PENSIONS

SIPP

Enjoy enhanced control and flexibility over your pension fund investments

What is a SIPP?

A Self-Invested Personal Pension (SIPP) is a type of personal pension registered under the Finance Act 2004. It is designed for individuals who want greater control over how their retirement savings are invested and access to a much wider range of investment options than those available through standard personal or stakeholder pensions.

SIPPs offer significantly more flexibility, but that flexibility comes with added responsibility. They are generally most suitable for experienced investors, or for those who want to make investment decisions with the support of a financial adviser. Due to the broader investment choice and additional administration involved, SIPPs can also carry higher charges than more conventional pension arrangements.

Investment flexibility
The defining feature of a SIPP is the breadth of permitted investments.

Depending on the provider, a SIPP may allow investment in:

UK and overseas shares
Government bonds (gilts) and corporate bonds
Investment trusts and Exchange Traded Funds (ETFs)
Unit trusts and Open-Ended Investment Companies (OEICs)
Cash deposits and money market instruments
Commercial property and land
Certain unlisted shares

This level of choice allows investors to build highly tailored portfolios and, where appropriate, diversify beyond traditional funds.

Purchasing commercial property through a SIPP

A SIPP can also borrow, typically up to 50% of the scheme’s net asset value, to help finance investments such as commercial property. Rental income generated by the property is paid directly into the SIPP and is usually free of income tax, helping to support ongoing costs or grow the pension fund.

Where a property is leased to a connected business, all arrangements must be conducted strictly on commercial, market-rate terms. Failure to comply with HMRC rules can result in serious tax consequences.

It is important to note that SIPPs are subject to strict investment restrictions. Most forms of residential property and tangible movable assets, such as art, wine, jewellery, or cars, are prohibited. Holding these assets can trigger significant tax charges and penalties.

Contributions and tax relief

Like other personal pensions, SIPP contributions benefit from tax relief. Basic-rate tax relief is added at source, while higher or additional-rate taxpayers can claim further relief through self-assessment.

The amount you can contribute tax-efficiently is limited by your earnings and the Annual Allowance. If you have already accessed pension benefits flexibly elsewhere, the lower Money Purchase Annual Allowance (MPAA) may apply, significantly reducing how much you can contribute going forward.

Accessing your SIPP

You can usually begin accessing SIPP benefits from age 55, rising to 57 from April 2028. Typically, up to 25% of the fund can be taken as a tax-free lump sum. The remaining balance can then be used to provide a taxable income, either through flexi-access drawdown or by purchasing an annuity.

Is a SIPP right for you?

While SIPPs offer exceptional flexibility and control, they are not suitable for everyone. Investment decisions directly affect the value of your pension, which can fall as well as rise. Managing a SIPP effectively requires time, knowledge, and ongoing review.

For many people, taking regulated financial advice can help ensure that a SIPP is appropriate for their circumstances and that investments remain aligned with long-term retirement objectives.

THE VALUE OF PENSIONS AND THE INCOME THEY PRODUCE CAN FALL AS WELL AS RISE. YOU MAY GET BACK LESS THAN YOU INVESTED. TAX TREATMENT VARIES ACCORDING TO INDIVIDUAL CIRCUMSTANCES AND IS SUBJECT TO CHANGE.