What is a SIPP and how does it work?
A SIPP (Self-Invested Personal Pension) is a pension you control yourself, rather than one run by an employer or insurer. You choose the investments — funds, ETFs, shares — and get tax relief on what you pay in: every £80 a basic-rate taxpayer contributes is topped up to £100, with higher-rate taxpayers able to claim more back. The money grows free of UK income and capital gains tax. You can normally access it from age 55 (rising to 57 in 2028), taking 25% tax-free with the rest taxed as income.
What a SIPP actually is
A SIPP is a tax wrapper for retirement saving that you run yourself. A workplace pension is arranged by your employer and usually offers a limited menu of default funds; a SIPP lets you choose your own platform and investments — global trackers, ETFs, individual shares, investment trusts — and manage them like any other portfolio. The tax treatment is the same as any personal pension; the difference is control and choice.
How the tax relief works
Contributions get tax relief at your marginal rate, which is the SIPP's headline benefit. A basic-rate taxpayer's £80 contribution is automatically grossed up to £100 by 20% relief claimed by the provider. Higher-rate (40%) and additional-rate (45%) taxpayers can claim the extra relief through self-assessment — so £100 in the pension can cost a higher-rate taxpayer as little as £60. You can contribute up to 100% of your earnings or the £60,000 annual allowance, whichever is lower, with unused allowance from the previous three years sometimes available to carry forward.
Tax-free growth, taxed-later income
Inside the SIPP, investments grow free of UK income tax and capital gains tax — like an ISA. The trade-off comes at withdrawal: a pension defers tax rather than removing it. From age 55 (57 from 2028) you can normally take 25% of the pot tax-free, with the remaining 75% taxed as income when you draw it. Many people draw it gradually in retirement to stay within lower tax bands.
SIPP vs ISA
Both shelter growth from tax; the difference is timing and access. A pension gives relief on the way in and taxes income on the way out, and locks the money up until 55/57 — which is exactly why it's powerful for higher-rate taxpayers and disciplined long-term retirement saving. An ISA gives no upfront relief but is completely tax-free and accessible any time. For most people the answer isn't either/or — it's using both, often prioritising a workplace pension match first (free money), then balancing SIPP and ISA.
Who a SIPP suits
A SIPP suits anyone who wants more control and lower costs than a default workplace scheme, the self-employed who have no employer pension, and people consolidating old workplace pensions into one place. It does mean taking responsibility for your own investment choices — the flexibility is the point, but so is the homework. One caution: never transfer a defined benefit (final salary) pension into a SIPP without regulated advice, which is legally required above £30,000.
Key takeaway: A SIPP is a do-it-yourself pension: tax relief going in, tax-free growth, and full control of the investments, in exchange for locking the money up until 55/57 and choosing your own holdings. It pairs naturally with an ISA and is especially valuable for higher-rate taxpayers and the self-employed.
Arken brings your SIPP, old workplace pensions and ISAs into a single view — with fees, asset allocation and concentration scored across all of them — so you can manage your whole retirement picture as one strategy.
