Understanding when a SIPP adds value versus sticking with your workplace pension.
Quick Comparison
| Feature | Workplace Pension | SIPP |
|---|---|---|
| Set up by | Employer | You |
| Employer contributions | Yes | No |
| Investment choice | Limited | Wide |
| Fee cap | 0.75% | No cap |
| Effort required | Low | Higher |
How Each Works
Workplace Pension
| Feature | Details |
|---|---|
| Auto-enrolled | At work |
| Provider chosen | By employer |
| Contributions | You + employer |
| Investment options | Pre-selected funds |
| Tax relief | Automatic |
SIPP (Self-Invested Personal Pension)
| Feature | Details |
|---|---|
| You set up | Choose provider |
| You fund | No employer contributions |
| Investment choice | Thousands of options |
| Tax relief | Claimed same way |
| Full control | You manage |
Employer Contributions
Why This Matters Most
| Workplace Pension | Benefit |
|---|---|
| You contribute 5% | |
| Employer adds 3% | Minimum |
| Some add more | Up to 10-15% |
| Free money | Don’t lose this |
Example Impact
| Monthly Salary: £3,000 | Workplace | SIPP Only |
|---|---|---|
| Your contribution (5%) | £150 | £150 |
| Employer contribution (5%) | £150 | £0 |
| Tax relief (20%) | £37.50 | £37.50 |
| Total invested | £337.50 | £187.50 |
Never Sacrifice Employer Match
| Rule | |
|---|---|
| Always get employer match | First priority |
| Even if fees higher | Free money wins |
| Then consider SIPP | For additional savings |
Investment Choice
Workplace Pension Options
| Typical Choice | Range |
|---|---|
| Default fund | Often target-date |
| Some alternatives | 5-20 funds |
| Usually | Quite limited |
| Quality | Varies by employer |
SIPP Options
| Available | Range |
|---|---|
| Individual shares | Thousands |
| Funds | Thousands |
| ETFs | Hundreds |
| Investment trusts | Hundreds |
| Bonds | Yes |
When Choice Matters
| Situation | Impact |
|---|---|
| Happy with default fund | Workplace fine |
| Want specific investments | SIPP needed |
| Want very low-cost index | SIPP may be cheaper |
| Want ethical/ESG specific | Check both |
Fees Comparison
Workplace Pension Fees
| Component | Typical |
|---|---|
| Fee cap | 0.75% max |
| Many schemes | 0.3-0.5% |
| Default fund | Often lowest |
| Other funds | May be higher |
SIPP Fees
| Component | Range |
|---|---|
| Platform fee | 0-0.45% |
| Fund fees | 0.1-1.5% |
| Trading fees | £0-12 per trade |
| No cap | Can be higher |
Fee Examples
| Provider Type | Total Typical Fee |
|---|---|
| Good workplace pension | 0.3-0.5% |
| Low-cost SIPP | 0.2-0.4% |
| Mid-cost SIPP | 0.4-0.6% |
| High-cost SIPP | 0.8-1.5% |
Fee Impact (£100,000 over 20 years)
| Annual Fee | Final Value* | Lost to Fees |
|---|---|---|
| 0.25% | £320,714 | £4,351 |
| 0.50% | £306,131 | £18,934 |
| 0.75% | £292,054 | £33,011 |
| 1.00% | £278,464 | £46,601 |
*Assuming 7% gross returns
When Workplace Pension Is Better
Stick with Workplace If
| Situation | Why |
|---|---|
| Employer matches | Free money |
| Low fees | Under 0.5% |
| Decent default fund | Good enough |
| Simple needs | Less effort |
| Auto-escalation | Contributions increase |
Workplace Benefits
| Benefit | Details |
|---|---|
| Employer pays in | Unmatched advantage |
| Payroll deduction | Effortless |
| Fee cap | Protected |
| Default option | Works for most |
When SIPP Is Better
Add a SIPP If
| Situation | Why |
|---|---|
| After employer match | Extra savings |
| Workplace fees high | 0.75%+ |
| Poor fund choice | Better options elsewhere |
| Self-employed | No workplace option |
| Want specific investments | Control needed |
SIPP Benefits
| Benefit | Details |
|---|---|
| Investment freedom | Full choice |
| Provider choice | Shop around |
| Consolidation | Multiple pots together |
| Control | Manage yourself |
Common Strategies
Strategy 1: Workplace Only
| Approach | Details |
|---|---|
| Maximise employer match | Top priority |
| Use default fund | If reasonable |
| Simple and effective | For most people |
| Review periodically | Fees and performance |
Strategy 2: Workplace + SIPP
| Approach | Details |
|---|---|
| Workplace for | Employer contributions |
| SIPP for | Additional savings |
| Best of both | Employer match + choice |
| Common approach | For engaged savers |
How to Split
| Order | Action |
|---|---|
| 1st | Get full employer match |
| 2nd | If more to save, compare options |
| 3rd | SIPP if workplace expensive |
| 4th | Or increase workplace if cheap |
Strategy 3: SIPP Only
| Approach | Details |
|---|---|
| Self-employed | No workplace option |
| No employer contribution | Nothing to lose |
| Full control | Choose everything |
Transferring Pensions
When to Transfer to SIPP
| Situation | Consider Transfer |
|---|---|
| Old workplace pensions | Consolidate |
| High-fee schemes | Move to cheaper |
| Poor performance | Better options |
| Want control | Full choice |
When NOT to Transfer
| Situation | Keep Where It Is |
|---|---|
| Current workplace | Lose employer contributions |
| Defined benefit | Lose guarantees |
| Guaranteed annuity rates | Valuable |
| Exit penalties | Check first |
Transfer Process
| Step | Action |
|---|---|
| 1 | Open SIPP |
| 2 | Get current pension details |
| 3 | Request transfer via new SIPP |
| 4 | Usually takes 4-8 weeks |
| 5 | Old pension closed |
Choosing a SIPP Provider
What to Compare
| Factor | Why |
|---|---|
| Platform fee | Annual percentage |
| Fund charges | On top of platform |
| Trading costs | If buying shares |
| Minimum investment | Can you start? |
| User experience | App/website quality |
Popular SIPP Providers
| Provider Type | Examples |
|---|---|
| Low-cost | Vanguard, InvestEngine |
| Mid-range | Hargreaves Lansdown, AJ Bell |
| Fund-focused | Fidelity, Interactive Investor |
Summary
| Factor | Workplace Wins | SIPP Wins |
|---|---|---|
| Employer contributions | ✓ | |
| Investment choice | ✓ | |
| Lowest fees | Sometimes | Sometimes |
| Effort | ✓ | |
| Control | ✓ |
| Recommendation | |
|---|---|
| First priority | Get employer match |
| If fees low | Workplace may be enough |
| For extra savings | Compare fees, consider SIPP |
| Self-employed | SIPP is the option |
| Old pensions | Consider consolidating to SIPP |