Self-Invested Personal Pensions (SIPPs)

A self-invested personal pension (SIPP) is a type of money purchase scheme which is a tax-efficient long-term investment designed to provide you with an income in retirement. Your employer or your own company, if you are a Director, may also contribute into this for you. SIPPs can offer a wider range of investment opportunities.

You cannot normally access money in a SIPP until age 55 (57 from 2028). The benefits you receive at retirement pension will depend on a number of factors including the value of your plan when you decide to take your benefits which isn’t guaranteed.

How do I know if a SIPP is right for me?

A SIPP could be right for you if you are looking for a wider choice of investment options and have sufficient knowledge and experience of investing to make your own investment decisions or have a trusted adviser to help you make these decisions. You can invest money into your SIPP up until you reach age 75 and start withdrawing money from it as early as age 55 (57 from 2028).

As with all money purchase schemes, the amount that you will have available when you retire depends on the contributions that you, and any employers, have made and how your investments perform over time.

Parents can even open a Junior SIPP for their children. SIPPs are not suitable for every investor and other types of pensions may be more appropriate.

As with all pensions, SIPPs provide favourable tax treatment. Once in a SIPP wrapper, your savings will grow free from UK income tax and capital gains tax.

Do the same tax and contribution rules apply to a SIPP as other pensions?

They are governed by the same tax and contribution rules as other pensions. Anyone living in the UK who pays into a SIPP is eligible to claim pension tax relief, including low-income earners.

Tax relief is paid on your pension contributions at the highest rate of income tax you pay. Basic rate taxpayers receive 20% pension tax relief. Higher rate taxpayers can claim 40% pension tax relief and additional rate taxpayers can claim 45% pension tax relief.

In Scotland, income tax is banded differently, and pension tax relief is applied in a slightly different way. Starter rate taxpayers pay 19% income tax but get 20% pension tax relief. Basic rate taxpayers pay 20% income tax and get 20% pension tax relief. Intermediate rate taxpayers pay 21% income tax and can claim 21% pension tax relief. Higher rate taxpayers pay 41% income tax and can claim 41% pension tax relief. Top rate taxpayers pay 46% income tax and can claim 46% pension tax relief.

Is tax relief on a SIPP subject to the Annual Allowance?

You may contribute up to the value of your earned income to a pension in any tax year and receive tax relief. Rules for employer funded contributions are different, but can benefit company owners. Both are subject to the Annual Allowance, which is currently £60,000 for the tax year 2024/25. If your earnings are over £200,000 you may have a reduced Annual Allowance, referred to as the Tapered Annual Allowance.

Find out more about the Annual Allowance.

What flexibility at retirement do I have to take money from my SIPP?

You can normally take money from your SIPP when you reach age 55 (increasing to 57 from 2028). When and how you take your money can make a big difference to how much tax you might pay and how long your money will last.

There are different ways you can take money from your SIPP. Keep in mind that you can choose one option or a combination of options. You can read more about the various methods of withdrawing from your pension in our Pension Withdrawal knowledge article.

Can I use my SIPP as partial security against a loan to borrow money?

SIPP lending or borrowing is when your SIPP is used as partial security against a loan to borrow more money and increase its investment capacity. There are numerous rules around SIPP lending and you should take professional financial advice if you are considering this option.