SIPP vs Workplace Pension — Which Is Better?

Understanding when a SIPP adds value versus sticking with your workplace pension.

Quick Comparison

Feature	Workplace Pension	SIPP
Set up by	Employer	You
Employer contributions	Yes	No
Investment choice	Limited	Wide
Fee cap	0.75%	No cap
Effort required	Low	Higher

How Each Works

Workplace Pension

Feature	Details
Auto-enrolled	At work
Provider chosen	By employer
Contributions	You + employer
Investment options	Pre-selected funds
Tax relief	Automatic

SIPP (Self-Invested Personal Pension)

Feature	Details
You set up	Choose provider
You fund	No employer contributions
Investment choice	Thousands of options
Tax relief	Claimed same way
Full control	You manage

Employer Contributions

Why This Matters Most

Workplace Pension	Benefit
You contribute 5%
Employer adds 3%	Minimum
Some add more	Up to 10-15%
Free money	Don’t lose this

Example Impact

Monthly Salary: £3,000	Workplace	SIPP Only
Your contribution (5%)	£150	£150
Employer contribution (5%)	£150	£0
Tax relief (20%)	£37.50	£37.50
Total invested	£337.50	£187.50

Never Sacrifice Employer Match

Rule
Always get employer match	First priority
Even if fees higher	Free money wins
Then consider SIPP	For additional savings

Investment Choice

Workplace Pension Options

Typical Choice	Range
Default fund	Often target-date
Some alternatives	5-20 funds
Usually	Quite limited
Quality	Varies by employer

SIPP Options

Available	Range
Individual shares	Thousands
Funds	Thousands
ETFs	Hundreds
Investment trusts	Hundreds
Bonds	Yes

When Choice Matters

Situation	Impact
Happy with default fund	Workplace fine
Want specific investments	SIPP needed
Want very low-cost index	SIPP may be cheaper
Want ethical/ESG specific	Check both

Fees Comparison

Workplace Pension Fees

Component	Typical
Fee cap	0.75% max
Many schemes	0.3-0.5%
Default fund	Often lowest
Other funds	May be higher

SIPP Fees

Component	Range
Platform fee	0-0.45%
Fund fees	0.1-1.5%
Trading fees	£0-12 per trade
No cap	Can be higher

Fee Examples

Provider Type	Total Typical Fee
Good workplace pension	0.3-0.5%
Low-cost SIPP	0.2-0.4%
Mid-cost SIPP	0.4-0.6%
High-cost SIPP	0.8-1.5%

Fee Impact (£100,000 over 20 years)

Annual Fee	Final Value*	Lost to Fees
0.25%	£320,714	£4,351
0.50%	£306,131	£18,934
0.75%	£292,054	£33,011
1.00%	£278,464	£46,601

*Assuming 7% gross returns

When Workplace Pension Is Better

Stick with Workplace If

Situation	Why
Employer matches	Free money
Low fees	Under 0.5%
Decent default fund	Good enough
Simple needs	Less effort
Auto-escalation	Contributions increase

Workplace Benefits

Benefit	Details
Employer pays in	Unmatched advantage
Payroll deduction	Effortless
Fee cap	Protected
Default option	Works for most

When SIPP Is Better

Add a SIPP If

Situation	Why
After employer match	Extra savings
Workplace fees high	0.75%+
Poor fund choice	Better options elsewhere
Self-employed	No workplace option
Want specific investments	Control needed

SIPP Benefits

Benefit	Details
Investment freedom	Full choice
Provider choice	Shop around
Consolidation	Multiple pots together
Control	Manage yourself

Common Strategies

Strategy 1: Workplace Only

Approach	Details
Maximise employer match	Top priority
Use default fund	If reasonable
Simple and effective	For most people
Review periodically	Fees and performance

Strategy 2: Workplace + SIPP

Approach	Details
Workplace for	Employer contributions
SIPP for	Additional savings
Best of both	Employer match + choice
Common approach	For engaged savers

How to Split

Order	Action
1st	Get full employer match
2nd	If more to save, compare options
3rd	SIPP if workplace expensive
4th	Or increase workplace if cheap

Strategy 3: SIPP Only

Approach	Details
Self-employed	No workplace option
No employer contribution	Nothing to lose
Full control	Choose everything

Transferring Pensions

When to Transfer to SIPP

Situation	Consider Transfer
Old workplace pensions	Consolidate
High-fee schemes	Move to cheaper
Poor performance	Better options
Want control	Full choice

When NOT to Transfer

Situation	Keep Where It Is
Current workplace	Lose employer contributions
Defined benefit	Lose guarantees
Guaranteed annuity rates	Valuable
Exit penalties	Check first

Transfer Process

Step	Action
1	Open SIPP
2	Get current pension details
3	Request transfer via new SIPP
4	Usually takes 4-8 weeks
5	Old pension closed

Choosing a SIPP Provider

What to Compare

Factor	Why
Platform fee	Annual percentage
Fund charges	On top of platform
Trading costs	If buying shares
Minimum investment	Can you start?
User experience	App/website quality

Popular SIPP Providers

Provider Type	Examples
Low-cost	Vanguard, InvestEngine
Mid-range	Hargreaves Lansdown, AJ Bell
Fund-focused	Fidelity, Interactive Investor

Summary

Factor	Workplace Wins	SIPP Wins
Employer contributions	✓
Investment choice		✓
Lowest fees	Sometimes	Sometimes
Effort	✓
Control		✓

Recommendation
First priority	Get employer match
If fees low	Workplace may be enough
For extra savings	Compare fees, consider SIPP
Self-employed	SIPP is the option
Old pensions	Consider consolidating to SIPP