Pensions are long term investments. You may get back less than you originally paid in because your capital is not guaranteed and charges may apply.
Last updated: 29 March, 2021
A Self Invested Personal Pension (SIPP) is pension that you're solely responsible for. This means you have to choose and manage your own investments.
SIPP providers are the companies that supply these pensions. It’s crucial to find the best SIPP provider if you’re to find the best SIPP for your needs.
A SIPP works very much like a standard personal pension, except you have more flexibility and control over your investments. A SIPP holds your investments until you retire, and then you start accessing the funds.
It is often referred to as a 'SIPP pension' or even a 'DIY pension'.
Finding the best SIPP: different kinds of SIPPs
As well as choosing between SIPP providers to find the right one, you'll also need to work out which type of self-investment pension is right for you.
A full SIPP gives you the most choice on where to invest. This could be the best SIPP for you if you have a large pension fund and lots of experience with investing. The charges are high but you do usually have access to a team who you can discuss your investments with. They might be able to help you with complex investments, too.
The other type is a low cost SIPP. This is sometimes called a low-cost DIY SIPP or lite SIPP. It still gives a lot of choice on where you can invest, but not as much as a full SIPP. There's no option to own property or offshore funds, or to invest in unquoted shares. This could be the best SIPP for you if you have smaller pension savings. You could start one of these with a sum as small as £5,000. The charges are lower, so if you're looking for a good value pension, look out for the cheapest SIPP lite you can find. With this kind of SIPP, you won't get any advice from the pension provider. Low cost SIPP providers just act on your instruction.
Whichever type you choose, it's important to find the best SIPP providers for your needs. Some offer a ‘bells and whistles’ service with the latest technologies, and others are ‘no frills’. As you’d expect, the ‘no frills’ ones are likely to be cheaper.
You’ve found the best SIPP provider … but is a SIPP right for you?
If you're looking into SIPP providers because you fancy opening a SIPP, it's important that you have some financial knowledge. You'll need to understand how to manage and invest in individual funds.
If you try to manage a SIPP without knowing how to do this, you could lose the money you put in. For this reason, they’re not right for everyone. Managing a SIPP comes with a lot of responsibility, and can take up a lot of time.
Some people would prefer to control where their money goes themselves. These people might not want a pension company controlling where their savings are invested. If having this control is important to you, you might like to open a SIPP, and it’s time to start looking at the best SIPP providers.
But, if you wouldn't be comfortable managing your own SIPP investments, then speak to an independent financial adviser. It might be that SIPPs aren't quite right for you. There could be more suitable pensions for your needs.
You can speak to a pensions broker about whether a SIPP is right for you and what the best SIPP might be. You can discuss SIPP pension rules too.
Most of the time, SIPPs are managed online, but some can be managed by phone or post. You might have to pay more for one that isn’t managed online. SIPP providers are different and have different SIPP rules, so you'd need to check the details.
Managing your self-invested pension online is usually the easiest option, so the best SIPP provider for you might be one that offers this. It works like online banking. You can buy and sell investments, and monitor their progress, at the click of a button.
With a standard personal pension, the investments are all managed for you by your pension provider and you don't need to get involved. They also have a shorter list of funds to choose from.
But with a SIPP, you're free to manage all the investments yourself. You could pay an investment manager to do it for you, but they're really designed for people who want to manage their own fund. You can switch your investments whenever – and to wherever – you like. You just instruct your SIPP provider to do what you want them to.
Our SIPP comparison shows you which markets you can invest in when building your SIPP. The options include:
Shares in AIM and FTSE
Permanent Interest-Bearing Shares (PIBS)
Personalised pension funds.
Research each market before choosing the best SIPP providers for you. SIPP providers all offer different funds, with varying investment strategies.
The costs can vary a lot, depending on how you invest in your SIPP. SIPP providers may also differ in what they charge.
There's a range of charges you might expect to see, including:
Annual management fees are the most common type of fee. Your annual management fees can either be a percentage charge of your entire pension pot each year, or a fixed fee.
Dealing charges are another type of charge you might see. These are fees for buying and selling investments in your SIPP and are usually based on how often and how many times you make trades.
Annual administration charges are part of some accounts, but not others. It’s either an annual flat fee, or a percentage of your investment. You might see this being called a ‘platform fee’.
Exit fees if you decide to transfer your SIPP to another SIPP provider. This could amount to a lot of money, depending on how many shares you have. So check carefully.
Drawdown charges if you start taking money from your SIPP. There could be an initial set-up fee, plus ongoing charges, so check before you choose your SIPP.
Before you start investing in a SIPP, make sure you do your research to find the best SIPP provider for your needs. Check out all the charges that apply when managing a pension with each of the SIPP providers you're looking at.
As with any pension, SIPPs come with advantages and disadvantages. Researching SIPP providers to find the best SIPP is crucial.
You can put as much money as you'd like into your pension, to build funds for your retirement. But there are limits on the amount you can get tax relief on.
While you're earning, you can put 100% of your earnings before tax in, up to £40,000. Over that, you won't get tax relief.
If you're a high earner, and bring in more than £240,000 a year, the amount you can put in gradually reduces. For every £2 earned over £240,000, the amount you can contribute reduces by £1, until the tax-free limit reaches £4,000.
If you're not earning money, you can still pay into a pension scheme and qualify to have tax relief added. You can put £2,280 a year into your pension and get tax relief of £720 added, which means you can add £3,600 a year to your pot.
Don't forget there's also a lifetime allowance on your pension. For the current tax year this is £1,073,100. This allowance is the maximum value of the pension benefits you can access without having to pay tax.
Once you’re 55, you’ll be able to take money from your SIPP, as with any pension. Alternatively, you can leave the money there until you need it.
A SIPP is the same as any other kind of pension in that you'll get income tax relief on what you pay in. It’s a good way of protecting your money from the tax man.
When it's time to take the money out of your SIPP, on retirement or when you reach 55, you can take 25% as a tax-free lump sum. You can choose how you receive the rest of your money, but you’ll be taxed on it as income.
Not always. But if your new pension company allows transfers in, and your existing pension company allows transfers out, you might be in luck. You might be able to do a pension-to-SIPP transfer, although you could be charged for it.
When SIPP providers allow transfers in, it's called 'in specie'. ‘In specie’ means that you don't need to sell the individual investments in your pension when you change pensions. Instead, you can just move the ownership of them to another company.
In specie contributions are when you transfer an asset from outside of a pension fund into your chosen company. Be aware that in specie contributions are rarely used. That's because issues often occur when transferring the actual value of each asset.
Most of the time, if you die, your SIPP would be inherited, tax-free, by your nominated beneficiaries.
If you die before you’re 75, your beneficiaries will get it as a tax-free lump sum.
But, if you die after you’re 75, things work a little bit differently. They’d be given three options on how they could take the money:
As a lump sum – and it’s subject to their current income tax rate.
As a regular income – and it’s subject to their current income tax rate. This option is only offered to dependents.
As periodical lump sums – subject to their current income tax rate.
You are. If you are not sure how to manage your SIPP, speak to an independent financial adviser.
Yes, but most pension companies offer SIPPs that are built from a range of funds categorised by their level of risk and volatility. Find out more here.
Usually when you reach 55, but check with your pension company as their SIPP terms and conditions may set a different age.
When you are 55 your pension company will contact you to ask if you want to keep paying into your SIPP or if you want to withdraw it. Read here for more.
Yes, you can have more than one SIPP. If fact, many people have a SIPP or multiple SIPPs in addition to a workplace pension.
We have commercial agreements with some of the companies in this comparison and get paid commission if we help you take out one of their products or services. Find out more here.
You do not pay any extra and the deal you get is not affected.