Workplace Pension vs SIPP — Should You Switch or Have Both?

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 (2025/26)

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	£48	£20	£148

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		with employer’s £1,013 = £11,013

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.