SIPP / Personal Pension
A self-invested personal pension offering income tax relief on contributions and tax-free growth. One of the most powerful long-term tax planning tools available in the UK.
How It Works
You open a SIPP and make contributions from personal income. Basic rate relief (20%) is added automatically. Higher/additional rate taxpayers claim extra via Self Assessment. You choose your investments. From age 57 you take 25% tax-free and draw the rest as taxable income.
Tax Treatment
Contributions receive income tax relief at your marginal rate. Growth is free of income tax and CGT. 25% can be taken tax-free from age 57. The remaining 75% is taxed as income when drawn.
Tax Advantages
- Income tax relief at your marginal rate (20%, 40%, or 45%)
- Investment growth is free of income tax and CGT
- 25% tax-free lump sum
- Carry forward unused allowance from previous 3 years
- Normally outside your estate for IHT
Who Is This Suitable For?
Anyone building retirement savings. Company directors should consider employer contributions instead for even greater tax efficiency.
Frequently Asked Questions
SIPP vs company pension?▾
Company pension contributions are more efficient as they also avoid NI. Use company contributions first, then personal SIPP if you have remaining allowance.
Can I access before 57?▾
Generally no. Be wary of schemes claiming to unlock pensions early — these are usually scams with up to 55% tax charges.
What happens on death?▾
Before 75: beneficiaries inherit tax-free. After 75: they pay income tax at their marginal rate. Normally outside estate for IHT.