What is a SIPP?

SIPPs and tax relief

Up to the age of 75, the government will automatically add a basic rate of tax relief to your personal contributions paid into your SIPP. Contributions across all your pensions that exceed your annual allowance, may be subject to a tax charge.

If you pay more than the basic rate of income tax, you can usually claim extra tax relief on your personal contributions directly from HM Revenue and Customs as part of your annual tax return. We do not add this additional relief to your SIPP.

Learn more about tax relief and pensions

Taking money from your SIPP when you retire

When you’re ready to take your money from your SIPP, (from age 55, changing to 57 from 6 April 2028), you have options.

• Get flexible access to your pension: Keep your money invested but take taxable withdrawals whenever you like. The first 25% is usually tax free. Also called flexi-access drawdown.
• Get a guaranteed regular income for life, also called annuity. We don’t offer an annuity with our SIPP, but we can help you transfer to a provider who does.
• Take it as cash: Take part, or all, of your pension as a cash lump sum. The first 25% is normally tax-free, with the rest subject to tax at your income rate.
• Leave it invested: You can keep working and take more time to decide when and how to access your pension. There's no maximum age to take your pension benefits.

Other things to think about

• Lump Sum Allowance (LSA): Generally, you can take 25% of your SIPP as a tax-free lump sum, up to a maximum of the LSA, which is currently £268,275.
• Money Purchase Annual Allowance (MPAA): The MPAA limit applies once you start taking income from your pensions – this could be a withdrawal from your flexi-access drawdown or taking a taxable lump sum. The MPAA limit impacts the amount you can pay into your SIPP in the future without incurring a tax charge. This limit is currently £10,000 each tax year. 

The government may change this in future.

Learn more about your pension options (PDF, 288KB)

What happens to your SIPP pension savings when you die

When you set up a pension, you’ll be asked who you want to get your pension savings when you die. This is called a beneficiary, and can be a person or a cause you support, such as a charity. 

When you die, your SIPP can be passed to your beneficiaries. 

You can add or change your beneficiaries at any time. It's important you review and change these as your life and circumstances change (such as a divorce or birth). You can do this easily through the app.

Your beneficiaries can normally choose to receive:

• a cash lump sum
• a guaranteed yearly income, by buying an annuity from an annuity provider
• a flexible income, by setting up a beneficiary drawdown.

If you die before age 75

Income death benefits will normally be paid tax free. For most people this is on the condition the payment occurs within two years of notification of death, and it’s  within your Lump Sum Death Benefits Allowance (LSDBA) which is currently £1,073,100.

If you die after age 75

Any benefits paid to your beneficiaries will be taxed at their marginal tax rate. The tax impact will vary depending on how your beneficiary chooses to access their benefits.

For example: You die after age 75 and nominate one beneficiary. Your beneficiary might decide to take their benefits as income over a period time instead of a lump sum. So, if they earn £30,000 a year and inherit £50,000, they can withdraw £10,000 per year, taxed at 20%. This is instead of taking the whole amount as a lump sum, which could be taxed more heavily.

How interest works within a SIPP

If you have a cash balance of £1 or more in your SIPP, we’ll pay you interest.

We currently pay interest at a gross rate of 3.00%. This rate may change in the future. Find out more about charges and interest rates.

All your cash we hold is kept in a central account, called a client money account.

We earn interest on this account from our banking partners. We keep a portion of this interest, which we expect to be between 0.70% to 1.20%. This charge is called retained interest. We use this retained interest to improve our products and services.

The remaining interest is paid to you at 3.00%.

We work out the amount of interest daily. We pay it to you yearly in March.

Interest rates are variable, which means the amount can change depending on different internal and external factors.

Understanding the risks of a SIPP

The main goal of any pension scheme is to provide you with an income during retirement. There are some important things to think about that could affect the benefits you’re able to receive in the future.

The Scottish Widows Self-Invested Personal Pension is provided by Embark Investment Services Limited, a company incorporated in England and Wales (company number 09955930) with its registered office at 33 Old Broad Street, London EC2N 1HZ. Embark Investment Services Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register number 737356).

Dealing and stockbroking administration services for the Scottish Widows SIPP are provided by Halifax Share Dealing Limited (HSDL), which is a wholly owned subsidiary of Embark Group Limited and part of Lloyds Banking Group. HSDL is a company incorporated in England and Wales (company number 3195646) with its registered office at: Trinity Road, Halifax, West Yorkshire, HX1 2RG. HSDL is authorised and regulated by the Financial Conduct Authority (Financial Services Register number 183332). HSDL is a member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager.