The 2023-24 tax year ends at midnight on 5 April, so you still have time to open and start paying into a self-invested personal pension (SIPP) – or increase your contributions if you haven’t yet reached your annual allowance.

To help you make the most of the opportunities, here’s a checklist of everything you need to know about SIPPs:

1. A SIPP puts you in control

A SIPP is a pension scheme that offers a flexible way to save for retirement and gives you more control over how your money is invested. Unlike a workplace pension, your employer can’t contribute to your SIPP.

2. A SIPP can complement your current workplace pension

Most employers offer a company pension. By law, your employer must pay in a minimum of 3% of your ‘qualifying earnings’1, with an additional 5% coming from you (including tax relief). Some employers will match any additional contributions you make. But if they don’t, a SIPP can help with your additional pension saving needs. It could also give you access to more appropriate investments.

3. A SIPP can help you organise your other pensions

Most people are likely to work for several employers during their careers, accumulating different company pensions along the way. Bringing them under one roof can give you a clearer picture of your overall retirement savings and whether you’re on track to achieve your goals2. It can also give you more control over your overall strategy and costs. Consolidating your pensions in a SIPP early on can save on paperwork later in life and ensure you don’t lose track of pensions as you grow older.

4. SIPPs are particularly useful for the self-employed

If you’re self-employed and have no company pension, there’s even more reason to have a personal pension like a SIPP. You can contribute money to it whenever you like, as and when your circumstances allow. This can be particularly useful if your earnings or expenses fluctuate.

If you’re a director of your own limited company, you can contribute to your SIPP directly from your pre-taxed company income. This can lower your company’s profits and, therefore, the corporation tax it must pay.

5. Contributing to a SIPP has tax benefits

Like most other pensions, SIPP contributions benefit from tax relief from the government. For every £80 you contribute, you’ll get a top-up of £20. If you’re a higher-rate or additional-rate taxpayer, you can claim back an additional £20 or £25, respectively, via your self-assessment tax return.

Your investments are also sheltered from capital gains tax (CGT) within a SIPP.

6. Tax relief is subject to an annual allowance

Under current regulations, the most you can pay into your pensions each year and earn tax relief on is £60,000 or 100% of your gross relevant earnings3, whichever is lower. This applies across all your pensions, including your SIPP. For those with higher incomes, the £60,000 may be reduced4. Those without earned income can still contribute £3,600 per year (including tax relief). 

7. You can draw money from age 55

You can start withdrawing money from your SIPP – and most other personal pensions – once you turn 55. This is due to rise to 57 from April 2028. Before you make a pension contribution, you should feel comfortable with the fact you’re locking away money for what could be several decades.

8. SIPP withdrawals have tax benefits too

When you come to withdraw your pension money, you can usually take up to 25% as a tax-free lump sum, capped at £268,275. If you don’t want to take this money in one go, you can make smaller ongoing withdrawals until you’ve used your tax-free cash. Any further withdrawals will be taxed as income.

9. A SIPP differs from an ISA

SIPPs and ISAs are both tax-efficient savings vehicles, but there are some important differences. As mentioned above, money in a SIPP is locked away until at least age 55, whereas you can draw money from ISAs whenever you like. And whereas SIPP contributions earn tax relief, ISA contributions do not. On the flipside, you won’t be taxed when you draw money from your ISA.

SIPP vs ISA: key differences

Tax relief on contributions Yes No
Access any time No Yes
Free of capital gains tax Yes Yes
25% tax-free lump sum Yes No
Tax-free withdrawals No Yes
Annual allowance £60,000 £20,000

Source:, Vanguard

10. Vanguard offers a low-cost SIPP

Vanguard’s SIPP has an annual fee of just 0.15%, capped at £375 per year. We don’t charge for SIPP withdrawals or transfers, so once you add on the cost of the funds you invest in – depending on the funds you choose – your total costs with us can end up being well below 0.5%.

Other providers may charge two, three or more times this. The table below shows the difference that could make to your long-term wealth. It shows the potential impact of costs on £10,000 earning a 5% return over 20 years. After just three years, an investor paying 0.5% a year is almost £500 better off than one paying 2%. After 20 years, they’re more than £6,000 better off.  

The potential impact of costs on a £10,000 investment over 20 years

Total costs 1 year 3 years 5 years 10 years 20 years
0.5% £10,450 £11,412 £12,462 £15,530 £24,117
1% £10,400 £11,249 £12,166 £14,802 £21,911
1.5% £10,350 £11,087 £11,877 £14,106 £19,898
2% £10,300 £10,927 £11,593 £13,439 £18,061

Source: Vanguard calculations. Note: Assumes £10,000 invested and earning an average annual return of 5%. Results are rounded to the nearest pound. Any projections should be regarded as hypothetical in nature and do not reflect or guarantee future results.

With Vanguard, you can build your own portfolio from a choice of more than 85 low-cost funds or choose from our ready-made portfolios, including our Target Retirement Funds, which reduce the level of investment risk as you approach retirement.


1 Qualifying earnings are earnings between a lower and upper limit in a given tax year. For the 2023-24 and 2024-25 tax years, qualifying earnings are between £6,240 and £50,270.

2 Not all company pensions may be suitable for transferring into a SIPP. So-called defined benefit (DB) – or ‘final salary’ schemes – which are becoming rarer, are usually not. If in doubt, consult a financial adviser.

3 For more on what counts as ‘relevant earnings’ that can earn tax relief when used to fund a pension, see the HMRC Pensions Tax Manual.

4 To work out if you have a reduced (tapered) annual allowance, see HMRC’s website.

Vanguard Personal Pension

Straightforward retirement saving at low cost.

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Eligibility to invest in a Vanguard Personal Pension depends on your individual circumstances. Please be aware that pension and tax rules may change in the future and the value of investments can go down as well as up, so you might get back less than you invested. You cannot usually access your pension savings or make any withdrawals until the age of 55.

Your pension transfer will be sent to us as cash. During this period you will be out of the market (not invested) so you could miss out on any increase in the value of your pension fund should the market rise.

The eligibility to invest in either ISA or Junior ISA depends on individual circumstances and all tax rules may change in future.

Any tax reliefs referred to are those available under current legislation, which may change, and their availability and value will depend on your individual circumstances. If you have questions relating to your specific tax situation, please contact your tax adviser.

Important information

Vanguard Asset Management Limited only gives information on products and services and does not give investment advice based on individual circumstances. If you have any questions related to your investment decision or the suitability or appropriateness for you of the product[s] described, please contact your financial adviser.

This article is designed for use by, and is directed only at persons resident in the UK.

The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information does not constitute legal, tax, or investment advice. You must not, therefore, rely on it when making any investment decisions.

The Authorised Corporate Director for Vanguard LifeStrategy® Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard LifeStrategy Funds ICVC.

Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.

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