Three reasons to open a SIPP

A Self-Invested Personal Pension or SIPP is a type of pension which gives you more control over what your retirement savings are invested in. They can be a sensible way of saving for later life for those unsatisfied with their workplace pension, people who want to add more to their pot, and the self-employed who need to take retirement saving into their own hands.

However, according to Boring Money research, only 11% of non-retired individuals state they have a personal pension scheme in place. Breaking this down further by different levels of income, only 7% of those who earn less than £20,000 have a personal pension, compared to 24% for people who earn over £70,000. 

So should you be opening a SIPP? How could it benefit you? And how do you know if your current workplace pension scheme ticks all your boxes already? In this article, we’ll run through three scenarios where it may make sense for you to open a SIPP and take the wheel on your retirement saving journey.

1. You want to contribute more

If you’re already paying into a workplace pension today (many will have a so-called “defined contribution” scheme), you should check if you’re maxing out your employer contributions. That is, if your employer is willing to match your contributions or pay more into your existing pot, it’s a very sensible idea to make the most of it. This will typically involve having a conversation with your HR department or at the very least talking to your line manager about your company’s pension policy.

Let’s say you’re currently paying the minimum contribution rate, which came into force in April 2019. This means you pay 5% of your pre-tax earnings into your workplace pension scheme while your employer puts in 3%. Overall your total contributions will amount to 8% of your pre-tax income.

Workplace pension contributions explained