Can I have a SIPP and a workplace pension?
Learn more about the key differences between SIPPs and workplace pensions for your retirement planning.
Key points
- You can have a SIPP and a workplace pension at the same time.
- Workplace pensions include employer contributions and tax relief on employee contributions.
- SIPPs offer greater control over investments compared with most workplace pensions.
- It is possible to contribute to both pensions, subject to annual pension allowance limits.
Yes – you can have a SIPP (self-invested personal pension) and a workplace pension at the same time. What’s more, there are benefits to using both.
The value of your pensions can go down as well as up, so you could get back less than you invest.
What is a workplace pension?
A workplace pension is provided by your employer.
You contribute a portion of your salary into the pension, and your employer adds money into it as well. Your contributions also benefit from tax relief from the government.
This type of pension is designed to provide you with a retirement income based on how much has been contributed over your working life and how your investments perform.
A SIPP is a personal pension that allows you to pick and choose from a range of investments.
How does a workplace pension differ from a SIPP?
The main difference between a workplace pension and a SIPP is control and choice over investments.
A workplace pension is managed by your employer or a pension provider chosen by them, and you often have fewer choices in how the money is invested. However, the value of your pension can still go up or down depending on how investments perform.
With a SIPP, you have full control over your investments. You can choose from a wide range of options, such as stocks and shares, bonds, and funds. However, this type of investing also requires some knowledge about financial markets, and there is a risk that investments may not perform as well as expected, which could affect your retirement income.
Some SIPPs come with investment options which make it easy for anybody to get started, even if they don't have knowledge about financial markets. For example, with an Aviva SIPP, you can choose from a range of investment options, from novice to pro.
In this video, Donato Boccardi, Head of Investments for Consumer Wealth at Aviva, explains whether you can choose your own pension investments and the options available to pension savers.
Can you choose your pension investments? | The Pensions Playbook
Transcript for video Can you choose your pension investments? | The Pensions Playbook Show more Show less
Can you choose your pension investments?
Yes, you can.
But many people don't need to choose individual investments themselves.
If you're saving through a workplace pension, there's a good chance your money is invested in what's known as a default fund.
Think of it as a ready-made investment solution designed to work for a wide range of people.
Investment professionals manage the fund and regularly review things like market conditions, changes in the economy, and where future opportunities might lie.
That doesn't necessarily mean the Default fund would be the right one for everyone, but it does mean you're not expected to choose and manage every investment yourself.
Some people prefer to be more involved.
For example, someone who is self-employed, who wants to bring their pensions together, or someone that simply wants a wider range of investment options, might choose a Self-Invested Personal Pension, or SIPP.
A SIPP can give you more choice and control over how your pension is invested.
Choose your own investments
Depending on your provider, you may be able to choose investments yourself or use professionally managed options that do much of that work for you.
So there isn't one approach that's right for everyone.
The important thing is understanding what you're invested in, why you're invested in it, and whether it still fits what you're trying to achieve.
On screen text says: This video is intended to provide general educational information and shouldn’t be taken as financial advice or a recommendation to invest. Tax rules and pension legislation can change and depend on your individual circumstances. If you already have a financial adviser and would like tailored support with your pensions or investments, this could be a good time to reach out to them. If not, you can visit MoneyHelper for up-to-date resources to help you find regulated financial advisers.
This video is part of The Pensions Playbook. Whether you're watching a full video or a single chapter, you can start wherever suits you.
Can I use a SIPP in conjunction with a workplace pension?
Yes, you can have both a SIPP and a workplace pension.
You can contribute to a workplace pension to benefit from your employer’s contributions while also contributing and managing a SIPP if you're looking for more control for your retirement. It's also worth seeing whether paying more into your workplace pension will mean your employer contributes more too. Remember, it's important to be aware of the annual and lifetime limits on pension contributions to avoid tax charges.
Taxation depends on your individual circumstances and may change in the future.
Can I transfer my workplace pension to a SIPP?
Transferring from a workplace pension to a SIPP is possible, but you should first check with your employer to ensure it won’t affect their contributions. This might be considered if you want more control over your investments or if you’re changing jobs and want to consolidate your pensions.
However, it’s important to check if there are any fees or if you would lose any valuable benefits by transferring your pension. If you're unsure you should speak to an Aviva financial adviser. Alternatively you can find an independent financial adviser unbiased.co.uk. There will usually be a fee for this advice.
SIPP vs workplace pensions for self-employed
If you’re self-employed, workplace pensions are not an option because there is no employer to set up or contribute to the pension.
Therefore, a SIPP could be a good option. It lets you choose how much to contribute, which may be helpful for people with a variable income, and also benefits from tax relief on contributions, similar to workplace pensions.
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Plan your future with an Aviva Pension
You can start an Aviva self-invested personal pension from just £25 a month and we have a range of investment options to help reach your goals. Investment values can rise and fall.