What a Self-Invested Personal Pension is

A Self-Invested Personal Pension (SIPP) is a type of personal pension where you, not an insurance company or fund manager, decide how your pension money is invested. You choose from a range of investments — stocks, bonds, funds, property, and other assets — within the rules set by HM Revenue & Customs (HMRC). The pension pot grows based on how well those investments perform, and you keep the tax relief on contributions that the government provides to all pension savers.

The key difference from a standard personal pension is control. With a regular personal pension, a provider invests your money according to a strategy they choose. With a SIPP, you direct the strategy yourself, or you hire a financial adviser to do it on your behalf. You also pay an annual charge to a SIPP provider (usually a bank or investment platform) to hold and administer the account.

SIPPs are available to anyone with earned income or a spouse with earned income, up to age 75. You can open one while still working or after you retire, as long as you have may have access to income to contribute.

Key Takeaways

  • You choose which investments go into your SIPP, rather than letting a provider choose for you, and you keep all the tax relief on contributions.
  • SIPPs allow a wider range of investments than standard pensions, including individual stocks, commercial property, and some alternative assets, but HMRC rules restrict what you can hold.
  • You pay an annual administration fee to the SIPP provider, which varies by provider and can range from under £100 to several hundred pounds per year depending on the service level.
  • You must follow HMRC rules about borrowing, prohibited investments (such as residential property you live in), and how much you can contribute each year.
  • When you reach 55 (rising to 57 from 2028), you can start taking money from your SIPP as a pension, either as a lump sum, regular income, or a combination.

How investment choices work in a SIPP

When you open a SIPP, the provider gives you access to an investment platform or list of available assets. What you can buy depends on the provider — some offer a wide range including individual company shares, bonds, and funds; others focus mainly on funds and investment trusts. You log in, select investments, and your contributions are used to buy them. You can change your investments whenever you want, and you pay dealing charges each time you buy or sell (these vary by provider and asset type).

You do not have to pick investments yourself. Many SIPP providers offer a "guided portfolio" service where an adviser recommends a strategy based on your age, risk tolerance, and goals, and then you approve it. Some providers also offer a discretionary service where an adviser manages the account on your behalf, though this usually costs more.

HMRC restricts certain investments. You cannot hold residential property that you or a connected person lives in, fine art, or certain collectibles. You also cannot lend money to yourself or use the SIPP as security for a personal loan. These rules exist to prevent people using pensions as a way to avoid tax on personal assets.

Annual charges and costs

SIPP providers charge an annual administration fee, usually between £100 and £500 per year, though some charge a percentage of your pot (typically 0.25% to 0.5%) or a combination. Charges vary widely, so it is worth comparing providers before you open an account. Some providers charge less if your pot is large or if you hold certain types of investments.

On top of the administration fee, you pay dealing charges when you buy or sell investments — these are separate from the annual fee and depend on what you are trading. You may also pay fund charges if you hold funds or investment trusts, which are set by the fund manager, not the SIPP provider. Over time, these charges can reduce your pension pot, so understanding the full cost before you commit is important.

Contribution limits and tax relief

You can contribute up to £60,000 per tax year into a SIPP and receive tax relief from HMRC. If you earn less than £60,000, you can contribute up to your gross earnings. The tax relief means the government tops up your contribution — if you contribute £8,000, the government adds £2,000 (assuming basic rate tax relief), so your SIPP receives £10,000. Higher earners can claim additional relief through their tax return.

If you have not used your annual allowance in previous years, you may be able to carry forward unused allowance from the past three years, which lets you contribute more in a single year. However, if your total pension savings across all pensions exceed £1,073,100 (the lifetime allowance was removed in 2023, but this threshold still applies to certain protections), you may face a tax charge, so it is worth checking your position if you have multiple pensions or very large savings.

When you can access your SIPP

You can start taking money from your SIPP from age 55 (this will rise to 57 from April 2028). You have several options: take a lump sum, set up regular income withdrawals, or a combination of both. The first 25% of your pot is tax-free; anything above that is taxed as income at your marginal rate.

You do not have to take money all at once or on a fixed schedule — you can leave your SIPP invested and withdraw money as you need it. This is called "drawdown" and is common among SIPP holders because it lets your remaining pot continue to grow. Some people take a tax-free lump sum early on and then draw income gradually, while others leave the money untouched until later.

If you die before age 75, your SIPP can pass to your beneficiaries tax-free. If you die after 75, beneficiaries pay income tax on withdrawals, but at their own marginal rate, not yours.

SIPP vs. standard personal pensions

A standard personal pension is simpler and cheaper to run. The provider chooses an investment strategy (often a "lifestyle" approach that becomes more cautious as you near retirement), and you pay lower annual charges because there is less administration. You have less control but also less responsibility for investment decisions.

A SIPP suits people who want to pick their own investments, have strong views about where their money should go, or hold assets (such as commercial property or shares in a family business) that they want to shelter in a pension. It also suits people who want to manage costs by choosing a low-cost provider and holding low-cost index funds.

A standard personal pension suits people who prefer a hands-off approach, want predictable charges, or have a smaller pot where the annual SIPP fee would eat into returns too heavily. Both receive the same tax relief on contributions and have the same access rules from age 55 onwards.

Rules you must follow as a SIPP holder

HMRC treats SIPPs as trusts, which means you have legal responsibilities. You must keep records of all transactions, report any loans or borrowing to the SIPP provider, and notify them if you move abroad (some providers restrict SIPPs for overseas residents). You cannot use your SIPP to buy assets from yourself or a connected person at below market value, and you cannot borrow against the SIPP to fund personal spending.

If you breach these rules — for example, by investing in a prohibited asset or lending money to yourself — HMRC can charge a tax penalty and require you to remove the asset from the SIPP. In serious cases, the entire SIPP can lose its tax-privileged status, meaning you would owe tax on the full value of the pot.

Most SIPP providers have compliance teams that flag potential breaches, so they will usually warn you before you make a prohibited investment. It is worth reading the provider's rules carefully when you open the account and asking questions if you are unsure whether a particular investment is allowed.

Frequently Asked Questions

Can I hold commercial property in a SIPP?

Yes. You can buy commercial property (offices, shops, warehouses) and hold it in a SIPP. You cannot hold residential property that you or a family member lives in. The property must be held in the SIPP's name, and you cannot live in it or use it for personal purposes. Some SIPP providers specialise in property; others do not offer it at all, so check before you open an account.

What happens to my SIPP if I move abroad?

You can keep a SIPP if you move abroad, but some providers restrict overseas residents or charge higher fees. HMRC still allows you to contribute and receive tax relief, though the rules are complex if you are not a UK resident for tax purposes. You should tell your SIPP provider about the move and check whether they will continue to administer your account.

Can I have more than one SIPP?

Yes. You can open multiple SIPPs with different providers if you want to spread your investments or use different providers for different asset types. However, your total contributions across all pensions are still limited to £60,000 per year (or your gross earnings if lower), and you must track this across all accounts to avoid exceeding the limit.

Do I need a financial adviser to open a SIPP?

No. You can open a SIPP and manage it yourself without professional advice. However, if you are unsure about investment choices or HMRC rules, paying for a one-off consultation with a financial adviser can be worthwhile. Some SIPP providers offer guidance (not personalised advice) as part of their service.

What charges should I expect when I start taking money from my SIPP?

The annual administration fee continues while you are drawing from your SIPP. You may also pay dealing charges if you sell investments to fund your withdrawals. The first 25% of any withdrawal is tax-free; the rest is taxed as income. Some providers charge extra for setting up regular withdrawals, so check the fee schedule before you start drawing.