Can I Have a SIPP and a Workplace Pension?

Learn how they work together, tax benefits, and how to manage them efficiently for retirement.

If you are saving for retirement, you may be wondering whether you can have both a Self-Invested Personal Pension (SIPP) and a workplace pension at the same time. The short answer is yes, you can contribute to both a SIPP and a workplace pension, and doing so can offer greater flexibility and potential tax benefits.

However, it is important to understand how the two pension types work together, the tax implications, and whether contributing to both makes financial sense based on your income and retirement goals.

What is a Workplace Pension?

A workplace pension is a retirement savings scheme set up by your employer. Under the UK auto-enrolment system, most employees are automatically enrolled if they:

  • Are aged between 22 and State Pension age.

  • Earn over £10,000 per year.

  • Work in the UK.

Contributions are made by both you and your employer, with additional tax relief from the government. The minimum contribution rates for a workplace pension are:

  • 5% from your salary (including tax relief).

  • 3% from your employer.

Your contributions are taken directly from your salary, making it an easy and tax-efficient way to save for retirement.

What is a SIPP?

A Self-Invested Personal Pension (SIPP) is a private pension that gives you more control over how your money is invested. Unlike workplace pensions, where funds are usually managed by a default provider, a SIPP allows you to choose your own investments, including:

  • Stocks and shares.

  • Exchange-traded funds (ETFs).

  • Investment trusts.

  • Government and corporate bonds.

  • Commercial property (for some SIPPs).

SIPPs are particularly popular with self-employed individuals, business owners, and those wanting more investment flexibility. Like workplace pensions, contributions benefit from tax relief, making them an attractive retirement savings option.

Can You Have a SIPP and a Workplace Pension at the Same Time?

Yes, you can contribute to both a workplace pension and a SIPP simultaneously. There are no restrictions preventing you from having multiple pensions, and doing so can provide added flexibility and investment choice.

However, there are some key factors to consider, including tax relief limits, employer contributions, and investment risk.

What Are the Benefits of Having a SIPP and a Workplace Pension?

  1. More Investment Control

    • A workplace pension is managed by a provider chosen by your employer, with limited investment options.

    • A SIPP allows you to choose your own investments, giving you more flexibility over risk and returns.

  2. Maximising Tax Relief

    • Pension contributions receive tax relief at your marginal tax rate (20%, 40%, or 45%).

    • Contributing to both a workplace pension and a SIPP can maximise tax efficiency, especially if you are a higher-rate taxpayer.

  3. Employer Contributions Still Apply

    • With a workplace pension, your employer is legally required to contribute at least 3% (if you qualify for auto-enrolment).

    • If you opt out of your workplace pension in favour of a SIPP, you lose these employer contributions—making it beneficial to keep both.

  4. Diversification of Investments

    • A workplace pension may have limited investment choices, whereas a SIPP allows investment in stocks, funds, and alternative assets.

    • Having both gives you a wider range of investment opportunities.

  5. Flexible Retirement Options

    • SIPPs offer greater flexibility when withdrawing funds compared to some workplace pensions.

    • If you have both, you can combine withdrawals strategically in retirement.

How Much Can You Contribute to a SIPP and a Workplace Pension?

While there is no limit to how many pensions you can have, there are limits on how much you can contribute tax-efficiently each year.

  1. Annual Allowance

    • The total amount you can contribute to all your pensions (SIPP + workplace) is £60,000 per year (2023/24 tax year).

    • Contributions above this limit may be subject to tax charges.

  2. Earnings Rule

    • You can only receive tax relief on pension contributions up to 100% of your annual earnings.

    • If you earn £50,000 per year, your combined SIPP and workplace pension contributions cannot exceed £50,000 for tax relief purposes.

  3. Tapered Allowance for High Earners

    • If your total income (including pension contributions) exceeds £260,000, your annual allowance reduces to a minimum of £10,000.

  4. Lifetime Allowance (Abolished in 2024)

    • Previously, there was a limit on total pension savings (£1,073,100), but this was abolished in April 2024.

    • You can now save as much as you want in your pensions, but withdrawals will still be subject to income tax.

Should You Have a SIPP if You Already Have a Workplace Pension?

While having both a SIPP and a workplace pension can be beneficial, it is not always necessary for everyone. Consider these key points:

  • If your employer contributes to your workplace pension, prioritising this first is usually the best option.

  • If you are a higher-rate taxpayer, a SIPP can help reduce your tax bill by allowing additional contributions with 40% or 45% tax relief.

  • If you want more investment control, a SIPP allows you to choose investments beyond those offered in a standard workplace pension.

  • If you plan to retire early, a SIPP offers flexible withdrawal options, whereas some workplace pensions may have restrictions.

However, if you are on a lower income, a workplace pension alone may be sufficient, as you still benefit from employer contributions and tax relief.

How to Manage a SIPP and a Workplace Pension Together

If you decide to contribute to both a SIPP and a workplace pension, it’s important to manage them effectively:

  • Track your total contributions to stay within the £60,000 annual allowance.

  • Check investment performance regularly to ensure a balanced portfolio.

  • Consider consolidating pensions later to make managing them easier.

  • Seek financial advice if unsure how to balance pension contributions efficiently.

Final Thoughts

You can have both a SIPP and a workplace pension, and doing so can provide greater flexibility, tax benefits, and investment control. However, you should first maximise employer contributions in your workplace pension, as these are essentially free money.

A SIPP is particularly useful if you are a higher-rate taxpayer, want more control over investments, or plan for early retirement. Managing both pensions wisely can help you build a stronger retirement fund while taking full advantage of tax relief.

If you are unsure whether a SIPP is right for you, consulting a financial adviser can help you decide based on your income, retirement goals, and tax position.