How to transfer your pension to a SIPP

Your pension will likely provide a large proportion of your income when the time comes to retire, so it’s important you are using the right products for you.

The best pensions will give you access to a diverse range of investments and provide the flexibility you need when it comes to taking income. 

Even if you have access to a workplace pension, if you have multiple pots elsewhere, it might make sense to transfer them into a modern personal pension.

What is a SIPP?

A self-invested personal pension (SIPP) is a type of personal pension.

It’s a tax-efficient savings plan that you can contribute to throughout your working life to build a pension fund.

What sets a SIPP apart from other types of personal pensions is the level of control it offers you.

With a SIPP, you will generally have a wider range of investment options compared to a traditional pension.

Investment options include stocks, bonds, mutual funds, and even commercial property. 

SIPPs are particularly beneficial for experienced investors or those with significant pension funds, as they allow for a more hands-on approach to managing their retirement savings.

It’s also worth noting that there are different types of SIPPs available.

For example, a full SIPP offers the widest range of investment options, while a low-cost SIPP may have fewer investment choices but lower fees.

There’s also the hybrid SIPP, often offered by insurance companies. With this type of SIPP, you may be expected to pay in a lump sum before choosing your investments.

Understanding the differences can help you choose the most suitable SIPP.

What types of pensions can be transferred to a SIPP? 

The two core personal pension schemes in the UK are defined contribution schemes and defined benefit schemes. 

Defined contribution

Defined contribution schemes can be paid into by an employer or you as a private pension. A specific amount is paid in on a regular basis, and the money is then put into investments.

This means that the value of your pension can fluctuate with market conditions.

You can access your pension from age 55 (57 from 2028), and how you take money out is up to you. A SIPP is a type of defined contribution pension.

Defined benefit

A defined benefit scheme is usually a workplace scheme arranged by an employer.

This promises to pay out a set amount upon retirement, and how much you receive will depend on the workplace pension rules rather than market conditions.

Because these pensions pay an income that is guaranteed for life, it’s generally considered a much higher risk to transfer funds from a defined benefit scheme into a SIPP.

As such, if your defined benefit pension is worth more than £30,000, you are legally required to seek regulated financial advice before transferring.

This is to ensure you fully understand the risks involved. The investment performance of your SIPP will not be guaranteed, and you could run out of money.

Not all defined benefit pensions can be transferred into SIPPs, however. If you are a member of an unfunded public sector scheme (such as the NHS or Teachers’ Pension), you won’t be able to transfer it at all.

Our expert says: SIPPs vs pensions, what to consider

Lisa-Marie Voneshen - Senior Content Writer at Unbiased

“You can enjoy access to many more investment options and flexibility with a SIPP compared to a traditional pension, but it’s not for everyone.

SIPPs require more time and effort to manage, making them more suitable for experienced investors, those with significant assets or people who desire more flexibility when accessing their pension.

If you’re not confident managing your assets or don’t plan to use a qualified financial adviser to manage your SIPP, it’s worth seriously considering if transferring your pension is the right move.” 

What are the benefits of a SIPP?

Transferring to a SIPP can have many benefits (as well as risks).

Consolidation 

If you have changed jobs regularly, it’s likely you will have many different pension pots, some of which might be quite small -  a SIPP can bring these together into a single pot. This makes it easier to review and manage your retirement savings.

Greater control 

With a SIPP, you can choose from a wide variety of investment options, and you can direct funds into those that you feel will offer the best return. 

Tax advantages 

Like other personal pensions, the government adds basic-rate tax relief to your contributions (20%). This is added automatically, boosting the value of your pension pot. 

The amount of tax relief you are entitled to is equivalent to the rate of income tax that you pay. So, if you are a higher or additional rate taxpayer, you can claim further tax relief through your tax return or by using HMRC’s new online service.

Any income and capital gains generated within a SIPP (or any other pension) are tax-free. 

You will be able to take 25% of your pension tax-free, but the remainder will be taxable when you make withdrawals.

Inheritance planning 

When you die, any money that is left in your SIPP can be passed on to the loved ones of your choice.

This money is paid free of income tax if you die before your 75th birthday (so long as it doesn’t exceed your lump sum and death benefit allowance - currently £1,073,100 - and that funds are designated within two years).

If you die at age 75 or older,  your beneficiaries must pay income tax on withdrawals at their own rate.

Although SIPPs can currently be passed on to your beneficiaries free from inheritance tax (IHT), the rules are changing in April 2027.

The new rules mean that your loved ones may have to pay up to 40% tax on the value of your SIPP, depending on the value of the rest of your estate and any available exemptions.

Junior SIPPs

You can also open a junior SIPP for under-18s, with a contribution allowance of £3,600 for the 2025/26 tax year (you can contribute up to £2,880 a year as the government adds basic rate tax relief, pushing this up to £3,600).

Contributions to a junior SIPP are eligible for tax relief in the same way as adult SIPPs, providing a valuable opportunity to start saving for retirement early.

Flexibility 

SIPPs also offer flexibility when drawing an income in retirement, including the ability to take a tax-free lump sum or move funds into flexi-access drawdown.

This feature lets you leave your pension invested while making withdrawals as and when you need them.

What are the risks of a SIPP? 

Like any investment offering a higher potential return than the ‘safe option,' it’s important to be aware of the risks involved. 

• Investment funds can go down as well as up, so make sure you minimise exposure to market downturns.

• Some investment options will be riskier than others. Individual company shares, for example, will typically be higher risk than mutual funds.

• Don’t put all your eggs in one basket. It’s a good idea to balance your investments over various funds to minimise exposure to market fluctuations.

• Loss of benefits. Ensure you research the benefits of your current plan so you can weigh up the loss of these versus the gain of the SIPP. For example, some older pensions may offer guaranteed annuity rates, which you’d lose if you transferred into a SIPP.

• Hidden fees and charges can be expensive, so read all of the small print to ensure you know what you’re paying.

How to transfer a pension to a SIPP? 

Transferring your pension scheme to a SIPP can be as simple as filling out the form for the new scheme.

Your new provider will do the legwork on your behalf - you just need to give it the authorisation to transfer your money.

It can take anywhere from a few weeks to a few months to finalise a SIPP transfer, depending on your provider. 

To transfer your pension to a SIPP as prudently as possible, we’ve put together a six-step guide to assist you: 

1. Understand your current pension scheme 

Familiarise yourself with the details of your existing pension scheme, including its terms, benefits, and any potential charges associated with transferring.

For example, most pensions these days allow a maximum 25% tax-free lump-sum withdrawal; however, some pre-2006 schemes allowed for a higher percentage.

Additionally, your existing scheme may well charge you an exit fee for leaving. These have been abolished on pensions taken out from 31 March 2017, but may apply to older schemes.

2. Do your research 

You’ll be in the driving seat with a SIPP, so it’s important to know the pros and cons of transferring.

You will have more control over your pension investments with a SIPP, as well as a wider range of investment options compared to traditional pension schemes. However, there are risks involved, too.

3. Choose a SIPP provider 

Research different SIPP providers and compare their fees, investment options, customer service, and reputation.

Ensure that the SIPP provider you select is authorised and regulated by the Financial Conduct Authority (FCA). 

4. Apply for a SIPP 

Contact your chosen SIPP provider and inform them of your intention to transfer your pension.

They will provide you with the necessary application forms and guide you through the process.

You will be required to provide details about your existing pension scheme, so have this information at the ready. 

5. Obtain transfer value and information 

Request a transfer value statement from your current pension provider.

This statement outlines the value of your pension and any applicable charges or penalties.

Your SIPP provider may require this information to process the transfer. 

6. Review investment options 

Once your pension transfer is complete, review the investment options available within your SIPP.

Decide how you want to allocate your pension funds across different investment assets, such as stocks, bonds, mutual funds, and other options offered by your SIPP provider.   

Get expert financial advice

The above list shows the steps you need to take to transfer a pension yourself. 

However, if you like the idea of transferring your pension into a SIPP but aren’t sure which product is right for you, or you don’t want to choose investments yourself, it’s worth seeking professional advice.

They will also be able to help you weigh up the benefits of transferring a pension into a SIPP against the possible downsides.

By following our guide, you can navigate the transfer process with greater confidence and ensure your new SIPP aligns with your long-term retirement goals.

Take the time to research, seek advice, and make informed decisions to secure a more tailored and potentially rewarding pension plan for your future.

Let Unbiased match you with a financial adviser for expert financial advice to ensure you make well-informed decisions throughout your pension transfer process and maximise the benefits of your new SIPP.