SIPPs Explained: Self-Invested Pensions

Annual allowance, 2026/27

£60,000

Earliest usual access age from 6 April 2028 (55 now)

57

FSCS limit if a SIPP operator fails

£85,000

Defined benefit transfers above this need advice

£30,000

A SIPP, or self-invested personal pension, is a personal pension that you set up yourself and where you choose what it invests in. It gets the same tax relief as other pensions, but instead of leaving the investments to your employer’s scheme or a pension company, you pick them, usually from a range of funds, ETFs and shares on an investment platform. This guide explains how SIPPs work, what they can hold, what they cost, how to move old pensions into one safely and when you can take the money out.

What is a SIPP?

MoneyHelper describes a SIPP as a type of pension you can set up yourself, where you choose the provider and often how your money is invested. It’s a defined contribution pension: what you get depends on how much goes in and how the investments perform, not on a guaranteed income.

People typically use a SIPP to:

• save for retirement if they’re self-employed or don’t have a workplace pension
• add to a workplace pension with their own extra payments
• bring old pensions together in one place they can manage
• have more choice over investments than their workplace scheme offers

A SIPP isn’t usually a replacement for a workplace pension if your employer pays into that. Employer contributions only go into the workplace scheme, unless your employer agrees otherwise.

How does tax relief work in a SIPP?

SIPPs use relief at source. You pay in from your take-home pay and the provider claims basic-rate relief of 20% from the government, so each £80 you pay in becomes £100. Higher and additional-rate taxpayers can claim extra relief through Self Assessment or from HMRC.

The usual pension limits apply. You get relief on payments up to 100% of your earnings, or up to £3,600 a year including relief if you earn less than that. Total payments into all your pensions count towards the £60,000 annual allowance for 2026/27. Our guide to pension tax relief covers the rules in full, including Scottish rates and carry forward.

Example: a self-employed person pays £400 a month into a SIPP. The provider adds £100 a month in basic-rate relief, so £6,000 a year goes into the pension for £4,800 of their own money. If they pay higher-rate tax on enough income, they can claim up to another £1,200 back through Self Assessment.

What can you invest in through a SIPP?

What you can hold depends on the provider. On most investment platforms, a SIPP can hold:

• funds, including index funds and actively managed funds
• ETFs and investment trusts, which are listed on a stock exchange
• shares in individual companies
• bonds, such as government gilts and corporate bonds
• cash waiting to be invested

MoneyHelper notes that some SIPPs can also hold commercial property and land, usually through specialist providers with higher charges. Residential property is different: HMRC classes it as “taxable property”, and a pension that invests in it directly triggers tax charges for both the member and the scheme. In practice, a SIPP isn’t a way to own a buy-to-let.

If you’d rather not choose investments yourself, most SIPP providers offer ready-made portfolios or a default fund. Our guides to index funds and ETFs explain two of the most common building blocks.

What does a SIPP cost?

SIPP costs work much like other investment accounts:

• a platform or administration fee, either a percentage of your pension or a flat amount
• fund charges (the ongoing charges figure) inside each fund or ETF
• dealing charges for buying and selling shares, ETFs and investment trusts on many platforms
• sometimes charges for drawdown once you start taking money out, or for transferring away

Because a pension can be invested for decades, small differences in charges add up. On our example of £10,000 plus £200 a month over 30 years, growing 5% a year before charges, charges of 1.0% a year leave about £38,000 less than no charges at all. Our platform fees guide explains how to compare them.

Should you transfer old pensions into a SIPP?

Bringing several old workplace pensions into one SIPP can make them easier to track and invest, and sometimes cheaper. But check what you’d lose before you move anything.

Defined contribution pensions

Before transferring, check whether the old pension has an exit charge, guaranteed annuity rates, a protected tax-free cash entitlement above 25%, a protected pension age, or lower charges than the SIPP. MoneyHelper warns that you might lose valuable benefits by leaving your current provider.

Defined benefit (final salary) pensions

A defined benefit pension pays a guaranteed income for life, usually rising each year. If it’s worth more than £30,000, you must get advice from a regulated financial adviser before you can transfer it. The FCA says most people would be best advised not to transfer, because they’d give up that guaranteed income and take on investment risk.

How to avoid pension scams

Scammers often target people moving pensions. Warning signs from the FCA include:

• unexpected contact offering a “free pension review”
• offers to release money before age 55, which the FCA says is almost certainly a scam
• cold calls about your pension, which are illegal and, the FCA says, probably a scam

Check any firm on the FCA register before you deal with it, and always start a transfer through the new provider yourself.

Is your money protected in a SIPP?

SIPP providers are authorised and regulated by the FCA. If a SIPP operator fails, or you received bad advice about a pension from a firm that has failed, the Financial Services Compensation Scheme may pay up to £85,000 per person, per firm. Like any investment, the FSCS doesn’t cover your investments falling in value.

When can you take money out of a SIPP?

You can usually start taking money from a SIPP at 55, rising to 57 from 6 April 2028, unless you have a protected earlier pension age. You then have several options, which you can combine:

• Tax-free cash. Usually up to a quarter of the pension, up to £268,275 in total.
• Drawdown. Leave the rest invested and take income as you need it. Each withdrawal beyond the tax-free part is taxed as income.
• An annuity. Use some or all of the pension to buy a guaranteed income for life.
• Taking it all at once. Possible, but the taxable part is added to your income for that year and can push you into a higher tax band.

Once you take taxable money, the amount you can pay into defined contribution pensions with tax relief usually drops to £10,000 a year.

If you’re 50 or over, Pension Wise from MoneyHelper offers a free, impartial appointment to talk through these options. It’s backed by the government and open to anyone with a defined contribution pension, whatever its size.

What happens to a SIPP when you die?

You can tell your provider who you’d like to receive your pension. From 6 April 2027, unused pension savings will usually count towards your estate for inheritance tax, under the Finance Act 2026. Pensions left to a spouse or civil partner, or to charity, remain exempt.

Can you open a SIPP for a child?

Yes. A parent or legal guardian can set up a pension for a child, often called a junior SIPP. Up to £2,880 a year can be paid in, which becomes £3,600 with tax relief, even though the child has no earnings. Control passes to the child at 18, but the money is locked until they reach the minimum pension age, currently due to be 57. That makes it very long-term saving, unlike a Junior ISA, which the child can use from 18.

What to check before choosing a SIPP

We can’t recommend a provider, but these questions help you compare:

• Charges. Is the platform fee a percentage or flat, and is there a cap? What are the dealing charges, and are there drawdown or exit fees?
• Investment range. Does it offer the funds, ETFs or ready-made portfolios you want?
• Transfers. Will it accept transfers in from your old pensions, and does it charge for them?
• Taking money out. Does it offer drawdown, and what does that cost?
• Authorisation. Is the firm on the FCA register?

For how SIPPs compare with ISAs and workplace pensions, see our guide to pension tax relief.

Sources

• MoneyHelper: Self-invested personal pensions (SIPPs)
• GOV.UK: Tax on your private pension contributions, tax relief
• HMRC: Pension schemes rates and allowances
• HMRC Pensions Tax Manual PTM125100: taxable property
• FCA: Pension transfer advice, what to expect
• MoneyHelper: Transferring your defined benefit pension
• FCA: How to avoid pension scams
• GOV.UK: Transferring your pension
• FSCS: Pensions
• MoneyHelper: Pension Wise
• MoneyHelper: Saving for your children
• MoneyHelper: Taking your whole pension in one go
• Finance Act 2022, section 10: normal minimum pension age
• HMRC: Inheritance Tax on unused pension funds and death benefits

Our guides are general information and education, not personal financial advice. If you are unsure whether an investment is right for you, speak to a regulated financial adviser. Capital at risk. Investments can fall as well as rise, and you may get back less than you put in.