Thinking ahead to retirement age, are you satisfied with the projections of your pension pot? If your preference is for more control, flexibility, and transparency around how your money is being managed, perhaps a Self-Invested Personal Pension (SIPP) is worth considering for your future planning.
Popular with self-employed individuals who don’t have access to a traditional employer pension scheme, the SIPP is a type of personal pension that offers a great deal of tax efficiency.
- Why are so many people rethinking their pension strategy?
- What is a SIPP and how does it work?
- How a SIPP might help you feel more in control
- Things to think about before opening a SIPP
- Could a SIPP help you build a bigger retirement fund?
- Summary
Why are so many people rethinking their pension strategy?
Good question. Wealthify carried out a survey recently asking people across the UK to get a better understanding of the public’s pension knowledge [2]. Here’s what it said:
- 61% of people regret not taking their pension more seriously when younger.
This is completely understandable. As we get older, we learn that with their tax efficiency, and the opportunity to invest over a long period, pensions are a beneficial tool for future planning. These stats further support the need for greater pension education in schools and early adulthood.
- There were trends in common pension pain points.
Almost three-quarters (76%) of UK adults agree that pensions aren't discussed or taught enough in schools or early adulthood (36% strongly agree).
- People are searching for basic terms such as ‘pension pot meaning’, while only 44% of those surveyed said they understood what it meant.
Other popular search terms such as ‘volatility’, ‘drawdown’, and ‘SIPP’ all had the same amount of people’s understanding of these pension phrases: 16%.
- 68% say they have recently become more interested in their pension.
This follows a lot of media coverage around possible and upcoming pension changes — and could be due to the government’s recent focus on pensions. They have since announced the launch of a new Pensions Commission, highlighting many of the same issues raised in our findings.
Overall, the survey found that more can be done to help people feel confident about pensions — with many citing they wish they’d received more of an education around the topic. And when 10% of people said that a lack of confidence or financial knowledge has stopped/delayed them from putting more money into their pension, it’s certainly a cause for concern.
Our findings suggest people would benefit from an education around this important financial topic from a younger age. And more so, a voice to be given to people who may feel they’ve been left out of the loop on this type of education (as they certainly wouldn’t be alone).
What is a SIPP and how does it work?
As only 16% of people we surveyed said they knew what a SIPP was (let alone have one), let’s give a clear breakdown of what they are and how they can help people with their retirement planning.
- Self-Invested Personal Pensions (SIPPs for short) are a personal pension pot that offers many tax-efficient benefits. You can opt-in for a government tax relief top-up, meaning anything you personally contribute can get an additional 20% added to the account.
- It differs from a traditional workplace pension scheme in that it offers you more flexibility with how your money is invested. You can withdraw from a SIPP from 55, however this will rise to 57 by 2028.
- With a SIPP, you can opt for a provider that lets you completely manage the fund (choosing where to invest), or go for a provider with a team of professionals handling that for you. This usually aligns with how you instruct them to invest on your behalf.
- You can contribute by setting up regular deposits, choose to top up with one-off sums — or a blend of both. Whichever you choose, you’ll be contributing towards the long-term retirement goals that you have in mind.
How a SIPP might help you feel more in control
More investment choice
With a workplace scheme, you don’t tend to have a say in the type of investments being made with your money. You may have ethical values you want to lean towards, or perhaps be more adventurous with your investments — both of which are possible with a SIPP.
Greater visibility and monitoring
Online pension platforms often let you track your finances more transparently, bringing comfort to those seeking more visibility.
For example, at Wealthify, our customers can log in to their accounts at any time to see how their funds are performing and how their contributions are having an impact.
Get a 20% government top-up
With a SIPP, you can opt in to receive an additional 20% for any personal contribution you make. For most people, this is a favourable benefit. With Wealthify’s SIPP, it works out as 25% for everything you put in, so for example if you deposit £800, you’ll get £200 added through the top-up (25%).
But if you’re a high earner who’s trying to maximise their personal pension, make sure you're up to date on the current pension allowance information, as these top-ups will contribute towards your pension allowance (£60,000 or your annual salary, whichever is lower).
You can easily merge your pension pots
Transferring your old pensions into a SIPP is a straightforward process that could help you manage your money better. If you have changed jobs a few times and have multiple pots dotted around, bringing them into one combined SIPP could be beneficial in terms of saving on fees and money management.
Eligibility varies between providers, but overall, if you have a list of your past employers and/or the scheme you remember them using, you should be able to track down your lost or forgotten pension pots.
It’s important to check you aren’t losing any special benefits from a past workplace scheme by doing this, though. Some offer benefits like a guaranteed annual income during retirement (often associated with public service roles), and for that reason, it might not be in your interest to consolidate those.
Note: Consolidating your pensions may not necessarily guarantee a higher return.
Using a SIPP to manage your estate planning
As with many other pension plans, you can usually name a beneficiary to instruct the provider of who you’d like your pension money to go to after you pass away. Ultimately, the choice sits with the provider, but by naming beneficiaries, it gives them a much clearer picture of your intentions.
Additionally, if you pass away before turning 75, the beneficiaries will receive the remainder of the money in the SIPP completely tax-free — subject to the lump sum death benefit allowance (LSDSA).
Remember though, the Inheritance Tax rules are set to change in April 2027.
From that point, your unused defined contribution pensions will be included as part of your estate. If you think your wealth will be over the £325,000 threshold (£500,000 if you’re also leaving your property to your child), read more about the Inheritance Tax rules on the Gov.uk website.
SIPP providers can still manage the investments for you
If you’re not comfortable with investing yourself, don’t let the ‘self-invested’ terminology put you off; you don’t need to use a DIY-style provider if that’s not what you’re after.
You can still use a SIPP that has an in-house team of investment experts, like Wealthify does. First, choose your investing style from five risk levels, ranging from Cautious to Adventurous. Then, select either an Original Plan or an Ethical Plan. Once set up, our team will handle the rest for you.
Things to think about before opening a SIPP
Self-Invested Personal Pensions aren’t the right choice for everyone
You may find on your research journey that a SIPP isn’t the best product for you and your circumstances — especially if you have a generous existing workplace pension with excellent benefits. Before consolidating any older pension pots, always compare your existing fees, and consider any exit charges and the expected projections (although the latter aren’t a guaranteed result).
Investing carries risk
Of course, with any kind of investing there comes the risk of the stock markets falling, as well as rising. Although, the overall aim is that your money grows over time, in the short term you’re likely to see the value go down as well as up. Even though this is normal, the reason why investing is considered something you do for a minimum of 5-10 years (ideally longer) is to give the money the opportunity to ride out those downturns.
Contribution limits and tax rules apply
As mentioned earlier, there is an annual pension allowance for when your pension pot can be considered tax-free. You could technically choose to contribute more than this amount, but at the cost of some hefty tax deductions. For most people, the allowance is capped at £60,000 or your annual salary (whichever is lower). This accounts for contributions:
- You’ve personally made;
- Your employer has made (if you’ve arranged to do this with your SIPP);
- And the government’s 20% tax relief top-up on personal contributions.
However, you can sometimes roll over any unused pension allowance from the previous three tax years, if applicable to your circumstances. Additionally, if you’re a high earner (over £200,000 per year) you might see your pension allowance being tapered.
If you’re at all unsure about moving your pension money, speak to an independent financial advisor before making any big decisions.
Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.
Could a SIPP help you build a bigger retirement fund?
For some people, having the control of being able to shape and manage their pension fund is highly favourable. SIPPs offer you this flexibility, in addition to the government top-up.
Of course, the projections for how much your pot could grow aren’t guaranteed. Time spent in the markets should theoretically see a pension pot grow to a sizable amount; ultimately, however, it comes down to the highs and lows of market performance and how much is contributed over the years.
Having a SIPP at least gives you the opportunity to pivot towards investments that align with your goals. Whether that’s more adventurous investing during your younger years, to a more conservative approach as the value builds — you have more control with a SIPP.
Summary
Based on our survey results, it’s clear to see that many people wish they’d taken more control of their retirement pot sooner.
Before you head into any quick decisions about your pension, it’s worth speaking to someone with a deeper knowledge of wealth-building, like an independent financial advisor. And by ‘independent’, we mean the advisor won’t necessarily be tied to promoting a specific product, company, or service to you. They’ll be looking out for your best interests.
Although there are many options for you on the market, if you’re considering a private pension to top up your existing pension pot projections, a SIPP could offer you the opportunity to take more control of your financial future.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.
References:
2: The survey conducted by Wealthify (06/2025) collated the data from 1,000 working-age adults in the UK on the topic of pension education. We asked several questions to better understand how age and lack of pension education can impact long-term financial planning.
