Could a SIPP bring your retirement plans together?

One of the greatest challenges in retirement planning is understanding whether your current savings will support the lifestyle you want later in life. When pensions are spread across several providers, it can be difficult to work out what level of retirement income they may generate as well as different investment strategies, levels of performance and charging structures to manage.

Ultimately, it becomes hard to track whether you’re on track to meet your retirement goals, and how best to use those assets when the time comes to draw an income.

Combining eligible pensions into a SIPP can simplify matters significantly. Rather than reviewing multiple statements or online portals, you’ll have a clearer picture of your overall retirement wealth with a single login. It also means you’re less likely to lose track of them if you move house or even change email address.

It can also help you make more joined-up decisions about taking income in retirement. You’re more likely to just cash in a small pot because it doesn’t seem worth converting it into an income, whereas combined with other pensions it could make a vital difference to the income you can afford to draw.

Combining pensions also helps you keep on top of beneficiary planning. From 6 April 2027, unused pensions will be included in estates for inheritance tax purposes, but they won’t be covered by your will. This means you’ll still need to tell your provider who you’d like to nominate to receive a share of your pot on your death. This will also be an enormous help to whoever is administering your estate after you’re gone.

What can a SIPP offer?

1. Wider investment choice and control

One of the defining features of a SIPP is the level of control it gives you over how your retirement savings are invested. Many workplace pensions offer a limited range of funds and often place members into a default investment strategy. While that approach may be suitable for some savers, others may want greater flexibility to tailor their investments to their own goals, time horizon and attitude to risk.

Importantly, you can choose a level of involvement to suit you. Those who enjoy managing their own investments can build and maintain a portfolio themselves, making decisions about asset allocation, fund selection and risk levels. Meanwhile, investors who would prefer a more hands-off approach can choose ready-made portfolios, multi-asset funds or professionally managed investment solutions that do much of the heavy lifting for them.

2. A complement to your workplace pension

A SIPP is not necessarily a replacement for a workplace pension. In many cases, it works best alongside one, particularly for higher earners looking to top up their pension savings and maximise the benefit of tax relief.

Employees should normally seek to maximise any employer-matching contributions available through their workplace pension, as this represents one of the most valuable benefits available. A SIPP can then be used to supplement those savings for any additional cash. If this is you and you’re still saving into a workplace pensions, you might also consider transferring this money across to your SIPP on a regular basis. Your workplace pension stays open to take advantage of any matched contributions, but the money can be swept up regularly as a transfer every year, or a period to suit you.

3. Support for business owner tax planning

Rather than extracting all profits through salary or dividends, some business owners choose to make employer pension contributions directly into a SIPP. This can be a highly tax-efficient way of moving money from a company into a personal retirement fund while helping to build long-term financial security.

For owner-managed businesses, pension contributions can form part of a broader remuneration strategy and help maximise retirement savings while potentially reducing the overall tax burden on profits extracted from the business. Professional tax advice should always be sought to ensure contributions are appropriate and remain within relevant allowances and regulations.

4. Greater flexibility in retirement income

Retirement planning is about more than building a pension pot; it’s also about creating flexibility when it comes to drawing an income. A SIPP can provide access to a range of retirement income options, giving you greater choice over how and when you access your pension savings.

While no single product provides a complete retirement solution, a SIPP can be one of the key tools in a tax-efficient retirement planning toolkit. Investors who have access to multiple sources of retirement income may have greater flexibility in how they meet their spending needs. For example, retirees might draw on pension income, ISA withdrawals, cash savings and other investments at different times.

What to consider before you transfer

As well as comparing the ongoing charges between your schemes, check for any guarantees, safeguarded benefits or protected features. This might include protected tax-free lump sums or guaranteed annuity rates that could be lost on transfer. Some older pensions can also carry exit charges for moving your money. Many pension finding services (including AJ Bell’s) can help you gather the information to help weigh up the costs and benefits or transferring from one defined contribution pension pot to a SIPP.

If you’re consider a transfer a defined benefit scheme, you’re likely to be giving up incredibly valuable guarantees that would be far more expensive to replicate through a SIPP. It’s why in most cases it’s not worth making this switch. In fact, you must get formal financial advice to transfer from a scheme that has safeguarded benefits (which includes defined benefits) worth more than £30,000.