SIPP vs Workplace Pension: What's the Difference?
If you’re planning for retirement, you may be wondering whether to stick with your workplace pension or open a SIPP (Self-Invested Personal Pension). Both can help you grow your retirement savings, but they work in very different ways. Understanding the key differences will help you choose the right option — or use both effectively.
What Is a Workplace Pension?
A workplace pension is a retirement savings scheme arranged by your employer. You pay in a percentage of your salary each month, and your employer also contributes — usually at least 3% of your qualifying earnings. If you’re over 22, earn more than £10,000 a year, and work in the UK, you’ll typically be automatically enrolled. Your contributions are invested by the pension provider, usually in a small range of pre-set funds.
What Is a SIPP?
A SIPP is a type of personal pension that you arrange yourself. It gives you complete control over where your pension savings are invested, from shares and bonds to funds, ETFs, and even commercial property (in some cases). SIPPs are often used by self-employed people or experienced investors who want more choice and flexibility than a standard pension offers.
Key Differences Between SIPPs and Workplace Pensions
| Feature | Workplace Pension | SIPP |
|---|---|---|
| Who sets it up? | Your employer | You |
| Employer contributions | Yes (at least 3%) | No, unless paid via your own company |
| Investment control | Limited choice of funds | Full control over investments |
| Best for | Employees wanting simplicity | Confident investors or the self-employed |
| Fees | Usually low | Often higher, especially for frequent trading |
Can You Have Both a SIPP and a Workplace Pension?
Yes. In fact, many people combine them. A workplace pension allows you to take advantage of free employer contributions, while a SIPP offers more investment freedom. The main thing to watch is your annual pension allowance, which is £60,000 for the 2025/26 tax year (including all contributions from you and your employer).
Tax Relief on Contributions
Both options offer generous tax relief from the government:
- Basic-rate taxpayers get 20% tax relief automatically.
- Higher and additional-rate taxpayers can claim more via a Self Assessment tax return.
Which One Should You Choose?
Your decision should be based on your circumstances and preferences:
- Stick with a workplace pension if you’re employed — the employer contributions make it unbeatable value.
- Consider a SIPP if you’re self-employed or want more say in how your money is invested.
- Use both if you want to maximise contributions and keep flexibility for part of your retirement savings.
Bottom Line
Workplace pensions and SIPPs are both powerful tools for retirement planning. If you have access to a workplace pension, it’s usually worth keeping for the employer contributions, even if you also open a SIPP for additional flexibility and investment choice.
Frequently Asked Questions
Can I transfer my workplace pension into a SIPP?
Yes, in most cases you can transfer your workplace pension into a SIPP. However, you should check whether you’ll lose valuable benefits or guarantees before doing so.
Is a SIPP riskier than a workplace pension?
It can be. With a SIPP, you have more control but also more responsibility for your investment decisions. Poor investment choices can reduce your retirement savings.
Do I still get tax relief if I’m self-employed and use a SIPP?
Yes. The government adds 20% basic-rate tax relief to your contributions automatically, and you can claim more if you pay higher or additional rates of tax.