SIPP vs Workplace Pension: What's Right for You?
The choices you make now about your SIPP (Self-Invested Personal Pension) and workplace pension could mean the difference between a comfortable retirement and... well, working a lot longer than you'd like.
The good news? You don't have to choose between them. Both can play an important role in your retirement planning - they just work in different ways.
In this guide, we'll break down how each works, their benefits, and why combining the two can be a powerful strategy for growing your retirement savings.
TL;DR
Workplace pensions offer automatic employer contributions and tax relief, making them structured and hassle-free - but with limited control over investments.
SIPPs offer more flexibility and choice over where your pension is invested - but they require a bit more involvement.
Combining both can give you the best of both worlds: employer contributions plus more control over your investments.
What is a Workplace Pension?
A workplace pension is a pension scheme set up by your employer. If you're employed, you're usually automatically enrolled, and both you and your employer make regular contributions.
Here's how it typically works:
You contribute at least 5% of your salary.
Your employer adds a minimum of 3% (often more in some schemes).
You also get tax relief on your contributions - meaning more of your money goes into your pension, not to the taxman.
Your contributions are taken from your gross salary, which makes saving for retirement feel almost effortless. Over time, this can add up to a significant pension pot.
👉 Think of workplace pensions as a structured, low-effort way to build a foundation for your retirement.
What is a SIPP?
A SIPP (Self-Invested Personal Pension) gives you more control over where your pension is invested. Instead of sticking with a default fund chosen by your employer, you can pick and manage your own investments - like shares, bonds, funds, or even commercial property.
A SIPP might suit you if:
You want more flexibility in how your pension is invested
You're comfortable making investment decisions (or working with a financial adviser)
You want to consolidate older pensions in one place
You're interested in specific sectors or investment strategies
This extra flexibility comes with responsibility - a SIPP needs a bit more active management. But for many, it can be a great way to tailor a pension strategy around their personal goals.
Key Differences Between SIPPs and Workplace Pensions
Feature | Workplace Pension | SIPP |
|---|---|---|
Contributions | Employee + employer contributions (automatic enrolment) | You contribute directly (employer can contribute too) |
Tax Relief | Automatic | Automatic (apart from higher rate taxpayers) |
Investment Control | Limited - default funds chosen by provider | Full control over where your pension is invested |
Management | Low involvement | Higher involvement / active management |
Employer Contributions | Yes (mandatory minimum) | Optional - some employers may contribute |
Best For | Hands-off savers who want simplicity | People who want investment control and flexibility |
👉 In short: workplace pensions are simple and structured. SIPPs are flexible and customisable.
Why Some People Choose Both
You don't have to pick just one. In fact, having both a workplace pension and a SIPP can give you:
✅ Employer contributions from your workplace scheme (free money 💸)
✅ Investment flexibility through your SIPP to shape your own retirement strategy
✅ Pension consolidation - bring old workplace pensions together in your SIPP
✅ Diversification across different investment approaches
For example, you might:
Keep contributing to your workplace pension to make the most of your employer match
Use a SIPP to top up your savings, invest in different funds, or consolidate old pots from previous jobs
Allocate more adventurous investments to your SIPP while keeping workplace pension contributions conservative
Even small, regular SIPP contributions - say £25 a month - can grow significantly over time thanks to compound growth and tax relief.
Employer Contributions to SIPPs
While it's not as common as with workplace pensions, some employers will contribute to a SIPP if you provide your account details and arrange it with them.
These contributions:
Still count toward your annual pension allowance (£60,000 or 100% of earnings, whichever is lower)
Can be tax-efficient for both you and your employer
Might include National Insurance savings that your employer passes on
It's worth asking your employer if they offer this option - especially if you prefer the investment flexibility of a SIPP but don't want to miss out on employer contributions.
Transferring a Workplace Pension to a SIPP
If you have old workplace pensions from previous jobs, transferring them into a SIPP through pension consolidation can help:
✅ Simplify your retirement savings (one place to track everything)
✅ Potentially give you more investment choice and better fund options
✅ Make it easier to stay on top of your pension growth
✅ Potentially reduce fees (though not always - check first)
Before transferring:
Request a transfer value statement from your current provider
Check for any exit fees or loss of benefits
Compare the investment options and charges between schemes
If your pension has safeguarded benefits worth over £30,000, regulated financial advice is required by law
Transfers can take anywhere from a few weeks to a few months, depending on the providers involved.
Salary Sacrifice and Workplace Pensions
Salary sacrifice (sometimes called salary exchange) is a smart way to boost your workplace pension without reducing your take-home pay too much.
Here's how it works:
You agree to give up part of your salary
Your employer pays that amount into your pension instead
Both of you save on National Insurance
The result? More going into your pension and less going to the taxman.
Quick Example:
Without salary sacrifice:
You earn £1,000
Pay £200 income tax + £80 National Insurance = £720 left
That £720 goes into your pension and gets topped up to £900 with tax relief
With salary sacrifice:
Your employer puts £1,000 directly into your pension (before any deductions)
You both save on National Insurance
The full £1,000 (or more with NI savings) lands in your pension pot
👉 Bottom line: Salary sacrifice is one of the most tax-efficient ways to build your workplace pension contributions.
Tracking and Consolidating Old Pensions
If you've changed jobs a few times, you might have multiple workplace pensions sitting around with different providers. Consolidating them into a SIPP can:
✅ Make your retirement planning easier to manage
✅ Give you a clearer view of your total retirement savings
✅ Potentially lower fees (if your old schemes have high charges)
✅ Provide more investment options than your old schemes offered
Before consolidating:
Weigh up any benefits you might lose (some older pensions have valuable guarantees)
Check exit fees and transfer charges
Ensure it aligns with your long-term investment strategy
Pro tip: Use the government's Pension Tracing Service if you've genuinely lost track of an old pension.
Choosing a SIPP Investment Strategy
When investing through a SIPP, your risk tolerance and time horizon matter:
If you're decades away from retirement:
You might be comfortable with higher-risk, higher-growth investments
Short-term market dips are less concerning
Equities (stocks) often form a larger part of the portfolio
If you're closer to retirement:
You may prefer more stable, lower-risk investments like bonds
Protecting your pension pot becomes more important
Gradually shifting toward conservative investments makes sense
A Few Golden Rules:
✅ Diversify your investments across different assets, sectors, and regions
✅ Review your strategy regularly (at least annually)
✅ Adjust your risk level as your circumstances and retirement timeline change
✅ Don't panic during market dips - pensions are long-term investments
✅ Consider your whole financial picture - not just your pension in isolation
The Bottom Line
Both SIPPs and workplace pensions offer valuable benefits for your retirement planning.
Workplace pensions give you structure, automatic contributions, and employer contributions you shouldn't pass up.
SIPPs give you flexibility, investment control, and a way to consolidate old pensions.
Combining both can help you build a more resilient, diversified retirement plan that plays to each pension type's strengths.
Your pension is one of the most powerful tools you have for future financial security. The money you put in today could be worth significantly more by the time you retire, thanks to compound growth, tax relief, and employer contributions.
Ready to take action? Start by checking what workplace pension you have and whether you're getting the full employer match. Then decide if opening a SIPP makes sense for your goals and investment preferences. Your 65-year-old self will seriously thank you for sorting this out now rather than leaving it for later.
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✅ Important: This article is for general information only and isn't financial advice. Pension rules and tax treatment depend on your individual circumstances and may change. If you're unsure about what's right for you, consider speaking to a qualified financial adviser.
The value of investments can go down as well as up, and you may get back less than you invest.
