SIPP vs Workplace Pension: Where Should Your Next £100 Go?

If you’ve got a workplace pension already and you’re thinking about saving more for retirement, it’s not automatic that a SIPP (Self-Invested Personal Pension) is the better home for that extra money. The right answer depends almost entirely on one thing: whether your workplace scheme still has more employer contribution to give you.

Rule one: never leave employer match on the table

If your employer offers to match contributions above the auto-enrolment minimum - for example, matching up to 6% if you also pay in 6% - and you’re not yet contributing enough to get the full match, that’s where your next £100 should go, every time. An employer match is an immediate, guaranteed return that no SIPP, ISA, or investment product can compete with.

Once the match is maxed out, what does a SIPP add?

• Investment choice. Workplace schemes typically offer a limited range of funds chosen by the employer or trustees. A SIPP usually gives access to a much wider universe of funds, investment trusts, and individual shares.
• Control and consolidation. A SIPP is yours regardless of which employer you’re with, making it a natural place to consolidate old pensions as you change jobs (see our separate article on pension consolidation), including small pots that are quietly losing value to flat fees.
• Potentially lower charges for some savers, depending on your SIPP provider and the size of your pot - though many modern workplace schemes are also low-cost, so this isn’t guaranteed either way.

What a SIPP doesn’t offer that a workplace pension does

• No further employer contributions - money you personally pay into a SIPP only ever gets your own contribution plus tax relief, never a top-up from an employer.
• More administrative responsibility - you choose the investments yourself (or pay for advice/a managed option), rather than a default fund being selected for you.

A simple decision order

• 1. Contribute enough to your workplace pension to get the full employer match, if one is offered.
• 2. If you want to save more beyond that, compare your workplace scheme’s fund range and charges against a SIPP - for many people, a SIPP offers more flexibility, but check your workplace scheme isn’t already excellent value before assuming a SIPP is automatically better.
• 3. If you’re self-employed or your employer doesn’t offer a workplace pension, a SIPP (or a scheme like NEST) is likely your main or only pension option - see our separate article for the self-employed starting point.

Tax relief works the same way either way

Both workplace pensions and SIPPs receive Income Tax relief on personal contributions, up to the same £60,000 annual allowance (see our article on the annual allowance for the full detail on how this is shared across all your pensions combined). The mechanics of how relief is added can differ - many workplace schemes use net pay or salary sacrifice, while most SIPPs use relief at source, meaning higher and additional-rate taxpayers may need to actively claim the extra relief on a SIPP (see our article on reclaiming higher-rate pension relief).

The bottom line

There’s no universal winner - it’s specifically about whether your workplace scheme still has employer money on the table. Once that’s maxed out, the choice between adding more to your workplace pension or opening a SIPP comes down to investment choice, charges, and how much you want to consolidate older pensions in one place.