SIPPs Explained
A Self-Invested Personal Pension is a DIY pension wrapper. Tax relief on the way in, growth tax-free, taxed on withdrawal — usually still a great deal.
A SIPP gives you control over your pension investments. Instead of an employer-chosen default fund, you choose what to hold — funds, ETFs, individual shares, bonds, even commercial property.
How tax relief works
Every £80 you put in becomes £100 in the pension automatically. If you're a higher-rate taxpayer, you reclaim another £20 via Self Assessment, so the same £100 in the pension only cost you £60. Additional rate? £55.
The annual allowance
£60,000/year for most people. If you earn over £260k, this tapers down to £10,000. Unused allowance carries forward 3 years if you've been a member of a pension scheme.
Accessing your SIPP
From age 57 (rising to align with State Pension age), you can:
• Take 25% as a tax-free lump sum (capped at £268,275 lifetime)
• Drawdown the rest as taxable income
• Buy an annuity (guaranteed income for life)
SIPP vs workplace pension
Workplace pensions are usually fine — especially with employer matching. SIPPs come into their own when:
• You're self-employed and have no workplace scheme
• You want low-cost index funds your employer doesn't offer
• You're consolidating old workplace pensions into one place
• You're a higher earner using carry-forward to bank big contributions
