SIPPs explained

The basics

A SIPP is a pension for people who want to be in control of making their own investment decisions. Pensions are for your retirement, so you wouldn’t access your money until a time after your 55th birthday (57th from 2028) onwards.

  • Pensions can help us save for retirement in a tax-efficient way. But many standard pensions don’t give you the flexibility to invest how you want.
  • A SIPP allows you to choose your own investments. This is important as it could mean you spread your risk further to try to weather any market volatility and help grow your pension pot.
  • As SIPPs are usually free from inheritance tax you can pass on pension wealth tax efficiently, and in some cases completely tax free.
  • SIPPs also make it easy to manage your pension. You can log on to check your investments at any time and make changes whenever you like.
  • The maximum amount you can contribute to your SIPP is £60,000 each tax year (from all personal pensions and other sources, including tax relief).
  • If you are employed, your employer can make contributions into your SIPP. With our SIPP company contributions must be from a limited company and you must be the limited company business owner or one of the directors.

Pensions are a long-term investment. The retirement benefits you receive from your pension account will depend on a number of factors including the value of your account when you decide to take your benefits which isn't guaranteed, and can go down as well as up. The value of your account could fall below the amount paid in. Tax treatment depends on individual circumstances and may be subject to change in the future.

Tax relief

If you’re under the age of 75, and eligible to receive tax relief, any personal contributions paid into your SIPP receive immediate tax relief at the basic rate. For 2025/2026 this amount is 20%.

If you pay a higher rate of income tax, you can usually claim extra tax relief on your personal contributions directly from HMRC as part of your yearly tax return. We do not add this extra relief to your SIPP.

Cash will be available to invest in your account usually within three working days.

A basic rate taxpayer:

Total contribution of £1,250

A higher rate taxpayer:

Total contribution of £1,250

*By claiming back the extra 20% higher rate tax relief through self-assessment, this effectively means you’ve only paid £750 towards a £1,250 total pension contribution. If you live in Scotland, or are an additional rate taxpayer, the reclaimed tax amount could be more.

  • How you receive the pension tax relief you’re entitled to depends on the type of pension you’re paying into:

    • If you have a personal pension, because you’ve already been taxed on the income you’re paying in, it needs to be added back. Your pension provider claims tax relief for you from HMRC to automatically add the basic rate of 20% to your pot. If you’re a higher or additional rate taxpayer, you need to claim back the additional tax you’re eligible for through your yearly Self-Assessment.
    • If you have a workplace pension, your employer usually takes your pension contributions out of your pay before deducting Income Tax. This means you haven’t paid tax on these contributions, so you don’t need to claim anything back.
  • If you pay tax at a higher rate than basic tax rate, you can claim any further tax relief to which you are entitled through self-assessment. If you are a Scottish tax payer and you pay tax at a rate higher than the basic rate, you’ll be entitled to claim further tax relief at that higher rate. If you pay tax at lower than the basic rate of tax, you’ll still be entitled to receive tax relief at the basic rate.

Interest in your SIPP

How interest works within a SIPP

How interest works within a SIPP

In a Self-Invested Personal Pension (SIPP) if you have a cash balance of £1 or more, we’ll pay you interest. We currently pay interest at a gross rate of 3.00%. Please bear in mind that this rate may change in the future.

How we handle the money

How we handle the money

All the cash we hold is kept in a central account; this is called a client money account. Here is how it works:

  • We earn interest on this account from our banking partners.
  • We keep a portion of this interest (we expect this to be between 0.70% to 1.20%) This is called retained interest and any interest retained is used to improve our products and services.
  • The rest of the interest is paid to you at the current rate shown in the table below.

Calculating and Paying Interest

Calculating and Paying Interest

We work out the amount of interest daily, and we pay it to you, yearly in March.

Interest rates are variable, which means the amount can change depending on different internal and external factors in the future.

Current interest paid

  • We hold uninvested cash in a central client money account, in compliance with Financial Conduct Authority (FCA) rules.
  • Your money is protected under the Financial Services Compensation Scheme (FSCS).
  • The retained interest is the difference between the total amount we receive from our banking partners and the amount we pay to customers.
  • Please note that all interest rates can vary.

Interest rate paid to you

From

Interest rate paid to you

3.00%

From

28/08/2025

Interest rate paid to you

3.55%

From

31/08/2023

Interest rate paid to you

2.65%

From

23/03/2023

Interest rate paid to you

2.45%

From

19/01/2023

Interest rate paid to you

1.30%

From

07/10/2022

SIPP beneficiaries

When you die, your SIPP (Self-Invested Personal Pension) can be passed to your beneficiaries, usually free from Inheritance Tax. You can nominate as many beneficiaries as you like, such as a spouse and a child, or a charity. Who you choose is up to you but it’s always worth regularly reviewing, especially as your life and circumstances change. 

Your beneficiaries can choose to receive their benefits in one of the following ways:

  • as a cash lump sum (normally not subject to Inheritance Tax)
  • as a guaranteed yearly income, by buying an annuity from an annuity provider (which will normally pay a regular, secure income for the rest of their life), or
  • as a flexible income, by setting up a beneficiary drawdown (leaving the pension invested with potential to also pass on savings to future generations).

Some of these benefits may be taxed but this will depend on what you’ve done with your pension and your circumstances at the time of your death.

To nominate or change your beneficiaries, you should contact us.

If you die before age 75

If you die before age 75

Cash lump sum and income death benefits will normally be paid tax free.
This is on the condition the payment happens within two years of notification of death, and it’s within your Lump Sum Death Benefits Allowance (LSDBA).

For 2025/26 this limit is £1,073,100. The LSDBA will be reduced by Relevant Benefit Crystallisation Events (RBCEs) – effectively, withdrawals already taken from your pension before your death.

Death benefits paid as a flexible income through a beneficiary drawdown are not subject to the LSDBA.

If you die after age 75

If you die after age 75

Benefits will be subject to tax at the marginal tax rate. The tax impact will vary depending on how your beneficiary chooses to access their benefits.

For example: You die after age 75 and nominate one beneficiary. Your beneficiary might decide to take their benefits as income over a period time instead of a lump sum. For example, if they earn £30,000 a year and inherit £50,000, they can withdraw £10,000 per year, taxed at 20%. This is instead of taking the whole amount as a lump sum, which could be taxed more heavily.

Taking money from your pension

Once you reach the age of 55 (57 from 2028), you can start taking an income from your SIPP, or you can choose to keep your money invested and continue to contribute to your pension pot.

  • If you need to take an income or need access to the money in your pension, you can choose any, or a combination, of the below options.

    1. Leave it invested
    2. Take it as cash
    3. Flexible income through drawdown
    4. Buy an annuity

    Find out more about retirement options

  • While you can generally take 25% of your SIPP as a tax-free lump sum, please be aware that this is capped by the lump sum allowance, which is currently £268,275.

    There is also the lump sum and death benefit allowance, currently £1,073,100. This puts a limit on the tax-free lump sums that can be paid on your death. (Note that this is reduced by any tax-free lump sums you take during your lifetime).

    As of 6 April 2024, there are no limits on how much of your SIPP you can convert to income drawdown or an annuity, whether during your lifetime or on death.

    There is also a limit once you start taking money from your SIPP - this could be a withdrawal from your flexi-access drawdown or taking a taxable lump sum, called the Money Purchase Annual Allowance (MPAA). The MPAA limit impacts the amount you can pay into your SIPP in the future without incurring a tax charge. This limit is currently £10,000 each tax year (although the Government may change this in future).

We're all part of Lloyds Banking Group, which incorporates many well-known companies including Halifax, Scottish Widows, Halifax Share Dealing Limited and Embark Investment Services Limited.

Our retirement partner for our pensions is Scottish Widows, who have more than 200 years experience in pensions and retirement. 

Understanding the risks

The main goal of any pension scheme is to provide you with an income during retirement. There are some important things to think about that could affect the benefits you’re able to receive in the future.

  • Before transferring benefits into your SIPP from another pension provider, you should check you aren’t giving up valuable features or benefits.

    Although we don’t charge you, your existing pension provider may apply a penalty, or other reduction in the value of your benefits, if it’s transferred.

    If you transfer money into your SIPP from another pension, the final pension benefits you receive could be less than if you stayed in your existing scheme.

    If you’re in any doubt about the benefit of transferring, we recommend that you take advice from a suitably qualified, professional adviser before arranging the transfer. There will normally be a charge for that advice.

  • Most experts will tell you not to keep all your eggs in one basket, as it’ll help you to diversify and manage your overall risk appetite.

    You can deal in a wide range of investments, each of which carries a different level of risk. The value of your SIPP depends on the level of risk and potential performance of the investments you choose. It’s always worth doing your research first but past performance is not a guarantee of how investments will perform in the future.

    But remember, investment performance can go down as well as up and you may get back less than you originally invested. Some investments may need to be held for longer term to achieve a return.

    If the value of your SIPP is small and you deal regularly in smaller amounts, dealing costs could be disproportionately high and weaken the value of your SIPP.

  • Your retirement benefits are not guaranteed. If you start to take income earlier than planned, the total amount may be lower than expected and may not meet your needs in retirement.

    Your SIPP value may not be large enough to provide income for as long as you wanted, in instances where you take a higher than planned level of income (for example as a flexi-access Drawdown) over a long period of time.

    If you take a large proportion of income in a short period, you may end up paying a higher rate of tax than usual.

FSCS logo

Investments with Halifax Share Dealing Limited are protected up to a total of £85,000 by the Financial Services Compensation Scheme. This limit is applied to the aggregated total of any stock or cash held across the following brands that we administer.

This is in addition to any other savings deposits you may hold across Lloyds Banking Group.