What is a SIPP?
A SIPP (Self Invested Personal Pension) is a type of pension that gives you more control over your retirement planning.
Please remember, SIPPs are aimed at people happy to make their own investment decisions. Investment value can go up or down and you could get back less than you invest. You can normally only access the money from age 55 (57 from 2028). We recommend seeking advice from a suitably qualified financial advisor before making any decisions. Pension and tax rules depend on your circumstances and may change in future.
How does a SIPP work compared with other pensions?
A SIPP works much like any other pension, but gives you more control and flexibility over how it is invested.
While most pensions are invested in the stock market in some way, many offer a limited choice of investments. With a SIPP you can choose from a wide range of funds, shares, ETFs, Investment Trusts and more.
If you need help with choosing investments, we've made it easy to get started with our Quick-start Funds and other investment ideas.
Combining old pensions into a SIPP
It is easy to lose track of old pension pots. Each will have its own fees that can be expensive in the long run.
Combining these into a single pension means you can keep track of all your retirement savings in one place, and make the most of a single account fee.
With the ii SIPP you will pay a simple, flat fee. Most other pension providers charge percentage fees that grow with your pension.
Before you merge your pensions, remember to check whether you would lose any safeguarded benefits from existing schemes. These could include guaranteed annuity rates or a protected pension age that is lower than the Normal Minimum Pension Age (rising from 55 to 57 in 2028). You should also check for any transfer-out fees from your current provider(s).
*Analysis shows you could be better off over 30 years of investing in an ii SIPP due to our low flat fees. This is just for illustration if all other factors were the same. The advantage of lower flat fees over time means that you could be significantly better off in the long run. By how much will always depend on your personal circumstances. More about our analysis
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Who can open a SIPP?
Anyone over 18 years of age can open our Which? Recommended SIPP. You can even open a SIPP if you are unemployed and/or do not plan to make regular payments.
You must be a UK resident to open a SIPP, although non-UK residents can hold one. If you are not a UK taxpayer you will not receive tax relief on your contributions.
Remember, a SIPP is suitable for people who are happy to make their own investment decisions. If you're not sure, seek advice from a suitably qualified financial adviser.
What are the SIPP tax benefits?
Like all pensions, contributions into a SIPP receive a top-up from the government in the form of tax relief.
You get tax relief on contributions up to 100% of your earnings each year (capped at £60,000).
This means that for every 80p you contribute, the government tops it up to £1. Tax relief is included in your total annual allowance – so the most you can pay from your own pocket is £48,000.
Higher rate and additional rate taxpayers can claim back further tax relief through a Self-Assessment tax return.
Other tax benefits of a SIPP include:
- Pay no Capital Gains Tax on your investment growth
- Not part of your estate for inheritance tax
- You can withdraw up to 25% of your pension tax-free once you reach 55 years of age (57 from 2028), subject to a maximum of £268,275. The rest is taxed like normal income.
Simple investment choice
You don't have to be an expert to use our SIPP. We’ve made it easy to get started with our Quick-start Funds – low-cost funds that give you one-stop access to the world's markets.
For our experts’ latest recommendations, have a look at our Super 60 rated list of investment options, or our ACE 40 list which makes ethical investing simple.
Or you can choose from more than 40,000 investments – with UK and overseas shares, funds, investment trusts and ETFs to choose from.
I had never heard of a SIPP but I’m now completely sold. It’s incredibly straightforward.
Making contributions into a SIPP
- You and/or your employer can contribute to a SIPP. You will need to check whether your employer will agree to contribute.
- Up to 100% of your earnings can be contributed into a SIPP every year (up to the Annual Allowance of £60,000 gross). This includes your own contributions of £48,000 and the government tax relief of £12,000.
- If you have no UK earnings, or earn less than £3,600 a year, you can still pay contributions up to £2,880 and receive tax relief of £720.
- Once you start taking a taxable income from your pension, your annual allowance is reduced to the lower of £10,000 a year and your annual income. This is known as the Money Purchase Annual Allowance (MPAA).
- You can contribute to your SIPP by Direct Debit, bank transfer or debit card.
What happens to my SIPP when I die?
You can pass your pension pot on to your loved ones when you die, which is a tax-efficient way of managing your estate.
You simply need to keep your Expression of Wishes up to date so the trustees have an indication of how you would like your pension fund distributed.
If you die before your 75th birthday and the funds are transferred within two years of your death, your pension pot will be passed on to your beneficiaries tax-free.
If you die after your 75th birthday, they will be liable to pay income tax.
How can Pension Wise help?
If you have a defined contribution pension scheme and are 50 or over, then you can access free, impartial guidance on your pension options by booking a face to face or telephone appointment with Pension Wise, a service from MoneyHelper.
If you are under 50, you can still access free, impartial help and information about your pensions from MoneyHelper.
Learn more about our SIPP
Learn how to make the most of your SIPP with our useful guides.