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A self-invested personal pension (SIPP) is a type of personal pension that offers more choice about where and how your investments are placed than a typical pension administered by a pension fund manager. The changing world of work has led many of us to consider opening a SIPP to give us some control over our retirement savings. Learn how SIPPs and other personal pensions differ and which might be best for you. 

SIPPs have many benefits. They offer attractive tax incentives and allow you to start withdrawing your money from the age of 55 (57 from 2028)

They also give you choice over the funds and shares you use to invest for your retirement or later years. Those with the means even have the option to include some commercial property, such as offices, shops or industrial spaces into a SIPP. Residential property, however, is only permitted in certain circumstances. 

How does a SIPP work? 

If you have ever held an Individual Savings Account (ISA), you may find a SIPP easy to understand. When you open one it becomes a wrapper for your pension investments, which can grow without being taxed on returns, until you need to use them. 

You can add to your SIPP by transferring an existing pension, depositing lump sums into the account, or by setting up a monthly direct debit. The funds within your SIPP can be used to invest in different types of assets, including shares, bonds, or funds. You can buy and sell investments within your SIPP, but the money cannot be withdrawn until you reach 55. 

Is there any tax relief with a SIPP?  

SIPPs offer the same attractive levels of tax relief as all other pensions. When you put money into your SIPP, the government adds back the basic rate tax you have paid on that money, turning an £8,000 lump sum you pay into your pension into £10,000. 

If you pay tax at the higher or additional rate, you can claim back the extra tax you have paid on that pension contribution through your tax return. This means that a higher rate taxpayer would receive an extra £2,000 back on the £8,000 contribution. Additional rate taxpayers would receive a further £500 on top of that.  

Most of us are allowed to put £40,000 a year into our pension in the current tax year (this is known as the Annual Allowance), although this is reduced for exceptionally high earners. 

Over time, this tax relief, together with gains on investment, can help you to build up a nest egg for a comfortable retirement. Use our calculator to see how much your pension could grow over time. 

Can I save lump sums in a SIPP?  

You can save into a SIPP either by depositing lump sums into your account, or by setting up a direct debit, whichever is most suitable for your circumstances. If you stay within your Annual Allowance, either strategy is fine. 

How does Nutmeg’s personal pension differ from a SIPP?  

 Not everyone has the time, the risk appetite, or the expertise to run their own investment portfolio. A personal pension, such as the one offered by Nutmeg, can give you the same tax benefits as a SIPP, but with the backing of a wealth manager – to ensure that your investments are balanced, diversified and aligned to your personal goals.  

This can help you to have the best-performing pension fund possible. When market conditions change, you do not have to worry about changing your investments, as our expertise team is on hand to manage investment choices in Fully Managed portfolios, or investments are rebalanced automatically in a Fixed Allocation portfolio. You can also choose a socially responsible pension with Nutmeg, ensuring that your retirement pot is aligned with your values. The Nutmeg Smart Alpha portfolios, powered by J.P. Morgan Asset Management, are also available which also benefit from the latter’s expertise in active stock selection.  

SIPP vs personal pension 

Choosing between a SIPP and a personal pension comes down to what you want from your pension. SIPPs are especially flexible for those who change career frequently or who become self-employed. 


  • Allows you to choose from a wide range of investments. 
  • Can carry additional charges, depending on how often you choose to buy and sell the investments in your SIPP. 
  • Gives you a great deal of autonomy. 

A personal pension from Nutmeg 

  • Allows you to benefit from the expertise of our investment team. 
  • Ensures your investments are aligned with your risk appetite. 
  • Is managed or rebalanced in line with your goals and risk appetite at various times. 

Will a SIPP affect my lifetime allowances? 

As well as the Annual Allowance, mentioned above, it is important to be aware of the Lifetime Allowance on your pension pots, which is the amount you are allowed to save into a pension while benefiting from tax breaks. 

Your lifetime allowance will be the total value of benefits that you’ve built up in all your pension schemes, excluding your State Pension or any dependant’s pension that you’re receiving. 

If your pension savings go above this allowance, currently £1,073,100, then you will have to pay tax on pension savings. This tax is deducted before you start taking your pension. Money held in a SIPP counts towards this allowance, as does money in personal pensions and any workplace pensions. 

If you are worried about breaching this allowance, it may be worth seeking financial advice, as there are schemes to protect pensions and you may need to consider other savings vehicles. The Nutmeg wealth services team are on hand should you need professional advice.  

How many SIPPs can I have? 

Technically, you may have as many SIPPs as you like, and you can have SIPPs as well as personal pensions and workplace pensions. However, keeping track of lots of pensions can be tricky. You may want to consider consolidating pension pots so that you can ensure they are being invested well and you are making the most of your pension savings. 

Taking money from a SIPP or personal pensions 

Once you reach the age of 55, or 57 from 2028, you can start withdrawing money from your pension. You can use pension drawdown to take income from your pension, while keeping the rest invested. A quarter of your money can be withdrawn without paying tax on the proceeds, either immediately or in stages. However, please do take note of the Lifetime Allowance rules.  

The remainder of your money is taxed at what is known as your ‘marginal rate’, which is the highest rate of tax you pay in that financial year. So, if you are a basic rate taxpayer, pension withdrawals are taxed at the basic rate, while those who breach the higher rate threshold will pay more. These rules are the same for SIPPs and for personal pensions. 

If you leave your pension invested, you can pass it down to your children or grandchildren free of inheritance tax, so this is something that is also worth considering when looking at the benefits of pension savings. 

Why choose Nutmeg’s personal pension? 

Choosing to open a SIPP allows you to benefit from some great tax breaks and flexibility, and to build a retirement pot if you are freelance or self-employed.  

Nutmeg’s personal pension is equally suitable for those who want to save for retirement, but with the added advantage that you can benefit from experts who tailor the portfolios on offer and ensure that they are matched to your risk appetite. 

Getting retirement savings right is more important than ever and with the stock market currently in a volatile state, expertise can help your pension to grow and meet your goals. 

Risk warning  

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. A pension may not be right for everyone and tax rules may change in the future. If you are unsure if a pension is right for you, please seek financial advice.