SIPP Explained: Self-Invested Personal Pension Guide
What Is a SIPP?
A Self-Invested Personal Pension (SIPP) is a type of personal pension that gives you the freedom to choose your own investments. Unlike a standard personal pension where the provider manages your money in a limited range of funds, a SIPP lets you pick from thousands of options.
SIPPs are available from investment platforms like Vanguard, AJ Bell, Hargreaves Lansdown, Interactive Investor, and Fidelity.
What Can You Invest In?
A SIPP typically gives you access to:
- Index funds and ETFs — low-cost funds that track market indices
- Investment trusts — pooled investment companies listed on the stock exchange
- Managed funds — actively managed funds run by professional fund managers
- Individual shares — UK and international stocks
- Bonds — government gilts and corporate bonds
- Commercial property — some SIPPs allow direct property investment
- Cash — you can hold cash within your SIPP
The exact range depends on your SIPP provider. Most platforms offer thousands of funds and shares.
How Contributions Work
SIPP contributions work the same as any pension:
- You contribute from your personal income
- Your provider claims 20% basic rate tax relief from HMRC automatically
- Higher and additional rate taxpayers claim extra relief through Self Assessment
- The annual allowance is £60,000 (2025/26) or 100% of earnings
You can make regular monthly contributions, one-off lump sums, or a combination of both. Most SIPPs have no minimum contribution or a very low minimum (often £1).
SIPP Costs
SIPP costs typically include:
- Platform fee — an annual charge for holding your SIPP, usually 0.15% to 0.45% of your pot
- Fund charges — the ongoing charges for the funds you invest in (index funds: 0.05-0.20%, active funds: 0.50-1.50%)
- Dealing charges — fees for buying and selling investments (£0 to £12 per trade)
For a £100,000 SIPP invested in index funds, total annual costs could be as low as £250-£400 — compared to £1,000-£1,500 for a traditional personal pension.
Who Should Use a SIPP?
A SIPP is ideal if you:
- Want to invest in low-cost index funds
- Are comfortable making investment decisions
- Have a pension pot above £10,000-£20,000 (where the cost advantage becomes meaningful)
- Want flexibility in how and when you contribute
- Plan to use drawdown in retirement
If you prefer simplicity and do not want to choose investments, a personal pension with a default fund may be more appropriate.
SIPPs in Retirement
When you reach pension age (currently 55, rising to 57 in 2028), you can:
- Take 25% of your pot tax-free
- Draw an income through flexi-access drawdown
- Buy an annuity
- Take the whole pot as cash (though this may be heavily taxed)
Many SIPP providers offer drawdown as a standard feature, allowing you to keep your investments working while taking an income.
How to Open a SIPP
- Choose a platform (compare fees, investment range, and usability)
- Complete the application online (you will need your National Insurance number)
- Set up contributions (regular or one-off)
- Choose your investments
- Claim additional tax relief through Self Assessment if applicable
Using Accounted Alongside Your SIPP
Accounted helps you manage the income side so you can make informed pension decisions:
- Income tracking — know your earnings throughout the year
- Tax band visibility — understand your marginal rate for tax relief
- Self Assessment support — claim higher rate relief correctly
Check our pricing for details.
Take control of your retirement savings. Sign up for Accounted and let Penny give you the financial clarity to invest confidently.
Tax & Compliance Specialists
Our tax specialists have decades of combined experience in UK sole trader and small business taxation, MTD compliance, and HMRC submissions. All content is reviewed against current HMRC guidance before publication and updated quarterly to reflect legislative changes.
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