SIPPs Explained: How to Choose a Self-Invested Personal Pension

The one-minute version

Before you open a SIPP, know this

• A SIPP is a pension you control. Same tax relief as any pension, but you choose the investments and the provider, rather than an employer or insurer choosing for you.

• The big saving is on fees. Moving from a typical advised or legacy pension to a low-cost SIPP can cut your annual cost substantially, and on a large pot a flat fee can save many thousands a year.

• Percentage versus flat fee is the key decision. Percentage charging is cheaper on small pots; a flat monthly fee wins decisively once the pot is large.

• Control cuts both ways. A SIPP rewards people willing to make and own their decisions. It is not a shortcut to better returns, and it is not right for everyone.

• This is education, not advice. Nothing here is a personal recommendation or a suggestion to transfer any pension. For your situation, especially any final-salary transfer, take regulated advice.

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For most of the twentieth century, a pension was something that happened to you. An employer or an insurance company chose the investments, set the charges, and sent you a statement once a year that you filed unread. The self-invested personal pension changed the premise. It is a pension where you hold the controls: you choose the provider, you choose the investments, and crucially you can see and control what the whole thing costs. For the right person it is among the most powerful tools in personal finance. For the wrong person it is a way to make expensive mistakes with a tax-advantaged wrapper. This guide is about telling which you are, and if a SIPP suits you, how to choose one well.

I should be plain about my own position, because it shapes the lens. I have spent a career arguing that self-directed investors, given the right tools and the discipline to use them, can do perfectly well without paying a percentage of their wealth every year for the privilege. A SIPP is the vehicle that makes that possible for a pension. But the same honesty requires me to say that control is a responsibility as much as a freedom, and plenty of people are better served by simplicity or by advice. Both things are true.

What a SIPP actually is

Strip away the acronym and a SIPP is simply a personal pension with a wide investment menu and, usually, a transparent charging structure. It carries the same tax treatment as any other pension: contributions attract tax relief at your marginal rate, the money grows free of UK income and capital gains tax inside the wrapper, and from age 55, rising to 57 in 2028, you can begin drawing on it, normally with 25 percent available as tax-free cash up to the relevant limit.

What distinguishes it is breadth and control. A workplace pension typically offers a short menu of funds chosen by the scheme. A SIPP, by contrast, gives access to thousands of funds, exchange-traded funds, investment trusts, individual shares and more, depending on the provider. You decide where the money goes, when to change it, and what you are willing to pay to hold it. The trade is straightforward: more freedom, and more responsibility for the outcome.

A SIPP is a pension where you hold the controls. The freedom is real. So is the responsibility that comes with it.

Who a SIPP suits, and who it does not

A SIPP rewards a particular kind of person: someone willing to take an interest in their own money, make decisions and live with them, and value low cost and wide choice over having their hand held. If you are happy to hold a sensible, low-cost portfolio and review it once or twice a year, a SIPP can serve you for decades and save you a great deal.

It suits less well those who would lose sleep over decisions, who want a professional to take responsibility, or whose affairs are genuinely complex. There is no shame in any of those. A person who panics and sells in every downturn may do far worse in a SIPP they control than in a managed arrangement that stops them acting on the impulse. The honest question is not whether a SIPP is cheaper, which it usually is, but whether you will use the control well or badly. That is a question only you can answer truthfully.

One hard line: defined-benefit pensions

If you have a final-salary or other defined-benefit pension, transferring it into a SIPP means giving up a guaranteed income for life, usually a poor trade, and one the rules rightly surround with safeguards. Transfers above a certain value legally require regulated advice. This guide is not that advice, and nothing here suggests you should transfer such a pension. Treat that decision as a different and far more cautious conversation.

What SIPPs cost in 2026

This is where SIPPs earn their reputation, because the cost gap against legacy and advised pensions can be wide. A SIPP has two main cost layers: the platform or provider charge for holding the account, and the charges of the investments you hold inside it. There may also be dealing costs when you buy and sell.

Platform charges in 2026 fall into two camps. Percentage-based platforms charge a fraction of your pot each year, often with caps. Hargreaves Lansdown, for instance, cut its SIPP fund charge from 1 March 2026 to 0.35 percent a year on funds up to £250,000, tapering on larger pots, with its charge on shares, ETFs and investment trusts capped at £150 a year. [1] AJ Bell charges around 0.25 percent on its SIPP, with the charge on shares and ETFs capped at £10 a month. [2] Flat-fee platforms, by contrast, charge a fixed sum regardless of pot size: interactive investor runs a flat monthly model in the region of £13 a month for its core offering. [3] At the cheapest end, some newer platforms have stripped platform fees entirely: InvestEngine removed all platform charges on its DIY SIPP, leaving only the underlying ETF costs, though it restricts you to ETFs rather than the full investment universe. [4]

On top of the platform charge sit the investment charges. A global tracker might cost 0.1 to 0.2 percent a year; an actively managed fund commonly more. Add the two layers and you get the figure that actually matters: your total annual cost of ownership. For a low-cost SIPP portfolio of trackers, that total can sit well under 0.5 percent a year, a fraction of what a legacy or advised arrangement often charges.

The fee decision that matters most: percentage or flat

If you take one thing from this guide, take this. The single most consequential SIPP decision, once you have decided to have one, is whether you are charged a percentage of your pot or a flat fee, because on a large pension the difference is enormous.

A percentage fee scales with your wealth. At 0.25 percent, a £100,000 pot pays £250 a year, which is reasonable. The same rate on a £1,000,000 pot is £2,500 a year, for administratively near-identical work. A flat fee does not scale: it stays the same whether your pot is large or small. The arithmetic is stark. Independent comparison found that a £1,000,000 pension on a flat-fee platform at roughly £13 a month pays about £156 a year, against £2,500 a year on a 0.25 percent percentage platform, a difference of over £2,300 every year, and well over £20,000 across a decade. [5]

Table: Illustrative annual platform cost: percentage versus flat fee, by pot size. For illustration; confirm current charges.

• Pot size: £50,000 — At 0.25% percentage: £125 — At ~£13/month flat: ~£156

• Pot size: £250,000 — At 0.25% percentage: £625 — At ~£13/month flat: ~£156

• Pot size: £500,000 — At 0.25% percentage: £1,250 — At ~£13/month flat: ~£156

• Pot size: £1,000,000 — At 0.25% percentage: £2,500 — At ~£13/month flat: ~£156

The pattern is clear. On a small pot, percentage charging is often cheaper and simpler, and many caps make it competitive. As the pot grows, the percentage model becomes steadily more expensive while the flat fee stays put, and somewhere in the low-to-mid six figures the flat fee pulls decisively ahead. Anyone with a substantial pension who is still paying an uncapped percentage is, in effect, paying a growing tax on their own success. Knowing where you sit on that curve is worth more than any fund tip.

How to choose a provider

Once the charging structure is clear, the rest of the choice follows from how you intend to invest and what you will need later. Weigh these in order.

Cost for your pot size and style

Run your own numbers. Take your current pot, and your likely pot in ten years, and calculate the annual platform cost under both percentage and flat-fee providers. If you mostly hold funds, check the fund charge too. The right answer for a £80,000 pot is often different from the right answer for a £800,000 one.

The investment range you need

If low-cost index funds and ETFs are all you want, almost any platform serves, including the cheapest. If you want individual shares, investment trusts or a very wide fund menu, check the provider actually offers them, since the cheapest platforms sometimes restrict choice to win on price.

Retirement and drawdown features

This is the layer most people overlook and later regret. A platform that is cheap while you are building the pot may be clumsy or costly when you come to draw an income. If you are within a decade of retirement, check the provider supports flexible drawdown well and look at any drawdown charges before you commit.

Service, tools and reliability

Cheaper platforms sometimes offer less support and thinner research. If you value a UK helpline, strong tools or hand-holding through the mechanics, that may be worth paying a little more for. Match the service to how much help you actually want.

Opening and funding a SIPP

The mechanics are simpler than people fear. You open the account online with the provider you have chosen, typically in under half an hour. You can fund it three ways: a lump sum, regular monthly contributions, or by transferring existing pensions in. Contributions receive tax relief, with basic-rate relief usually added automatically and higher-rate relief claimed through your tax return.

Transferring old pensions into one SIPP can simplify your life and cut costs, but do it with care. Check first for any exit penalties on the old pension, and above all check whether the old pension carries valuable guarantees, such as a guaranteed annuity rate or any defined benefit, because those can be worth far more than the fee saving and should not be given up lightly. When in doubt, that is precisely the moment to take regulated advice rather than press the button yourself.

The contribution rules, briefly

For 2026/27 you can usually contribute up to £60,000 a year across all your pensions while receiving tax relief, or 100 percent of your earnings if lower. [6] Higher earners face a tapered allowance, and anyone who has flexibly accessed a defined contribution pension is usually limited to a £10,000 money purchase annual allowance. [6] Confirm current figures before relying on them, as allowances change.

Mistakes to avoid

The common errors are predictable and avoidable. Paying an uncapped percentage on a large pot is the most expensive, and the easiest to fix. Holding expensive active funds inside a cheap SIPP wrapper undoes much of the saving, since the wrapper is only part of the cost. Trading too often turns the freedom of a SIPP into a source of cost and error. And neglecting the retirement features until you reach retirement leaves people stuck on a platform that is awkward exactly when it matters most.

The deepest mistake, though, is mistaking control for skill. A SIPP gives you the freedom to build a sensible, low-cost, diversified pension and leave it largely alone. It gives you exactly the same freedom to tinker, chase performance and pay for the privilege. The vehicle does not make the decisions. You do, and the discipline to keep those decisions boring is what separates a SIPP that serves you from one that does not.

This is education, not advice

This guide explains how SIPPs work and how to compare them. It is general information, not a personal recommendation, and it cannot account for your circumstances. It is not a suggestion to open, transfer or fund any particular pension. Figures are sourced and dated below and change over time. For advice tailored to your situation, especially any defined-benefit transfer, consult an authorised financial adviser.

Frequently asked questions

What is a SIPP in simple terms?

A self-invested personal pension is a pension you control yourself. It has the same tax advantages as any pension, but instead of an employer or insurer choosing your investments, you choose them, along with the provider and what you pay. It offers a wide investment range and, usually, transparent charges.

Is a SIPP worth it?

For someone willing to make and own their investment decisions and who values low cost and wide choice, often yes, because the savings against legacy and advised pensions can be substantial. For someone who wants professional responsibility taken off their hands, or with complex affairs, it may not be. The test is whether you will use the control well.

How much does a SIPP cost?

Two layers: the platform charge and the investment charges. Platform charges range from zero on some ETF-only platforms, through percentage models around 0.25 percent, to flat monthly fees around £13. Investment charges add roughly 0.1 to 0.2 percent for trackers, more for active funds. A low-cost SIPP can total well under 0.5 percent a year.

Should I choose a percentage or flat-fee SIPP?

It depends on your pot size. Percentage charging is usually cheaper and simpler on smaller pots. A flat fee wins decisively on large pots: on a £1,000,000 pension the difference can exceed £2,000 a year. Calculate the cost under both for your pot now and in ten years.

Can I transfer my existing pension into a SIPP?

Usually yes, and consolidating can cut costs and simplify your affairs. But check first for exit penalties and, crucially, for valuable guarantees such as guaranteed annuity rates or defined benefits, which can be worth far more than the fee saving. Defined-benefit transfers above a threshold legally require regulated advice.

Can I lose money in a SIPP?

Yes. A SIPP is a wrapper around investments, and investments can fall as well as rise. The tax advantages do not protect you from market falls or from poor investment choices. The control a SIPP gives you includes the freedom to make mistakes, which is why a sensible, diversified, low-cost approach matters.

What can I hold in a SIPP?

Depending on the provider, funds, exchange-traded funds, investment trusts, individual shares, bonds and more. The cheapest platforms sometimes restrict the menu, for example to ETFs only, so if you want a wide choice, check the provider offers it before choosing on price alone.

When can I access my SIPP?

Normally from age 55, rising to 57 in 2028. From that point you can usually take up to 25 percent as tax-free cash, within the relevant limit, and draw the rest as taxable income, often through flexible drawdown. How smoothly that works depends partly on your provider's retirement features.

Do I need a financial adviser to open a SIPP?

No, you can open and run a SIPP yourself, which is the point of it. But advice has real value where your affairs are complex or the stakes are high, and it is legally required for larger defined-benefit transfers. The choice between going it alone and taking advice should rest on the complexity of your situation, not just cost.

What happens to my SIPP when I die?

Pensions can usually be passed on, often outside your estate, with the tax treatment depending on your age at death and the rules in force at the time. This is an area where the rules have changed and may change further, so it is worth checking the current position and, given the stakes, taking advice on estate planning.

Sources

• [1] Hargreaves Lansdown SIPP charges from 1 March 2026: 0.35% on funds up to £250,000 tapering above, with the share/ETF/investment-trust charge capped at £150 a year (Kepler Trust Intelligence, 2026).

• [2] AJ Bell SIPP platform charge of around 0.25%, with the charge on shares and ETFs capped at £10 per month (Good Money Guide; PensionHelper, 2026).

• [3] interactive investor flat-fee SIPP model, in the region of £13 a month for its core plan (Good Money Guide; financial platform comparisons, 2026).

• [4] InvestEngine removed all platform fees on its DIY SIPP, leaving only underlying ETF charges, with the menu restricted to ETFs (Smart Investor UK, 2026).

• [5] Flat-fee versus percentage comparison on a £1,000,000 pension: roughly £156 a year flat against £2,500 at 0.25%, a difference of over £2,300 a year and more than £23,000 over a decade (Good Money Guide, 2026).

• [6] Pension annual allowance for 2026/27 of £60,000 or 100% of earnings if lower, with tapering for higher earners and a £10,000 money purchase annual allowance after flexible access (House of Commons Library SN05901; MoneyHelper, 2026).

Figures verified June 2026 against the sources named. Platform charges, fund costs and tax allowances change over time; confirm current figures with providers or gov.uk before relying on them.