Self-Invested Personal Pension (SIPP)

A SIPP works like other personal pensions but gives the saver much wider control over investments, such as funds, shares, investment trusts, bonds and, in some cases, commercial property.

Contributions receive tax relief. For basic-rate taxpayers, the pension provider claims tax back from the government and adds it to the pension. For example, a personal contribution of 80 becomes 100 in the pension. Higher-rate taxpayers can claim additional relief through their tax return. Investments grow free of income tax and capital gains tax.

Money cannot usually be accessed until a minimum pension age, which is 55 and set to rise to 57 from 2028. At that point, part of the pension can usually be taken tax-free as a lump sum, and the rest is taxed as income when withdrawn.

SIPPs suit people who want control and are comfortable making investment decisions, or who use a financial adviser. Fees vary between providers. Annual limits apply to how much can be paid in with tax relief. SIPPs are similar in purpose to individual retirement accounts in the United States.