SIPP (Self-Invested Personal Pension)
Plain-English definition of SIPP (Self-Invested Personal Pension) — part of our pensions glossary.
Definition
A SIPP is a UK personal pension that lets you choose and manage your own investments. Contributions receive income tax relief at your marginal rate, making SIPPs especially efficient for higher-rate and additional-rate taxpayers. Funds are locked until age 55 (rising to 57 in 2028).
Worked example
A higher-rate taxpayer contributing £8,000 into a SIPP receives £2,000 basic-rate relief at source (£10,000 in the pension) and claims a further £2,000 via self-assessment — net cost £6,000 for £10,000 invested.
Why it matters
Pension contributions receive tax relief at your marginal rate — 20%, 40%, or 45%. That makes each £1,000 into a pension cost as little as £550 net if you are a higher-rate taxpayer, before any employer match. Very few other financial moves have that kind of uplift.
Common mistake
Under-contributing in the higher-rate years, then trying to "catch up" later in basic-rate retirement years when the tax relief is a fraction of what it was during your peak earnings.
Calculators that use this concept
See also
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- ISA (Individual Savings Account) — An ISA is a UK tax-free savings or investment wrapper. You can contribute up to £20,000 per tax year across Ca…