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Self-invested personal pensions allow a wide range of investments.

How self-invested personal pensions work

Self-invested personal pensions (SIPPs) are a type of personal pension. They are an agreement between you and the pension provider. However, with SIPPs you have more flexibility with the investments you can choose than for personal pensions.

With a SIPP you can invest in a wider range of investments, including:

  • Quoted UK and overseas stocks and shares
  • Unlisted shares
  • Collective investments (such as OEICs and unit trusts)
  • Investment trusts
  • Property and land (but not most residential property) insurance bonds.

Find out how much your pension is worth with this pension calculator

You can use a SIPP to borrow money to purchase some investments. For example, a SIPP can raise a mortgage to part-fund the purchase of a property. Such properties would normally then be rented out and the rental income, received by the SIPP, can be used towards servicing the mortgage repayments and the costs of running the property.

Not all SIPPs allow you to invest in the full range of allowable investments. SIPPs that hold specialist investments (such as property) may be liable to pay higher charges than schemes that hold ‘mainstream’ investments.


Although your employer may choose to contribute to your SIPP, there is no obligation that they do so. Where an employer does contribute, they may require that you, also contribute, for example by ‘matching’ your contributions.

SIPPs are flexible and are portable. If you change jobs, or stop working, you can continue contributing to the scheme, and, if you join a new employer, they may also decide to contribute to it. If you do change jobs, you should let the pension provider know to ensure that your contributions continue (especially if your old employer was paying contributions on your behalf).

Since 2006, there has been no restriction on the number of different pension schemes that you can belong to, although there are limits on the total amounts that can be contributed across all schemes each year if you are to receive tax relief on contributions.

Drawing pension benefits

SIPPs are money purchase schemes. The value of your retirement benefits are determined by:

  • The amount of contributions that have been made;
  • The period that each contribution has been invested, investment growth over this period; and
  • The level of charges.

Under current legislation, you can commence drawing retirement benefits from the age of 55 and you don't have to stop work to draw benefits.

Up to 25% of your accumulated fund can be withdrawn as a tax-free cash lump sum with the balance used to provide an income.

The amount of income you receive depends on the options that you select. These include the income continuing to be paid to a dependant in the event of your death, the income increasing each year to offset the effects of inflation and the frequency at which the income is paid.

There are different ways that this income in retirement can be provided. These include taking out an annuity and income drawdown.

Pensions that are paid are liable to income tax, but are not liable to National Insurance contributions.

If you are interested in investing your pension in SIPPs and would like further information please follow here Self-Invested Personal Pension - A Flexible, Tax-Efficient Way to Save for Retirement

This post was based on an article from the Pensions Advisory Service (14 May 2018)

BankTree Software does not provide financial advice and would recommend you ask a financial authority on such matters.

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