SIPP vs personal pension: What’s the difference?

The difference between a Self-Invested Personal Pension (SIPP) and other personal pensions often comes down to investment choice. While SIPPs allow users more investment control and options, standard personal pensions and stakeholder pensions can offer a simpler, more hands-off approach.

In this guide, we explain how each works and what might suit you.

What is a Self-Invested Personal Pension (SIPP)?

A SIPP is a type of pension. It offers control over investment choices as well as the substantial tax advantages of more traditional pensions.

Pension tax advantages:

• Annual allowance typically up to £60,000 or 100% of earnings (whichever is lower)
• Unused allowances can be carried forward for three years with the carry-forward rule
• You can't touch the money until age 55 (rising to 57 in 2028) 
• Tax-free growth and partially tax-free withdrawals (usually 25% of your pot)
• The government automatically boosts your contributions via tax relief

Other key SIPP features:

• Fees vary across providers, with Freetrade providing a free SIPP
• Flexible contributions mean you can pay regularly or add one-off lump sums
• You can have a SIPP alongside your workplace pensions and ISAs
• Intended for people who want to actively control and manage their pension
• Complete investment control over a wide range of assets, including individual stocks, ETFs, funds, and more

💡 For more, check out our SIPP guide.

What is a personal pension?

Personal pension is a broader term, and refers to all pensions you set up yourself rather than workplace pensions which are set up for you by your employer. 

The term ‘personal pension’ actually encompasses SIPPs and some other sub-varieties. These are similar, but subtly different. They have the same tax advantages as SIPPs, but some unique differences. Let’s take a look.

What is a stakeholder pension?

Stakeholder pensions are a form of defined contribution pension you can set up yourself. They need to meet certain criteria, often based around limiting charges and allowing accountholders to contribute smaller irregular amounts.

Key stakeholder pension features: 

• Annual management fees are capped at 1.5% for people joining after 6 April 2005, though this drops to 1% after 10 years of membership
• Offer low minimum contributions, commonly at around £20 per month
• Flexible contributions usually allow you to stop and restart without penalties
• Penalty-free transfers out
• Investment choice usually limited to pre-set options

What is a standard personal pension?

Standard personal pensions are defined contribution schemes not required to follow stakeholder pension minimum standards. They also may not offer as broad a range of investment as SIPPs.

Key standard personal pension features:

• Annual management fees not capped
• May require higher minimum payments than stakeholder pensions
• Flexible contributions usually allow you to stop and restart without penalties
• Transferring out may incur a fee
• May offer greater investment choice than stakeholder pensions, though still more limited than a SIPP

Is a SIPP a personal pension?

A SIPP is a type of personal pension designed to give you more control over how your retirement funds are invested. 

What’s the difference between a SIPP and a personal pension?

A SIPP is a type of personal pension, so the question is not so much “what’s the difference between a SIPP and a personal pension?” as “what’s the difference between a SIPP and other personal pensions?”. The table below covers the key differences.

Should you have a SIPP or a personal pension?

Can you transfer a personal pension to a SIPP?

You can transfer a personal pension to a SIPP, as long as the receiving scheme will accept it. However, some pensions may charge exit or transfer fees when you leave, or they may require you to sell investments before moving to another provider.

SIPP vs personal pension FAQs

What’s the difference between a SIPP and a personal pension?

A SIPP is a type of personal pension. Personal pensions are simply pensions you arrange yourself, as opposed to workplace pensions which are arranged by an employer. Types of personal pensions other than a SIPP are standard personal pensions and stakeholder pensions.

Is a SIPP a personal pension scheme​?

Yes, a SIPP is a type of personal pension scheme.

How do fees typically compare between SIPPs and personal pensions?

Personal pensions tend to charge annual management fees or service charges, which are usually a percentage of your portfolio.

SIPP fees vary depending on the provider. Freetrade’s free SIPP is available with no annual management fee, no monthly fees, and no commission on trades. Other fees apply.

Can I have both a SIPP and a personal pension?

Yes, you can have both a SIPP and a personal pension. There is no limit to the number of pension pots you can have. However, having too many can make it difficult to keep track of your retirement funds.

Can I transfer a SIPP to a personal pension?

Yes, you can transfer a SIPP to a personal pension, providing the receiving scheme accepts it. Transferring a SIPP to a personal pension may require you to sell investments.

Which is better, a SIPP or a pension plan?

Neither is necessarily better than the other, and either may be appropriate for you based on your personal circumstances. A SIPP offers greater flexibility and control than other pension plans, though it may require more attention as well.