What is a SIPP and how does it work?

A SIPP (Self-Invested Personal Pension) is a type of personal pension that gives you full control over your investments. Unlike a workplace pension where the scheme chooses the funds, a SIPP lets you hold index funds, ETFs, shares, bonds, and investment trusts. Contributions attract the same tax relief as any pension — 20%, 40%, or 45% depending on your income tax rate. When you pay in £800, the provider automatically claims £200 from HMRC (basic rate relief), so the full £1,000 goes into your pot.

How much can I contribute to a SIPP in 2026/27?

The annual allowance for all pension contributions in 2026/27 is £60,000 (or 100% of your earnings, whichever is lower). This limit covers all pensions, not just your SIPP. If you have already triggered the Money Purchase Annual Allowance (MPAA) by flexibly accessing a pension, your limit drops to £10,000. Unused allowances from the previous three tax years can be carried forward.

When can I access my SIPP?

You can access your SIPP from age 55 currently, rising to 57 in April 2028. You can take 25% as a tax-free lump sum (capped at £268,275), then draw the rest as taxable income. You do not have to take everything at once — most people use flexible drawdown, taking income as needed. There is no obligation to buy an annuity.

Is a SIPP better than a workplace pension?

Not necessarily better — different. You should always contribute enough to your workplace pension to capture the full employer match before using a SIPP. Employer contributions are free money that a SIPP cannot replicate. A SIPP is most useful for: additional contributions beyond what your employer scheme allows, more investment choice than your workplace scheme offers, consolidating old pensions from previous employers, or if you are self-employed without access to a workplace scheme.

Who should consider a SIPP?

A SIPP suits you if you are self-employed (no workplace scheme available), want to consolidate multiple old pension pots onto one platform, want to invest in assets not available in your workplace scheme (e.g. individual shares, ETFs, or commercial property), or are a higher rate taxpayer making significant additional contributions beyond the employer scheme. It is not usually the right first step for employed workers — capture employer matching first.

Can I have a SIPP and a workplace pension at the same time?

Yes — and this is very common. Many people contribute to a workplace pension for employer matching and salary sacrifice benefits, then also make additional contributions into a SIPP for investment control or flexibility. Both count towards your £60,000 annual allowance combined. There is no rule against holding multiple pension arrangements.

SIPP UK 2026/27 — Self-Invested Personal Pension Guide, Providers and Rules

UK SIPP guide: how self-invested personal pensions work, tax relief rates, investment options, contribution limits, access age, and when a SIPP beats a workplace pension.

A SIPP (Self-Invested Personal Pension) is the most flexible pension wrapper available to UK savers. It offers the same tax relief as any pension — up to 45% depending on your income tax rate — but lets you choose exactly where your money is invested. For the self-employed, for people with old pensions scattered across previous employers, and for investors who want more control than a default workplace scheme allows, a SIPP is often the most important retirement account they will ever open.

This hub covers how SIPPs work, the key rules for 2026/27, when a SIPP makes sense over a workplace pension, how to choose a provider, and what the access and tax rules look like. For broader pension planning decisions, use the Pension Planning hub.

SIPP Key Rules 2026/27

Feature	2026/27 rule
Annual allowance	£60,000 (or 100% of earnings)
Money Purchase Annual Allowance (MPAA)	£10,000 (triggered by flexible access)
Carry forward	Up to 3 previous tax years of unused allowance
Tax relief — basic rate	20% (provider claims automatically)
Tax relief — higher rate	40% (you claim extra via Self Assessment)
Tax relief — additional rate	45% (you claim extra via Self Assessment)
Minimum access age	55 (rising to 57 in April 2028)
Tax-free lump sum	25% of pot, capped at £268,275

How Tax Relief Works in a SIPP

Tax relief is the biggest financial advantage of a SIPP. When you pay money in, the government adds back the income tax you paid on those earnings.

Taxpayer	Cost to contribute £1,000	Relief received
Basic rate (20%)	£800	£200 claimed by provider
Higher rate (40%)	£600	£200 via provider + £200 via Self Assessment
Additional rate (45%)	£550	£200 via provider + £250 via Self Assessment

The relief is always based on what you actually pay in. If you contribute £800 net, the provider claims £200, and £1,000 lands in your SIPP. Higher rate taxpayers must claim the extra 20% themselves through Self Assessment — it does not happen automatically.

Worked Example: SIPP vs No Pension for a Self-Employed Freelancer

Scenario: Maria is a self-employed graphic designer earning £55,000/year. She pays 40% income tax on earnings above £50,270.

She contributes £5,000 into her SIPP (net payment)
Provider claims £1,250 basic rate relief → £6,250 enters the SIPP
She claims a further £1,250 higher rate relief via Self Assessment
Net cost to Maria: £3,750 for £6,250 invested — an immediate return of 67%

Without a pension, that £3,750 after-tax saving would sit in a current account earning little. Inside a SIPP, it grows free of income tax and capital gains tax until withdrawal.

When a SIPP Makes Sense

Your situation	Does a SIPP help?
Self-employed, no workplace pension	Yes — primary retirement wrapper
Employed, employer offers matching	Use workplace pension first, SIPP second
Old DC pots from previous jobs	Yes — consolidate to reduce fees and complexity
Want to invest in ETFs and index funds	Yes — most workplace schemes have limited fund choice
Want to invest in commercial property	Yes — some full SIPPs allow this
Basic rate taxpayer, no extra contributions	Workplace pension may be simpler

Choosing a SIPP Provider

Provider type matters as much as the underlying investments:

Provider type	Best for	Watch-out
Low-cost platform SIPP (e.g. Vanguard, iWeb)	Index fund investors, lower pot sizes	Limited fund range
Full investment platform SIPP (e.g. AJ Bell, Hargreaves Lansdown)	Wider fund, ETF, and share choice	Higher fees on larger pots
Full SIPP (specialist providers)	Commercial property, esoteric assets	Higher charges, more complexity

Fee comparison matters most on larger pots. A 0.5% platform fee on a £500,000 pot costs £2,500/year. Over 20 years, switching from 0.5% to 0.25% saves tens of thousands of pounds in compounding.

SIPP vs Workplace Pension at a Glance

Feature	SIPP	Workplace Pension
Employer contributions	No	Yes (legally required minimum 3%)
Investment choice	Full range	Scheme-limited funds
Salary sacrifice available	No	Yes (saves NI for employee and employer)
Platform fee	You pay	Often employer-subsidised
Default investment	You choose	Scheme default (usually lifestyle fund)

The right order: capture employer matching in your workplace scheme first. Then decide whether additional contributions go into the workplace scheme or a SIPP.

Pension Planning hub — setting targets and contribution strategy
Pension Tax hub — annual allowance, tax-free cash, drawdown tax
Workplace Pensions hub — employer schemes and salary sacrifice
ISAs hub — the ISA alongside SIPP strategy

The SIPP Cluster Articles

How to Draw Income from a SIPP

Once you reach the minimum access age, you have several options for taking money out:

Withdrawal method	How it works	Tax treatment
Tax-free lump sum (PCLS)	Take up to 25% of pot in one go	Tax-free, capped at £268,275
Flexible drawdown	Keep pot invested, withdraw as needed	75% of each withdrawal taxable as income
Annuity purchase	Exchange pot for guaranteed income for life	Taxable as income
Uncrystallised funds lump sum (UFPLS)	Take ad-hoc lump sums without designating drawdown	25% tax-free, 75% taxable per withdrawal

Most SIPP holders use flexible drawdown because it keeps investment growth going and allows income to be timed around personal tax position. In years where you have little other income, you can draw more from the SIPP while staying within lower tax bands.

The MPAA trap: Once you start flexible drawdown, your future pension contribution limit drops from £60,000 to £10,000 (the Money Purchase Annual Allowance). This is a one-way door — you cannot reverse it. Anyone still earning and wanting to make significant future pension contributions should plan access timing carefully.

What Happens to a SIPP When You Die?

Unlike most assets, a SIPP sits outside your estate for Inheritance Tax purposes — until April 2027, when pension assets will become subject to IHT as part of wider estate planning changes. Until then:

If you die before age 75, your SIPP can be passed on to nominated beneficiaries tax-free
If you die aged 75 or over, beneficiaries pay income tax at their marginal rate on withdrawals
The pot does not form part of your estate for IHT (until April 2027 rule change)
Nomination form must be kept up to date — the pension trustees decide who receives the pot

Complete guide to SIPPs. How they work, tax relief, investment options, charges, and whether a SIPP is right for your …

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