SIPP vs NEST vs Workplace Pension: Which is Best for Self-Employed?

Choosing a pension when you are self-employed is not like choosing one as an employee. Nobody picks for you. There is no default option ticked by your HR department. You have to decide between a SIPP, NEST, or possibly a workplace pension if you are also employed part-time. Each has different costs, investment options, and levels of flexibility. This guide compares them side by side so you can make a sensible decision for the 2025/26 tax year.

The Three Options at a Glance

Before diving into detail, here is a quick summary.

| Feature | SIPP | NEST | Workplace Pension | |---|---|---|---| | Who is it for? | Anyone | Anyone (designed for auto-enrolment) | Employees (including self-employed with a job) | | Investment choice | Wide | Limited | Varies by scheme | | Annual charge | 0.15%–0.45% typical | 0.3% | 0.3%–0.75% typical | | Contribution charge | None | 1.8% on each contribution | None | | Employer contribution | No | No (unless employed) | Yes (minimum 3%) | | Flexibility | High | Low | Varies | | Minimum contribution | Varies (some from £1) | None | Based on qualifying earnings |

SIPP: Maximum Control

A Self-Invested Personal Pension gives you the widest range of investment options and the most control over your retirement savings. Most major investment platforms offer SIPPs.

How it works

You open a SIPP account with a provider, set up contributions (regular or one-off), and choose what to invest in. The provider claims basic rate tax relief (20%) from HMRC automatically. If you are a higher or additional rate taxpayer, you claim the extra relief through Self Assessment.

Investment options

This is where SIPPs stand apart. You can typically choose from:

• Index tracker funds (the simplest and cheapest option)
• Actively managed funds
• Investment trusts
• Individual shares
• Government and corporate bonds
• Ready-made portfolios based on risk level
• Cash holdings

If you do not want to pick individual investments, most SIPP providers offer ready-made portfolios. You choose a risk level (cautious, balanced, or adventurous) and the provider manages the asset mix. This gives you SIPP flexibility without needing to be an investment expert.

Charges

SIPP charges vary significantly between providers. The main costs are:

Platform fee: Typically 0.15% to 0.45% of your fund value per year. Some charge a flat monthly fee instead, which is better value as your pot grows.

Fund charges: The underlying funds have their own annual charges — 0.10-0.20% for index trackers, 0.50-1.00% for actively managed funds.

Dealing charges: Buying individual shares may cost £5-£12 per trade. Most funds have no dealing charge.

Crucially, there is no contribution charge. Every penny you put in goes into your account.

When a SIPP makes sense

A SIPP suits people who want investment control and the lowest overall charges. If you are contributing more than a few hundred pounds a month, the absence of a contribution charge makes a meaningful difference over time compared to NEST.

NEST: Simplicity and Low Cost

NEST (National Employment Savings Trust) was created by the government to support auto-enrolment for employees, but anyone can join, including self-employed people.

How it works

You sign up online at nestyourpension.org.uk, choose a fund, and start contributing. You can set up a direct debit for regular contributions or make one-off payments. NEST claims basic rate tax relief automatically. Higher rate relief must be claimed through Self Assessment.

Investment options

NEST keeps things simple. The main options are:

NEST Retirement Date Fund: You choose the fund based on when you expect to retire (for example, NEST 2040 if you plan to retire around 2040). The fund starts more heavily invested in shares for growth and gradually shifts towards bonds and cash as you approach retirement. This is the default and suits most people.

NEST Ethical Fund: Excludes sectors like tobacco and weapons, focusing on better environmental and social practices.

NEST Sharia Fund: Compliant with Islamic finance principles.

NEST Higher Risk Fund: More heavily weighted towards shares for potentially higher long-term returns.

NEST Lower Growth Fund: Mainly cash and short-term bonds for minimal risk.

You cannot pick individual shares or build your own portfolio. It is pick-a-fund-and-go.

Charges

NEST has two charges:

Contribution charge: 1.8% on every payment you make. So if you contribute £500, £9 goes to NEST and £491 is invested.

Annual management charge: 0.3% of your fund value per year.

The contribution charge is the main drawback. Over a long period, the low annual charge partially offsets it, but in the early years the 1.8% bite on every contribution is noticeable. For someone contributing £5,000 a year, that is £90 a year that never gets invested.

When NEST makes sense

NEST suits people who want simplicity, are contributing small amounts, or prefer a government-backed option. It is also good if you just want to start saving without comparing SIPP providers.

Workplace Pension: The Employed Option

If you are self-employed but also have a part-time job, you may already be enrolled in a workplace pension. This is worth understanding because it comes with free money from your employer.

How it works

Under auto-enrolment, your employer must contribute at least 3% of your qualifying earnings to a pension scheme. You contribute at least 5% (which includes tax relief). The total minimum is 8%.

Qualifying earnings for 2025/26 are the band between £6,240 and £50,270. So on a part-time salary of £20,000, qualifying earnings are £13,760. The minimum employer contribution is 3% of that: £412.80 per year. Your contribution would be 5%: £688 per year.

Investment options

This depends entirely on the scheme your employer uses. Some use NEST, some use providers like Scottish Widows, Aviva, or Royal London. The range of fund options varies — some schemes offer a good selection, others only have a handful of funds.

Charges

Workplace pension charges are capped at 0.75% per year for default funds in auto-enrolment schemes. Many schemes charge less. There is typically no contribution charge.

When this matters for self-employed people

If you have a part-time job alongside your self-employment, do not opt out of the workplace pension. The employer contribution is free money — a guaranteed and immediate return on your contribution. No SIPP or NEST can match that.

You can have both a workplace pension and a personal pension (SIPP or NEST). Just make sure your total contributions across all schemes stay within the annual allowance of £60,000.

Head-to-Head Comparison

Charges over 20 years

Let us say you contribute £400 per month (£4,800 per year) for 20 years, with a 5% annual return after fund charges.

SIPP (platform fee 0.25%, fund charge 0.15%):

• Total contributions: £96,000
• Charges paid: approximately £3,400
• Estimated pot: approximately £195,000

NEST (1.8% contribution charge, 0.3% annual charge):

• Total contributions: £96,000
• Contribution charges: approximately £1,730
• Annual charges: approximately £4,200
• Estimated pot: approximately £188,000

The SIPP comes out ahead, mainly because the contribution charge in NEST reduces the amount invested from day one. The gap widens with larger contributions and longer time periods.

Flexibility

SIPPs win here. You can transfer pensions in and out, choose from hundreds of funds, and adjust your mix at any time. NEST has restrictions on transfers and limited investment choice — it is designed to be hands-off.

Ease of use

NEST wins on simplicity. Pick a retirement date fund, set up contributions, and you are done. A SIPP requires more involvement, though ready-made portfolios make it almost as simple.

Which Should You Choose?

Choose a SIPP if:

• You are contributing more than £200 per month
• You want control over your investments
• You have old pensions you want to consolidate
• You are comfortable using an investment platform (even a simple one)

Choose NEST if:

• You want the simplest possible option
• You are contributing small amounts to start
• You do not want to think about investments at all
• You prefer a government-backed scheme

Keep your workplace pension if:

• You are employed part-time alongside self-employment
• You are getting employer contributions (free money)
• The scheme charges are reasonable

There is nothing wrong with having more than one pension. You might have a workplace pension from a part-time job and a SIPP for your self-employed savings. Just keep track of your total contributions.

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Related Reading

• Tax Guide for Self-Employed Architects
• Allowable Expenses for Self-Employed: What HMRC Lets You Claim

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