A private pension is any pension you arrange yourself, outside of a workplace scheme. The two main types are personal pensions (managed for you by the provider) and SIPPs (Self-Invested Personal Pensions, where you choose your own investments).
Unlike a workplace pension, there's no employer — you make contributions directly, choose the provider, and control (to varying degrees) how the money is invested. The government still adds tax relief on your contributions, just as with a workplace pension.
Private pensions are regulated by the Financial Conduct Authority (FCA) and the Pensions Regulator. Your funds are protected up to £85,000 per institution by the FSCS if the provider becomes insolvent, though this is rarely a practical concern for large established platforms.
For most individuals looking to open a private pension in 2026, a SIPP on a modern platform (Vanguard, Hargreaves Lansdown, AJ Bell, InvestEngine) is the default choice — competitive fees, broad investment choice, and full online management.
The SIPP has become the dominant private pension vehicle in the UK, accounting for the majority of individually-arranged pension assets. Here's what distinguishes it:
Most retail investors use a "simple SIPP" — a platform-based SIPP limited to funds, ETFs and shares. "Full SIPPs" can hold commercial property and more exotic assets, and are typically used by business owners. For the vast majority of people, a simple SIPP on a mainstream platform is all they need.
| Feature | Workplace Pension | Private Pension (SIPP) |
|---|---|---|
| Employer contributions | Yes — minimum 3% by law | No (unless via group SIPP scheme) |
| Investment choice | Limited — scheme's fund range | Broad — funds, ETFs, shares |
| Fees | Often subsidised by employer | Market rate — 0.15–0.45%/year typical |
| Portability | Stays with scheme when you leave | Always with you — consolidate at will |
| Control | Limited — default fund usual | Full — you choose everything |
| Tax relief | Same — at marginal rate | Same — at marginal rate |
| Annual allowance | Shared £60,000 limit | Shared £60,000 limit |
| Access age | 57 (from April 2028) | 57 (from April 2028) |
The critical difference: workplace pensions come with employer money attached. A SIPP doesn't. This is why the standard advice is always to maximise the workplace pension first (at least to the employer match), then consider a SIPP for additional contributions.
If you're self-employed, there's no employer to auto-enrol you and no employer contributions. A SIPP is your primary pension vehicle. This makes it one of the most important financial accounts a self-employed person can open — especially because self-employment income can be variable, and a SIPP lets you contribute flexibly (lump sums in good years, smaller amounts in lean years).
Zara is a freelance graphic designer earning around £45,000/year. She has no workplace pension.
If you've changed jobs several times and have small pension pots scattered across multiple providers, a SIPP can serve as a consolidation hub. Transferring multiple pots into one SIPP gives you:
If you want to contribute more than your workplace scheme allows or offers, a SIPP lets you direct additional contributions with the same tax relief. The £60,000 annual allowance is shared across all pensions.
Non-earners can contribute up to £2,880/year and receive basic-rate tax relief, adding £720 from the government to give £3,600 in the pension. This is particularly valuable for partners taking a career break — keeping pension contributions going during periods of no income.
Private pension contributions work identically to workplace pensions for tax relief purposes:
| Tax rate | Cost to you | Total in pension | How relief is claimed |
|---|---|---|---|
| Basic rate (20%) | £800 | £1,000 | Provider claims automatically (relief at source) |
| Higher rate (40%) | £600 | £1,000 | £200 via Self Assessment tax return |
| Additional rate (45%) | £550 | £1,000 | £250 via Self Assessment tax return |
Most SIPP providers use "relief at source" — they automatically claim 20% basic-rate relief and add it to your pot. If you're a higher-rate taxpayer, you must claim the additional 20% (or 25% for additional-rate) yourself via a Self Assessment return. Many higher-rate taxpayers miss this and overpay tax significantly.
The standard annual allowance is £60,000 or 100% of your earnings — whichever is lower. If you haven't used your full allowance in the previous three tax years, you can carry forward the unused amount and make a larger contribution in the current year.
Marcus hasn't contributed much to his pension for three years. His unused allowances are:
In 2026/27, he can contribute: £60,000 (current year) + £135,000 (carry forward) = £195,000
The most common and recommended approach for most SIPP investors is low-cost global index funds or ETFs. These provide instant diversification across thousands of companies at minimal cost.
A 1% annual cost difference on a £200,000 pot over 20 years can reduce your final pot by more than £90,000. Use our Investment Return Calculator to model the impact of different fee structures.
Transferring old workplace pensions into a SIPP is straightforward and tax-free. The process:
Final salary pension transfers are irreversible and can result in a significantly worse outcome if your DB entitlement is valuable. If the transfer value is above £30,000, you are legally required to take regulated financial advice before transferring.
For people with multiple old DC workplace pensions (NEST, The People's Pension, NOW: Pensions etc.), consolidation into a SIPP is usually beneficial — especially if the old pots are small and paying higher percentage fees than a flat-rate SIPP platform would charge.
Anna has three old pensions totalling £35,000, each charging 0.75%/year. She opens a SIPP at 0.25%/year platform fee with a 0.1% fund charge.
When choosing a SIPP provider, the key factors are fee structure, investment range, and platform quality.
| Provider type | Best for | Typical cost |
|---|---|---|
| Vanguard / InvestEngine | Low-cost, index-fund focused investors | 0.15–0.25% platform + ~0.1–0.22% fund |
| AJ Bell / Bestinvest | Wider fund and share choice, mid-market | 0.25% (capped) + fund charges |
| Hargreaves Lansdown | Broadest fund range, premium service | 0.45% (capped above £250k) + funds |
| Interactive Investor | Active traders, larger pots (flat fee) | £12.99/month flat + trading charges |
For pots under £50,000 with a simple index fund strategy, percentage-fee platforms (Vanguard, InvestEngine) are typically cheapest. For larger pots above £150,000–£200,000, flat-fee platforms (Interactive Investor) become more cost-competitive.
Enter your current pot, monthly contribution and expected return to see your projected retirement income.
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