Pension information is based on current UK legislation. Pensions are regulated by the FCA and The Pensions Regulator. This is not financial advice — consider consulting an FCA-regulated financial adviser.
Contents
Workplace pensions and SIPPs both help you save for retirement, but they work differently. Here’s how to use them together effectively.
Quick Comparison
Feature
Workplace Pension
SIPP
Employer contributions
Yes (minimum 3%)
No
Investment choice
Limited funds
Thousands of options
Fees
Usually low (0.5-1%)
Varies (can be lower)
Control
Limited
Full
Auto-enrolment
Automatic
You must set up
Portability
Can transfer
Already portable
How Workplace Pensions Work
Auto-Enrolment Requirements (2026/27)
Contribution
Minimum
Your contribution
5% of qualifying earnings
Employer contribution
3% of qualifying earnings
Total
8% of qualifying earnings
Qualifying Earnings
Element
Range
Lower earnings limit
£6,240
Upper earnings limit
£50,270
Contributions calculated on
Earnings between these
Example: £40,000 Salary
Calculation
Amount
Qualifying earnings
£33,760 (£40,000 - £6,240)
Your contribution (5%)
£1,688/year
Employer contribution (3%)
£1,013/year
Total annual contribution
£2,701
You pay £1,688 and get £1,013 free from employer — 60% boost on your money.
How SIPPs Work
The Basics
Feature
Details
Set up by you
Choose your provider
Fund yourself
No employer contributions
Investment control
Choose from thousands
Tax relief
Same as workplace pension
Annual allowance
£60,000 (total across all pensions)
Tax Relief on SIPP Contributions
Your Tax Rate
You Pay
Relief
Total in SIPP
Basic (20%)
£80
£20
£100
Higher (40%)
£60
£40
£100
Additional (45%)
£55
£45
£100
Why Employer Contributions Matter
The Free Money Principle
What You Pay
Employer Adds
Tax Relief
Total
£80
£60
£20
£160
Never sacrifice employer contributions — you can’t replicate this in a SIPP.
Impact Over a Career
Scenario
Total at Retirement*
Workplace (8% total)
~£400,000
SIPP only (5% no employer)
~£250,000
*Assumes £50,000 salary, 5% growth, 40 years. Employer contributions add ~£150,000+ over a career.
Investment Options Compared
Typical Workplace Pension
Option
Availability
Default lifestyle fund
Yes
Equity funds (3-5)
Usually
Bond funds (1-2)
Usually
Cash fund
Usually
Total options
5-15 typically
Typical SIPP
Option
Availability
Index funds
Hundreds
Active funds
Thousands
ETFs
Thousands
Individual shares
Yes
Investment trusts
Yes
Bonds
Yes
If you want to invest in specific index funds or build your own portfolio, SIPPs win.
Fee Comparison
Workplace Pension Fees
Fee Type
Typical Range
Management charge
0.5-1.0%
Auto-enrolment cap
0.75% maximum
Hidden costs
Sometimes higher
SIPP Fees
Provider
Platform Fee
Vanguard
0.15% (capped £375)
AJ Bell
0.25% (capped £120)
Interactive Investor
£12.99/month flat
Plus underlying fund costs (0.05-0.5% typically).
Fee Impact Example: £200,000 Pot
Annual Fee
Annual Cost
0.75% (workplace)
£1,500
0.25% (SIPP)
£500
Difference
£1,000/year
Over 20 years, this could mean £30,000+ difference.
When to Use Each
Keep Contributing to Workplace Pension If:
Situation
Reason
Employer contributes
Free money
Fees are reasonable
Under 0.75%
Investment options adequate
Can find suitable funds
Convenience matters
Auto-deducted from salary
Open a SIPP If:
Situation
Reason
Want more investment choice
Specific funds/strategies
Old pensions to consolidate
Easier to manage
Lower fees available
Save on management costs
Additional contributions
Beyond workplace scheme
Self-employed
No workplace pension available
The Combined Strategy
How It Works
Account
Use For
Workplace pension
Employer contributions (mandatory)
SIPP
Additional savings with better investments
Example: Higher Earner Strategy
Contribution
Where
Why
£2,700
Workplace
Get £1,013 employer match
£7,300
SIPP
Better funds, lower fees
Total: £10,000/year
already includes the £1,013 employer match within the workplace figure
Transferring Old Workplace Pensions
When to Transfer to SIPP
Situation
Consider Transfer?
Old pension with high fees
Yes
Multiple small pensions
Yes — consolidate
Want investment control
Yes
Leaving money dormant
Yes
Defined benefit (final salary)
Usually NO
When to Keep in Workplace Scheme
Situation
Keep It?
Still paying in
Yes — keep employer contributions
Defined benefit scheme
Usually yes — guaranteed benefits
Protected retirement age
Check before moving
Low fees and good options
May be fine where it is
Transfer Process
Step
Action
1
Open SIPP with chosen provider
2
Get transfer request form
3
Provide old pension details
4
SIPP provider handles transfer
5
Usually takes 4-8 weeks
Defined Benefit Pensions: Special Case
What They Are
Feature
Details
Guaranteed income
Based on salary and years
Employer risk
They fund any shortfall
Inflation protection
Usually built in
Examples
NHS, Teachers, Local Government
Should You Transfer Out?
Consideration
Details
Generally: NO
Guaranteed income very valuable
Transfer value
Often seems attractive
Reality
Almost never better than guarantee
Requirement
Must take financial advice if >£30,000
Defined benefit schemes are almost always worth keeping.
Managing Multiple Pensions
The Problem
Issue
Impact
Multiple logins
Hard to track
Different investments
Inconsistent strategy
Various fees
May overpay
Forgotten pensions
Money languishing
Solution: Consolidate in SIPP
Before
After
4 old workplace pensions
1 SIPP
1 current workplace pension
1 workplace pension (keep)
Total: 5 logins
2 logins
Keep current workplace scheme → transfer old ones to SIPP.
Contribution Limits
Annual Allowance
Allowance
Amount
Standard
£60,000
Or 100% of earnings
If lower
Carry forward
3 years unused
This is total across ALL pensions — workplace and SIPP combined.
Example: Maximising Contributions
Source
Amount
Workplace (you + employer)
£8,000
SIPP
£52,000
Total
£60,000 (at limit)
Decision Framework
Step 1: Keep Workplace Pension?
Question
Answer → Action
Employer contributes?
Yes → Keep
Fees under 0.75%?
Yes → Keep
Decent fund options?
Yes → Keep
Step 2: Open a SIPP?
Question
Answer → Action
Want to save more?
Yes → Open SIPP
Want specific investments?
Yes → Open SIPP
Have old pensions?
Consider SIPP for consolidation
Step 3: How Much Where?
Income
Strategy
Low (under £30k)
Workplace only, maximise employer match
Medium (£30-60k)
Workplace + SIPP top-up
High (£60k+)
Workplace match + significant SIPP
Self-employed
SIPP primarily
Summary
Recommendation
Details
Never give up employer match
Free money beats everything
Keep current workplace pension
For employer contributions
Consider SIPP for extras
Better choice and fees
Transfer old pensions
Consolidate for simplicity
Don’t transfer DB schemes
Without proper advice
Best strategy for most people: Workplace pension to get employer contributions → SIPP for additional savings and old pension consolidation.