Self-invested personal pensions (SIPPs) are increasingly popular among UK savers seeking more control over their retirement funds, but the added flexibility brings rules that are often overlooked. From contribution limits to access ages and tax implications, getting the details right can make a significant difference to long-term financial outcomes.
New research by AJ Bell, based on search data from Google Search Console, Semrush and Peec AI, reveals widespread uncertainty about SIPP basics. The findings highlight the most common questions savers are asking as they navigate how SIPPs actually work.
What is a SIPP and how much can you pay in?
A SIPP is a type of personal pension that allows savers to choose from a much wider range of investments than traditional pension schemes. Depending on the provider, this can include funds, shares, investment trusts, exchange-traded funds (ETFs), bonds and gilts. Like other pensions, SIPPs benefit from government tax relief on contributions, helping to boost long-term savings.
For most people, the annual pension allowance is £60,000. This includes contributions made by you, your employer or anyone else paying into your pension. Those without earnings can still contribute and receive tax relief on up to £3,600 a year. Unused allowances from the previous three years can also be carried forward in some cases—although you cannot contribute more than your earnings in the current tax year.
When can you access your SIPP savings?
SIPP savings are designed for later life, so you won’t be able to access the money straight away. Currently, the minimum age is 55, although this is set to rise to 57 in 2028. Once you reach that point, you have several options for how to use your pension. In most cases, you can take up to 25% of your pot tax-free. The rest can remain invested and be drawn down gradually to provide an income.
Drawdown allows you to keep your pension invested while taking money out as needed, offering flexibility over how and when you access your savings. However, taking too much too soon could leave you short later in retirement. Tax implications should also be considered when deciding how much to withdraw.
How withdrawals affect future contributions
Taking certain types of taxable income can trigger the Money Purchase Annual Allowance (MPAA), reducing how much you can contribute to pensions with tax relief to £10,000 a year. This rule is designed to prevent people from recycling pension withdrawals to gain additional tax advantages.
Sarah Coles, head of personal finance at AJ Bell, said: "Since their launch in 1990, self-invested personal pensions have changed significantly. Nowadays, they appeal to huge numbers of people looking for the flexibility they need to take control of their pension. However, there are still millions of people who have yet to get to grips with what they have to offer, so it's worth exploring the most common questions and answers."
Transfers, costs, and death benefits
In many cases, you can move existing pensions into a SIPP or run one alongside your workplace scheme—but it’s not always a straightforward decision. Transferring can give you more control, but some pensions, particularly defined benefit schemes, come with valuable guarantees that could be lost if you move them. Others may include perks such as guaranteed annuity rates or exit charges, so it’s important to understand exactly what you might be giving up before making a switch.
It’s also possible to have a SIPP alongside a workplace pension, as long as you stay within the annual allowance rules. However, experts say it’s worth checking what your employer offers first. If they match contributions, making the most of that should usually be the priority before diverting extra money into a SIPP. While some employers may be willing to pay into a SIPP, opting out of a workplace pension altogether could mean missing out on valuable contributions—so it’s a decision that needs careful thought.
Costs vary depending on the provider and investments chosen. These can include platform fees, fund charges and trading costs. Some providers charge a percentage of your pension value, while others use flat fees or caps.
On death, you can nominate beneficiaries to receive your pension, although the provider has the final say on how it is distributed. AJ Bell says: "If you're under the age of 75 when you die, the payments are tax-free. If you are over the age of 75, they will usually pay income tax when they withdraw it." Until April 2027, all pensions are free of inheritance tax. After that, they will be brought into the IHT net—although most people will still not have a large enough estate to have to worry about inheritance tax.
One of the biggest draws of a SIPP is the wide range of investment options, including thousands of funds, shares, ETFs, bonds and more. For those who prefer a hands-off approach, some providers also offer ready-made or managed portfolios. Opening a SIPP is usually done online, requiring your National Insurance number, payment details and information about any pensions you want to transfer. AJ Bell advises savers to fully understand the charges and terms before committing—and to seek financial advice if unsure.
A Junior SIPP allows parents or guardians to start a pension for a child under 18. Up to £2,880 can be paid in each year, with tax relief boosting this to £3,600. While it can be a powerful way to build long-term savings, the money is locked away until the child reaches the minimum pension age.
