Many UK workers enrolled in a workplace pension wonder whether they should also open a Self-Invested Personal Pension (SIPP). The answer depends on whether you are already maximising your employer match, how much control you want over investments, and whether you have contribution room left within your annual allowance. Understanding the mechanics of each pension type helps you decide if running both makes financial sense.

How Workplace Pensions and SIPPs Work Together

Your workplace pension operates under auto-enrolment rules. Since 2018, minimum contributions have been set at 8 per cent of qualifying earnings (the band between £6,240 and £50,270 for the 2026/27 tax year), with at least 3 per cent coming from your employer (GOV.UK, 2026). Many employers offer more generous matching, for example 5 per cent employee contribution matched by 5 per cent employer contribution. This employer match is free money you cannot get through a SIPP.

A SIPP is a personal pension you open independently. You choose the provider, select your investments (typically from a range of funds, shares, and bonds), and make contributions that receive tax relief at your marginal rate. Basic-rate taxpayers get 20 per cent relief added automatically, higher-rate taxpayers can claim an additional 20 per cent through Self Assessment, and additional-rate taxpayers can claim 25 per cent extra (HMRC, 2026). However, you receive no employer contributions in a SIPP.

The annual allowance for pension contributions across all your pensions is £60,000 for the 2026/27 tax year, or 100 per cent of your earnings if lower. Contributions above this limit incur a tax charge. As covered in foundational texts such as Principles of Finance, understanding these limits is essential when planning retirement savings across multiple vehicles.

The Key Variables

Employer match. Always contribute enough to your workplace pension to capture the full employer match first. If your employer matches up to 5 per cent and you contribute only 3 per cent, you are leaving 2 per cent of your salary on the table each year.

Annual allowance headroom. If your combined workplace pension contributions (employee plus employer) are well below £60,000 and you can afford to save more, a SIPP lets you top up your retirement savings while still receiving tax relief.

Investment choice. Workplace pensions often limit you to a default fund or a shortlist chosen by your employer. SIPPs typically offer thousands of investment options, including individual shares, exchange-traded funds (ETFs), and investment trusts. This flexibility matters if you want to build a specific portfolio or pursue a particular strategy.

Fees. Workplace pensions usually benefit from institutional pricing, meaning lower annual charges. SIPP platform fees vary, and frequent trading or holding many funds can push costs higher. Compare the ongoing charges figure (OCF) of your workplace pension fund against the platform fee plus fund charges in a SIPP.

A Worked Example

Emma earns £45,000 per year. Her employer offers a workplace pension with a 5 per cent employer contribution if she contributes 5 per cent herself. She currently contributes the minimum 5 per cent (£2,250 per year), and her employer adds another £2,250, giving total contributions of £4,500 annually.

Read also: SIPP Versus Workplace Pension in the UK: Which Gives You More Control?

Emma wants to save more for retirement. She has £10,000 in savings she plans to invest gradually. She considers two options: increasing her workplace pension contributions to 10 per cent, or keeping her workplace contributions at 5 per cent and opening a SIPP with the extra amount.

Option 1: Increase workplace pension to 10 per cent. Emma contributes £4,500, her employer still contributes £2,250 (the match caps at 5 per cent), total contributions are £6,750. She gets tax relief on her £4,500 contribution automatically through salary sacrifice or relief at source.

Option 2: Keep workplace pension at 5 per cent, open a SIPP with £2,250. Workplace contributions remain £4,500 (£2,250 employee, £2,250 employer). Emma contributes £2,250 to a SIPP. As a basic-rate taxpayer, she receives £562.50 in tax relief added to her SIPP (20 per cent of £2,812.50 gross), making the gross contribution £2,812.50. Total across both pensions: £4,500 (workplace) plus £2,812.50 (SIPP) equals £7,312.50.

Option 2 gives Emma slightly more total gross contributions because the SIPP tax relief applies to the full amount, and she gains investment flexibility. However, she pays SIPP platform fees and must manage the SIPP herself. If her workplace pension has very low charges and a suitable default fund, Option 1 might be simpler and cheaper overall.

When a SIPP Makes Sense

A SIPP is worth considering if you have maxed out your employer match, have additional savings to invest for retirement, want control over your investment strategy, or are self-employed with no workplace pension at all. It is less compelling if you have not yet secured the full employer match in your workplace scheme, or if your workplace pension already offers low-cost access to the funds you want.

This calculation depends on your specific contribution rates, employer match, investment preferences, and fee structures. Use the calculator below to model your own scenario and see how combining both pensions affects your retirement savings over time.

Disclaimer: This article provides general educational guidance and is not regulated financial advice. Nexzoe is not authorised by the Financial Conduct Authority. Pension rules and tax relief rates are current as of July 2026. For personalised recommendations, consider speaking to an FCA-authorised Independent Financial Adviser or consulting MoneyHelper at moneyhelper.org.uk.