SIPP

A self-invested personal pension is a type of UK personal pension in which you choose and manage the investments yourself, from funds and ETFs to individual shares and bonds, usually through an investment platform. Contributions receive tax relief: for personal contributions, the provider typically claims basic-rate relief from the government and adds it to your pot, and higher-rate taxpayers can claim extra through their tax return. Investments grow free of UK income tax and capital gains tax. The money is normally locked away until a minimum pension age set by law, and allowances set by the government limit how much can be paid in with tax relief.

At retirement, part of the pot can usually be taken tax-free, subject to limits, and the rest is taxed as income when withdrawn, whether through flexible drawdown, an annuity or lump sums. Compared with an ISA, the trade-off is tax relief now and income tax later, against no relief now and tax-free withdrawals, plus the pension’s access restriction. A SIPP gives more control and choice than a standard workplace pension but also more responsibility: poor choices, frequent trading or high fees can erode the benefit. Workplace pensions usually come with employer contributions, which a personal SIPP typically does not. The closest US equivalent is an IRA.