Which AI tool is best for pension advice?
23 June, 1970
We asked Claude, ChatGPT and Gemini a real reader’s question about their pension contributions. Our expert marked their answers.
❓My work pension matches up to 7% and I invest 12% of my salary. Should I put the extra 5% into a SIPP instead?
This question was asked by a reader who has been investing between 1-5 years and is mildly nervous about investing. They are monitoring their portfolio and have no changes planned.
Marked by: Alistair McQueen, Head of Savings and Retirement, Aviva
Probably not, given what you’ve described, though it depends on a few details worth checking.
The case for keeping it in your workplace pension
If your scheme uses salary sacrifice, contributions come out before National Insurance as well as income tax. A SIPP can’t do that, so moving the extra 5% would cost you NI savings. Even without salary sacrifice, a workplace scheme usually gives you full tax relief automatically. With a SIPP, the provider claims only basic-rate relief, and higher-rate taxpayers have to reclaim the rest through self-assessment, which is easy to forget.
You’ve also said you’re not planning to change your portfolio and feel a bit nervous. The main reason people open a SIPP is wider investment choice, such as specific funds, trusts or shares. If you won’t use that choice, you’d be adding an extra account, extra paperwork and possibly extra platform fees without much benefit. One pot is also easier to keep an eye on.
When a SIPP could make sense
- Your workplace scheme has high charges. Compare its annual fee with SIPP platform and fund costs.
- The fund range is genuinely poor.
- You want to hold your pension with a provider you already know and trust.
Worth checking first
- Does your scheme use salary sacrifice?
- What are its total annual charges?
- Are you a higher-rate taxpayer?
If the answers are yes, low and either, staying put is usually the simpler and more tax-efficient choice.
I’m not a financial adviser, so for a personalised recommendation, a regulated adviser or your scheme’s own guidance service is worth a call.
Experts’ views
Claude is confident, but caveated, in its response. It opens with “probably not” and leans on words like “usually”. That shows the difference between the “guidance” an LLM provides and the “advice” an adviser would provide. That’s not a criticism. Caveating is sensible here, and Claude highlights many of the points that need to be considered, such as salary sacrifice and charges. But it means the responsibility for the decision is left with the reader. With advice, that responsibility sits with the adviser, who is held accountable for it.
Alistair McQueen
Grade: B
If your employer matches pension contributions up to 7% of your salary and you’re currently investing 12%, putting the extra 5% into a Self-Invested Personal Pension (SIPP) could be worth considering. But first, check whether you’re making the most of your workplace pension.
Start with your employer match
If you contribute enough to receive the full 7% employer contribution, you’re already benefiting from valuable extra money towards retirement. Check whether your employer matches contributions above 7% too. If they do, increasing your workplace contributions could be more attractive than opening a SIPP.
Workplace pension or SIPP?
Both offer tax relief on pension contributions, but there are differences.
- Workplace pension: Contributions are often taken directly from your salary. You may benefit from employer matching, lower charges negotiated by your employer and, depending on the scheme, National Insurance savings through salary sacrifice.
- SIPP: You generally have more control over your investments and a wider choice of funds. However, platform fees and investment charges can be higher, and you’ll need to manage your investments yourself.
If you’re a higher-rate taxpayer, additional tax relief may also be available on contributions to either pension, depending on your circumstances and how contributions are made.
What about your investment strategy?
As you’ve been investing for less than five years and feel mildly nervous, keeping things straightforward may be sensible. You don’t necessarily need a SIPP just to diversify your pension investments: check what funds your workplace scheme offers first.
Don’t forget access. Pension money is normally locked away until at least age 55, rising to 57 from April 2028, subject to exceptions.
The bottom line: Once you’ve secured your full employer match, compare charges, investment choice and tax benefits before deciding where the extra 5% should go.
Experts’ views
ChatGPT gave the most considered response of the three. Like the others, it uses careful language such as “could” and “normally”. That’s sensible, because this question doesn’t carry a definitive answer, and without knowing more about someone’s situation it would be easy to point them in the wrong direction. Its bottom line, to compare charges, investment choice and tax benefits before deciding, reflects that there is no single right answer, only the right things to weigh up.
Alistair McQueen
Grade: A
No, you should keep the extra 5% in your workplace pension rather than moving it to a SIPP. [1][2]
Key Reasons to Stay Put
- You already max the match: Your employer matches up to 7%, and your 12% total contribution already captures 100% of that free money. Putting that extra 5% into a SIPP will not unlock any extra employer cash. [3]
- Better for a nervous investor: A SIPP requires you to actively choose, monitor, and rebalance your own investments. Your workplace pension uses a hands-off default fund, which is safer and less stressful if you prefer a set-and-forget approach. [4][5][6]
- Higher tax efficiency: If your workplace pension runs on a salary sacrifice (salary exchange) basis, your contributions bypass National Insurance as well as income tax. A SIPP only provides standard income tax relief. [7][8]
When to Consider a SIPP
A SIPP is only worth opening if your workplace pension charges unreasonably high hidden fees or offers a very poor choice of funds. If your workplace fees are normal, sticking with your current setup is the easiest and most sensible path. [9]
If you'd like, let me know:
- Does your workplace pension use salary sacrifice?
- What are the annual management fees on your workplace pension?
I can help you figure out if switching makes any financial sense.
Experts’ views
Gemini is too certain in its response. It is the most confident of the three in its opening, a flat “No”, but then follows that bold opening with caveats that need to be considered. That confidence may appeal to a “mildly nervous” reader, and much of what it says is sensible. But a regulated firm, such as an adviser or a provider, would not choose to be so bold in its opening response. Advisers and providers can be held accountable for what customers go on to do, and a simplistic, bold answer like this could open them to legal action if that action wasn’t in the customer’s best interests.
Alistair McQueen
Grade: C
What the experts want you to know
Alistair sets out how he would answer this question:
This is a great question, but not one that carries a definitive answer. Without knowing more about the person's situation, they could easily be pointed in the wrong direction. However, a key consideration is their main objective at this time: is it simplicity or choice?
If it is simplicity, there is a lot to be said for sticking with the workplace pension. It has been set up by their employer; has much of the admin done; and could be benefiting from extra money via “salary sacrifice”.
If it is choice, they may be motivated by a SIPP. They often offer a wider range of investment options; may give them greater control over how they save; and would allow them to avoid “having all your eggs in one basket”. And don’t forget, options are not limited to pensions. ISAs or debt repayment are also options many could consider in their situation.
So, some more homework is required. Fortunately, they have time on your side and there is a lot of great free information out there to help. Perhaps begin by asking if the motivation is simplicity or choice. The answer to this question could direct their next steps.
If you’re using AI tools for questions on pensions, make sure you:
- Give the AI the full picture: your salary, whether you’re a basic or higher-rate taxpayer, how much you and your employer pay in, and roughly how much is already in your pension.
- Check whether your workplace scheme uses salary sacrifice, and tell the AI.
- Find out your scheme’s annual charges and fund range before you ask.
- Ask whether your employer matches contributions above 7%.
- If you’re a nervous investor who won’t change your investments, be wary of answers that push wider investment choice.
- Ask how tax relief works on each option.
- Ask about alternatives to a pension.
- Ask it to check that figures such as the minimum pension access age (55 now, rising to 57 from April 2028) are accurate and up to date.
- Decide what matters more to you, simplicity or choice. Alistair McQueen says the answer could point you to your next steps.
- Treat AI as a starting point.
Working out how to get the most from your pension isn’t always simple. Paying a financial adviser for one-off advice, or just to check your plans, could be money well spent.
———-
[1] Moneyscot
[2] Bippit
[3] Moneyscot
[4] Freetrade.io
[5] Joinchest
[7] inews.com
[8] Bippit
[9]Moneyscot
