PENSIONS · 2026/27

Should I Open a SIPP?

The honest version of the self-invested pension conversation — what it does, what it does not do, and when it makes sense.

12 min read · Updated June 2026

At some point in most people’s working lives, the question arrives: should I open my own pension? Not the one the employer set up, with its default fund and limited choices. A real one. One where you decide what to invest in, how much to put in, and when to access it.

The answer, for most people who ask the question seriously, is yes. But the reasoning matters almost as much as the decision itself — because a SIPP opened for the wrong reasons, or managed without understanding how it fits with everything else, can be considerably less useful than it appears.

This is the honest version of the SIPP conversation.

A SIPP does not give you better tax relief than a workplace pension. It gives you more control over where that relief goes.

What a SIPP Is and What It Is Not

A Self-Invested Personal Pension is a pension wrapper. Like all pensions, it provides tax relief on contributions, tax-free growth on investments, and a tax-free lump sum on the way out. What distinguishes it is investment choice. A SIPP typically allows you to invest in thousands of funds, individual shares, ETFs, investment trusts, bonds, and other assets. Your employer’s default workplace pension usually offers a much narrower range.

The tax relief mechanism is Relief at Source. You contribute from your net pay. The SIPP provider claims 20% basic rate tax from HMRC and adds it to your pot — usually within a few weeks. If you are a higher or additional rate taxpayer, you claim the extra relief through your Self Assessment return.

A £800 contribution from a higher rate taxpayer: the provider claims £200 from HMRC. Pot receives £1,000. The taxpayer then claims a further £200 via Self Assessment. Effective cost: £600 for a £1,000 pension contribution.

This is identical to what happens in a workplace pension using Relief at Source. The SIPP does not offer superior tax treatment. It offers the same tax treatment with more flexibility.

The one thing a SIPP does not do:

Save National Insurance. Because SIPP contributions come from your post-PAYE pay, your NI-able earnings are unchanged. If your employer offers salary sacrifice, that mechanism saves NI too. A SIPP does not.

This is why workplace salary sacrifice, where available, should generally come first. A SIPP is the right next step once the workplace scheme is fully used, or when salary sacrifice is not offered.

Who Should Open One

The self-employed. With no employer scheme available, a SIPP is the primary retirement vehicle. You contribute what you can afford, claim relief at 20% through the provider and the balance through Self Assessment, and build a pension entirely under your own direction.

Employees who want more than their workplace scheme offers. If your employer’s default fund is a low-cost global tracker, you may not need a SIPP at all. But if you want access to specific assets — individual equities, specialist funds, investment trusts — that your workplace scheme does not offer, a SIPP alongside the workplace pension gives you that access.

Higher earners approaching the £100,000 ANI threshold. SIPP contributions reduce your Adjusted Net Income in exactly the same way as workplace pension contributions. If your workplace scheme uses salary sacrifice and you have maxed it, a SIPP contribution provides the same ANI benefit through a different route. For someone at £102,000 ANI wanting to bring it below £100,000, a £2,000 gross SIPP contribution (£1,600 cash paid) achieves exactly that.

Those whose employer does not offer salary sacrifice. If salary sacrifice is not available, a SIPP offers equivalent Income Tax relief, broader investment choice, and the same tax-free growth. The NI saving is absent either way.

The Limits Worth Knowing

The Annual Allowance. Your total pension contributions from all sources — your contributions, your employer’s contributions, any personal SIPP payments — cannot exceed £60,000 per year or 100% of your earnings, whichever is lower. Exceed this and a tax charge applies. If you are contributing to both a workplace pension and a SIPP, the totals are combined.

The Money Purchase Annual Allowance. Once you have started drawing flexibly from any pension — taking income from drawdown, for example — your annual allowance for defined contribution pension contributions falls to £10,000. This catches people who access pension pots early and then want to continue contributing heavily.

Carry forward. If you have unused Annual Allowance from the previous three tax years, you may be able to contribute more than £60,000 in a single year. This can be useful if you have had a particularly good year or want to make a large lump sum contribution. It requires advice to calculate correctly.

Access age. You cannot access a SIPP before age 57 — rising from 55 in 2028. The money is locked away until then. This is a feature for retirement saving purposes, but worth being clear-eyed about if you value liquidity.

The April 2027 IHT change. From April 2027, pension pots — including SIPPs — will be included in estates for Inheritance Tax purposes. This does not affect the retirement savings case for a SIPP. But it changes the estate planning dimension significantly. If you were planning to leave your SIPP pot to your family, that plan requires revisiting. See our article on the pension versus ISA question for the full picture.

Choosing a Provider

The main SIPP providers for individual investors differ primarily on charges and usability. For smaller pots, a percentage-based annual charge (typically 0.25–0.45%) is usually cheapest. For larger pots above around £50,000, a flat annual fee tends to become more competitive.

The Bottom Line

A SIPP is not complicated to open and not difficult to understand. What requires care is making sure it fits properly with everything else — your workplace pension, your Annual Allowance, your ANI position, and from 2027, your estate plan.

Important: This article is for informational purposes only and does not constitute financial or tax advice. Based on 2026/27 HMRC rates which are subject to change. Individual circumstances vary. Seek independent advice from a qualified financial adviser before making any financial decisions. When you invest, your capital is at risk. WageLab is not FCA regulated.

Use the WageLab calculator to see how these tax rules apply to your specific circumstances.

WageLab is not FCA regulated and does not provide financial advice. This article is for informational purposes only. Full article content coming soon.