What are the advantages of moving to a SIPP?
10 November 2021
Question by David
What are the advantages of moving to a SIPP from my workplace pension?
Answered by Lysanne McBride
Effectively both pensions offer the same tax advantages such as the relief that you can receive on contributions into the pension and the ability for investment growth to accumulate tax efficiently.
However, there are benefits to either keeping your workplace pension or transferring to a SIPP depending on what you’re planning to do longer term and if you are still receiving ongoing contributions from an employer.
Working & benefitting from Ongoing Contributions
If you decide to consolidate the workplace pension into a SIPP, you are likely to lose the benefit of your employer pension contributions which would be a significant loss.
Your future plans
Thinking about when you want to access your pensions to retire is important. Workplace pensions traditionally don’t have the same flexibility to draw an income as a SIPP. So a SIPP may be a better option if you’re looking to draw an income in the near future.
Workplace pensions typically have quite limited investment options, whereas with a SIPP you could be looking at a much broader range. SIPPs often allow you to hold company shares, investment trusts, and things like commercial property in your pension. However, it could be that this isn’t a key driver for you and therefore of little benefit.
Workplace pension charges tend to be capped by the government and could work out much cheaper than a SIPP. Charges can make a big difference over the long term; so you need to weigh up any difference in charges against the flexibility of a SIPP.
There’s not really a right or a wrong answer here – it depends on what you want to do and the features of your pensions. This can be quite complex so I would encourage you to seek professional support.