Can You Have a SIPP and a Workplace Pension? Rules, Benefits and Considerations

Self-Invested Personal Pensions (SIPPs) and workplace pensions are both tax-advantaged vehicles for building retirement savings. In the UK, it is possible to hold and contribute to both SIPP and Workplace Pension at the same time, subject to annual and earnings-based limits. Using them in combination can provide access to employer contributions as well as greater investment flexibility.

At a glance

• You can contribute to both a SIPP and a workplace pension at the same time.
• Annual allowance: £60,000 (subject to tapering for high earners).
• Lifetime allowance abolished in April 2024, new lump sum limits apply.
• Combining both can enhance retirement savings flexibility.
• Partial transfers allow you to move some workplace pension funds into a SIPP while retaining benefits in other schemes.

Consider fees, investment control, and employer contributions before deciding.

Workplace Pension and SIPP for a Balanced Retirement Strategy

Both of these types of pensions have been designed to provide you with retirement income in addition to the income you may be entitled to receive from the state pension. With a SIPP, you are the sole contributor, whereas, with a workplace pension, your employer also contributes and must do so by law if certain criteria are met.

You can hold and contribute to both a SIPP and a workplace pension at the same time. If, after assessing your long-term goals, you find that your workplace and State Pension are unlikely to meet your expected retirement income needs, adding a SIPP or another personal pension could help close the gap.

It is not a matter of choosing between a workplace pension and a SIPP, but understand how they can work together within a diversified retirement strategy.

What is a workplace pension?

Workplace pensions and automatic enrolment were introduced by the UK government in 2012. If you are a worker between 22 and state pension age, and your salary is £10,000 per annum or more, your employer must automatically enrol you in their pension scheme. They are obliged to do this by law. There are some exceptions which you can check out here.

• There are two types of workplace pension:defined benefit (DB), also known as final salary schemes, provide a guaranteed income in retirement based on your salary and years of service.
• Defined Contribution (DC) for which the value of your pension depends on the contributions made by you and your employer, plus investment performance. They can take the form of group personal pensions, group stakeholder pensions and group SIPPs.

Most workplace pensions are defined contribution pension schemes, also known as money purchase schemes. They are driven by the contributions you and your employer make, plus any applicable tax relief and the performance of the products in which the contributions are invested.

The other type of workplace pension is the defined benefit scheme. This offers a guaranteed sum once you retire, based on both your salary and your length of service. This type of pension is no longer common but is mainly offered only by public sector employers.

In answering “can I have a SIPP and workplace pension” with a yes, we are talking about both types of workplace pension.

What is a Self-Invested Personal Pension (SIPP)?

A Self-Invested Personal Pension (SIPP) is a type of personal pension that offers great control over how your retirement savings are invested as it allows you to choose from a wide range of assets and manage your own portfolio.

SIPPs may be suitable for investors who:

• Want access to a broader choice of investments (i.e. shares, investment trusts, specialist funds)
• Prefer to tailor their investment strategy to their own objectives and risk tolerance
• Are comfortable making investment decisions

As with other registered pension schemes, SIPPs benefit from pension tax relief on eligible contributions.

Workplace pension vs. SIPP

How to use a SIPP in conjunction with a workplace pension

Employers are required to contribute at least 3% of qualifying earnings to an eligible workplace pension, making it sensible to take full advantage of this benefit.

As it is possible to hold both a workplace pension and a Self-Invested Personal Pension (SIPP), combining them can provide both the stability of employer contributions and the flexibility of self-directed investing.

In the 2025/26 tax year, the annual allowance for tax-relievable pension contributions is £60,000 or 100% of your earnings, whichever is lower (this allowance may be reduced for high earners).

The lifetime allowance, abolished in April 2024, was replaced by two new limits:

• Lump Sum Allowance (LSA) – £268,275 is the maximum tax-free amount you can usually take across all pensions (unless you have existing protections).

   

• Lump Sum and Death Benefit Allowance (LSDBA) – £1,073,100 is the combined limit for tax-free lump sums and certain death benefits.

   

Example
If you earn £40,000 a year, the most you can contribute across all pensions and still receive tax relief is £40,000 (100% of earnings), which includes both your contributions and those from your employer. 

As a basic-rate taxpayer, contributing £8,000 from your net income would be topped up by £2,000 in tax relief from HMRC, making a total contribution of £10,000. 

Your employer’s contributions are on top of this and do not use up your personal tax relief entitlement.

Can I transfer my workplace pension to a SIPP?

You can transfer (even partially) an existing workplace pension into a Self-Invested Personal Pension (SIPP).

With a partial transfer part of your workplace pension is moved into a SIPP while the original scheme remains open to new contributions. This is generally straightforward for defined contribution (DC) schemes. However, if you hold a defined benefit (DB) pension, transfers require careful consideration, as you could lose valuable guarantees such as inflation-linked income or enhanced tax-free cash rights.

Pension transfers, whether full or partial, should be assessed with the help of a regulated financial adviser, especially for DB schemes valued at over £30,000, where advice is a legal requirement.

An adviser can help you weigh the potential advantages of consolidation against the costs, risks, and any benefits you might forfeit, ensuring the decision aligns with your broader retirement strategy even if you decide to retire at 55.

Can my employer contribute to my SIPP?

If they wish, employers can contribute, or pay, to self-invested personal pensions rather than defined contribution workplace pensions, but they are not obliged to do so. If your employer does agree, the contributions will be taken from your gross pay before any income tax or national insurance is deducted. It means their contributions will not qualify for tax relief.

Some employers may be willing to pass on some or all of the money they save from paying reduced NI contributions.

What if you’re self-employed?

You will not be eligible for a workplace pension if you have never been employed. Also, unless you have paid at least 10 years’ National Insurance contributions, you won’t qualify for any state pension. So you can invest in a SIPP as an alternative.

A SIPP is a good choice as a self-employed pension. When you’re your own boss, you can’t always guarantee a steady, regular income. Income inflow can occur and stall depending on opportunity and workload. With a SIPP, you can invest as much as you like when you are able. The only thing to remember is that £60,000 per annum ceiling on pension contributions.

You can even carry up to three years’ worth of allowance forward. So, if you have a quiet year and can’t afford to contribute much, you can catch up next year or the year after, should your income improve.

If you are self-employed, you generally cannot join a new workplace pension unless you establish one through your own business, with the following two exceptions:

• You may continue contributing to a workplace pension from a previous period of employment.
• Some providers allow sole traders or company directors without employees to join their workplace schemes.

However, opening a private pension as an entrepreneur could be your best option.

Learn more about the Moneyfarm SIPP

Pension savings in this day and age are a must, and when your employer contributes as well as you, it will help to build a bigger pension pot for when you reach retirement age. But if you want greater freedom with the choice of investments, having a private pension or SIPP in addition to your workplace and state pensions could benefit your retirement savings.

As well as offering a wide range of investments, SIPPs also allow you to withdraw lump sums – up to 25% of your pension pot in total, tax-free.

Any sort of investment carries an element of risk. The value of invested funds can fall as well as rise. As regards pensions, it’s advisable to check that any scheme you have is FSCS protected.

Now that we have investigated the “can I have a workplace pension and a SIPP” query, you can find out more about SIPPs by checking out the “What is a SIPP” blog on the Moneyfarm website.

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