the funds are sitting untouched in the account, they’re sheltered from income tax and capital gains tax.

You also get tax relief on your pension contributions. If you’re employed, you can usually get tax relief on anything you pay in, up to 100% of your earnings (or the annual cap of £60,000). For basic-rate taxpayers, tax relief is added automatically by your SIPP provider. That means if you contribute £80, the government adds £20, turning it into £100 in your pension. If you pay a higher rate of tax, you can claim back even more when filing your self-assessment tax return.

To balance out that upfront tax relief, you do pay income tax on 75% of pension withdrawals from your SIPP account in retirement. In other words, the first 25% of your withdrawals are tax-free, up to a limit known as the lump sum allowance, which is currently £268,275 (as of 2025).

The most basic definition of SIPP describes the do-it-yourself version, where you pick and choose exactly where your money goes. Because you are managing everything yourself, the assumption is that you know a bit about investing already. Creating your own SIPP means you’d also need to keep an eye on how the investments are performing and be ready to make changes.

If you’d rather not go it completely alone, most SIPP providers offer ready-made portfolios designed to match your particular tolerance for risk. Alternatively, if you don’t know where to start with a SIPP account, you can pay a regulated financial adviser or even a robo-adviser to help choose and manage your investments for you.

If you’re considering a SIPP, remember that investing always comes with risk. Even seasoned investors experience ups and downs in the value of their funds. Opting for a SIPP means being comfortable with that risk.

SIPPs offer flexibility and the potential for better returns. They can be used as a main pension or alongside a workplace pension. Compared to other pension types, however, they carry risk and involve responsibility for the account holder, so they tend to suit those who know what they’re doing.

The taxes on accessing funds from a SIPP can be seen as a drawback. It’s worth pointing out, however, that the upfront tax relief on contributions to a SIPP means that more of your money stays in your pension pot, allowing it to potentially grow.

Because the funds in a SIPP account are locked away, however, it can be sensible to put some money in a savings account as well. With a fixed rate bond, for example, your savings are shut away for a set term, but you also get a guaranteed return on your money. This can provide some stability to offset the uncertain performance of investments in a SIPP.

SIPPs can be protected under the Financial Services Compensation Scheme (FSCS), but it depends on what is held within the account. Cash in a SIPP is usually protected up to £85,000 per person, per bank, as long as the provider is FCA-regulated.

Shares or funds aren’t protected if they simply perform poorly. But if a fund manager or investment firm goes into administration and you lose money, you may be covered up to the limit of £85,000 per bank. It’s crucial to check who holds your cash or investments, and whether they’re covered by the FSCS.

After looking at the meaning of a SIPP, you might be wondering what makes it different to a standard personal pension. The following table outlines the differences:

And what about workplace pensions? These are generally managed by your employer’s pension provider, and they may not offer as many investment options as a SIPP does. Of course, workplace pensions often come with employer contributions, so they have their own merits.

If you’re considering other options for building a retirement nest egg, you might see how SIPPs compare to ISAs.

When considering your retirement income, why not take your finances into your own hands and earn fixed interest on your savings? Fixed rate bonds boast a guaranteed return, giving you predictability. Raisin UK offers competitive savings accounts from a variety of banks and building societies, and all eligible savings are protected under deposit insurance in the UK. Register now to get started!