SIPP Alternatives: What Other Options Exist?

Alternatives to SIPPs include workplace pensions, ISAs, and annuities, each offering different benefits and limitations. Your choice depends on your financial situation and retirement objectives.
  • Last Updated: 22 Mar 2024
  • Fact Checked
  • Our team recently fact checked this article for accuracy. However, things do change, so please do your own research.


Francis Hui
Read This to Explore and Evaluate Alternatives in the UK Pension Landscape. Weigh Up the Pros and Cons of Diverse UK Pension Options.
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Key Takeaways
  • The best alternatives to SIPP for retirement in the UK include personal pensions, stakeholder pensions, final salary pensions, and equity release schemes.
  • SIPP alternatives may offer varying returns and risks, with personal pensions often giving lower returns but also carrying less risk than SIPPs.
  • For withdrawal flexibility, consider personal and stakeholder pensions, which typically allow access from age 55.
  • SIPP alternatives like personal pensions and equity release schemes may offer tax benefits, such as 25% tax-free cash on retirement.
  • Costs and fees associated with SIPP alternatives vary, with personal pensions typically having lower charges, while equity release schemes may have higher upfront costs.

Self-Invested Personal Pensions (SIPPs) are just one segment of a UK pension market worth a staggering £2,5 trillion,1 and while these products may present an attractive option for many, it’s wise to consider SIPP alternatives when planning your retirement.

Workplace pensions, for example, harness the power of employer contributions, while products such as Individual Savings Accounts (ISAs) aim to keep things simple to manage.

In This Article, You Will Discover:

    Our team at Every Investor has meticulously researched and analysed the pension options available to you if you think a SIPP may not be the most suitable tool. 

    Our content undergoes extensive fact-checking and quality control processes before publication to ensure you’ll always be able to access trustworthy, up-to-date information. 

    Read on to find out more about the SIPP alternatives you may be interested in.

    What Is a SIPP?

    SIPPs allow pension holders to take charge of their retirement portfolios, providing flexibility and choice in selecting investments for potential long-term growth.

    What Are the Best Alternatives to a SIPP for Retirement?

    If you’re exploring alternatives to a Self-Invested Personal Pension (SIPP) for retirement, one strong option is the standard Personal Pension. This traditional pension scheme is managed by a pension provider, simplifying your investment process.

    Additionally, employer contributions and tax relief make Personal Pensions an attractive choice. Another superior alternative is a Lifetime ISA (LISA). LISAs offer a government bonus of 25% on your contributions, providing a substantial boost to your retirement pot.

    Furthermore, this scheme allows tax-free withdrawals after age 60. As industry experts, we believe these alternatives offer viable financial pathways, providing flexibility and potential for significant growth.

    Is It Important to Explore SIPP Alternatives?

    Yes, it’s important to explore SIPP alternatives as doing so allows you to consider different options for your retirement savings and investment strategy. 

    By exploring alternatives, you may find investment vehicles that align better with your financial goals, risk tolerance, and preferences.

    The alternatives to SIPPs include workplace pensions, Lifetime ISAs, and various other products.

    Pensions options to consider are:

    • Workplace pensions
    • Personal pensions
    • State pension
    • Annuities
    • Lifetime ISAs
    • Property investments
    • Stocks and shares investments

    Each of these alternatives has distinct characteristics and may be more or less suitable depending on an individual’s personal financial situation, retirement goals, and risk tolerance.

    Let’s take a closer look at your potential alternatives to SIPPs.

    What are The Types of Workplace Pensions?

    These are pension schemes arranged by employers, typically involving contributions from both the employee and employer.

    Let’s take a look at the two main types of workplace pension available in the UK, namely occupational pensions and group personal pensions or stakeholder pensions.

    Occupational Pensions

    Occupational pensions are usually provided directly by your employer.

    This pension category includes Defined Benefit (DB) and Defined Contribution (DC) pensions. 

    Usually both employee and employer contribute to an occupational pension,2 with the employer taking responsibility for ensuring the scheme meets regulatory requirements.3

    Defined Benefit (DB)

    This type of pension scheme guarantees a specific income in retirement, calculated based on factors like salary and length of service. 

    The employer takes on the investment risk and promises to pay a specific benefit, which means your retirement income won’t be dependent on stock market or investment performance.4

    Defined Contribution (DC)

    In this scheme, the employee contributes to the pension pot, though your employer may also contribute (depending on whether you qualify for automatic enrolment or not).5

    The final pension amount depends on the total contributions made and how well the investments perform. 

    In other words

    The investment risk falls on the individual, not the employer, and your retirement income isn’t guaranteed.6

    Group Personal Pensions

    Group Personal Pensions are individual personal pensions arranged collectively by an employer, and they usually take the form of Defined Contribution schemes.

    Both employee and employer may contribute to a Group Personal Pension, but the responsibility of the pension scheme’s performance lies with the pension provider rather than the employer.7

    Did you know?

    The government’s auto-enrolment initiative8 makes it compulsory for companies to enroll qualifying employees into a workplace pension scheme, with certain exceptions. 

    Employers are also required to make minimum contributions to these schemes on behalf of their employees.

    Other pension options that fall under workplace pensions include:

    • Public sector pensions
    • SSAS pensions
    • Additional Voluntary Contributions (AVCs)

    Let’s take a look at these pensions.

    Public Sector Pensions

    As the name suggests, public sector pensions are plans that are available to state employees.9  

    NHS Pension

    Specific to healthcare workers, this is a public pension scheme with different structures and benefits.

    What Are the Benefits of a Public Sector Pension?

    The benefits of a public sector pension include the fact that most are Defined Benefit schemes and that they may present the option to retire early. 

    Benefits of public sector pensions include:

    • Defined Benefits: Predetermined retirement income for financial security.
    • Inflation Protection: Pensions rise with inflation.
    • Early Retirement Options: Possible, though often at a reduced rate.
    • Spouse & Dependent Benefits: Support for family members.
    • Employer Contributions: Generous employer contributions.
    • Flexibility: Additional contributions or tax-free lump sums.
    • Tax Advantages: Tax-free contributions within limits.
    • Portability: Transfer benefits when changing jobs.
    • Regulation & Security: Government-backed and regulated.
    • Death in Service Benefits: Lump sum if you pass away while employed.

    While public sector pensions are widely considered to be generous, they are not without their challenges, such as the need for public funding and the potential for future reform. 

    Therefore, it’s important to understand the terms and conditions of your specific pension scheme and possibly consult a financial advisor for personalised guidance.

    What Are the Risks of a Public Sector Pension?

    The risks of a public sector pension include inflationary risks and potential future underfunding.

    Risks of this pension type include:

    • Political Risk: Government policy impact.
    • Underfunding: Demographic and economic changes.
    • Taxation Changes: Future tax policy impact.
    • Inflation Risk: Uncertain protection against rising costs.
    • Investment Risk: Market performance affecting funds.
    • Limited Portability: Difficulty transferring abroad.
    • Opportunity Cost: Reduced disposable income.
    • Complexity: Complex rules may lead to missed benefits.
    • Changes to Retirement Age: Altered claim age.
    • Economic Conditions: Public spending scrutiny.

    It’s essential to stay informed about your specific pension scheme and any changes that may occur. 

    Consulting with a financial advisor familiar with public sector pensions can provide personalised guidance to help you navigate these complexities.

    SSAS Pensions

    SSAS pensions are Small Self-Administered Schemes, a type of occupational pension scheme. 

    These plans are primarily designed for small businesses and are usually established by company directors for their benefit and that of selected employees. 

    SSAS pensions offer a high degree of control over the investment strategy and can hold a broad range of asset classes, including equities, bonds, property, and more.

    What Are the Benefits of a SSAS Pension?

    The benefits of a SSAS pension include aspects like flexibility and tax benefits.

    Advantages of SSAS pensions:

    • Flexibility: Diverse investment options.
    • Loanback: Can loan 50% to employer.
    • Control: Member-run for investment control.
    • Tax Benefits: Tax-deductible contributions, tax-free growth.
    • Family Involvement: Inclusion of family members.
    • Property Purchase: Buy commercial property for synergy with the business.

    What Are the Risks of a SSAS Pension?

    The risks of a SSAS pension may include costs and regulatory complications.

    Drawbacks of SSAS pensions may include:

    • Complexity: Requires expertise to manage effectively.
    • Costs: Higher setup and admin expenses.
    • Investment Risks: Greater freedom, but higher risk.
    • Regulatory Risk: Potential for regulatory issues.

    An SSAS pension can be a highly advantageous retirement planning tool for business owners and directors, but it’s important to seek professional advice to ensure it aligns with your financial goals and risk profile.

    Additional Voluntary Contributions (AVCs) 

    Additional Voluntary Contributions (AVCs) are a way for individuals in the UK to contribute extra money to their pension fund, in addition to the regular contributions made to their workplace pension scheme. 

    AVCs are typically used by those who want to boost their retirement savings. 

    Here’s a closer look at the two types:

    • In-Scheme AVCs: These are contributions made within the existing workplace pension scheme. They’re often invested in the same funds as the main scheme.
    • Free-Standing AVCs (FSAVCs): These are independent AVC plans managed by a different pension provider. They may offer a wider choice of investment options but could come with higher charges.

    Some employers may match AVCs with additional contributions, although this is less common than with main pension contributions.

    What Are the Benefits of AVCs?

    The benefits of AVCs include flexible investment and withdrawal options.

    Additional benefits of AVCs:

    • Enhanced Savings: Boosts retirement income significantly.
    • Tax Efficiency: Tax-deductible contributions, tax-free growth.
    • Investment Flexibility: Tailor investments to risk tolerance.
    • Lump Sum Option: Tax-free lump sum at retirement.
    • Phased Retirement: Flexible phased retirement planning.
    • Catching Up: Make up for missed contributions.
    • Employer Contributions: Employer contributions, though less common.
    • Diversification: Diversify retirement savings.
    • Portability: Transferable to new employer’s scheme.

    Before making Additional Voluntary Contributions, it’s important to consider any potential drawbacks, such as the risk associated with your investment choices and the impact on your liquidity. 

    It’s advisable to consult a financial advisor to assess whether AVCs align well with your overall financial and retirement planning strategy.

    What Are the Risks of AVCs?

    As with other pension investments, AVCs carry the risk of investment performance. Different investment choices may come with different levels of risk and potential return.

    Fees and charges can vary, especially between in-scheme AVCs and FSAVCs, and should be considered when choosing an AVC arrangement.

    In other words

    AVCs offer a flexible way to increase pension savings, providing additional investment choices and tax benefits.

    However, they should be considered in the context of overall financial planning and retirement goals, taking into account factors such as contribution limits, investment risks, and charges. 

    It may be beneficial to seek professional financial advice to determine the best approach for individual circumstances.

    What Are the Benefits of Workplace Pensions?

    The benefits of workplace pensions include automatic enrolment and economies of scale.

    More benefits of workplace pensions:

    • Employer Contributions: Employers contribute, some may offer more.
    • Tax Relief: Contributions reduce taxable income.
    • Compound Growth: Investments grow over time.
    • Automatic Enrolment: Simplifies retirement savings.
    • Diversified Investments: Align with risk tolerance.
    • Economies of Scale: Lower fees due to large membership.
    • Flexibility: Adjust contributions to circumstances.
    • Portability: Transfer options when changing jobs.
    • Risk Mitigation: Managed by professionals.
    • Fiduciary Duty: Trustees protect members’ interests.
    • Savings Habit: Promotes long-term financial discipline.

    It’s important to understand the terms and conditions of your specific workplace pension scheme, as features and benefits can vary. 

    Consulting a financial advisor for personalised advice is often recommended to make the most of your workplace pension.

    What Are the Risks of Workplace Pensions?

    The risks of workplace pensions include inflationary risk and the possibility that you’ll have limited control over your pension.

    Risks and drawbacks to consider:

    • Investment Risk: Market fluctuations affect returns.
    • Management Fees: Fees impact savings over time.
    • Limited Control: Limited investment choices.
    • Employer Solvency: Risk to contributions in financial difficulties.
    • Regulatory Changes: Impact on contribution limits, tax relief.
    • Inflation Risk: Eroding purchasing power without protection.
    • Annuity Rates: Unfavourable rates reduce income.
    • Longevity Risk: Outliving finite pension savings.
    • Governance: Varies, affecting investment choices and fees.
    • Opportunity Cost: Trade-off between returns and benefits.
    • Portability: Transfer restrictions and fees.
    • Sequence of Returns: Impact on final pension size.

    Given these risks, it’s essential to regularly review your workplace pension and possibly consult a financial advisor to ensure it aligns with your overall financial and retirement strategy.

    What are The Different Types of Personal Pensions?

    Personal pensions are pensions that individuals arrange themselves. 

    These products are sometimes known as defined contribution or ‘money purchase’ pensions.

    Managed Personal Pension Plans

    Managed Personal Pension plans are a specific type of personal pension scheme in the UK where the investment decisions are made by professional fund managers rather than the individual policyholder. 

    These plans are designed for individuals who prefer to have their pension investments actively managed, rather than taking a DIY approach.

    Stakeholder Pensions

    A stakeholder pension’s a type of personal pension plan with specific features defined by the UK government.10

    Stakeholder pensions have capped charges, low minimum contributions, and flexible contribution levels.

    What Are the Benefits of Personal Pensions?

    The benefits of personal pensions may include portability and access to death benefits.

    Additional personal pension advantages:

    • Tax Relief: Reduces retirement investment cost.
    • Investment Growth: Long-term growth potential.
    • Flexibility: Choose contribution frequency.
    • Diverse Investments: Wide investment choices.
    • Portability: Not tied to employment.
    • Access From Age 55: Early access, tax-free lump sum.
    • Death Benefits: Passing on to beneficiaries.
    • Self-Employed Use: Ideal for self-employed individuals.
    • Low Entry Limits: Accessible for varying incomes.
    • Inflation Hedge: Protects purchasing power.
    • Responsibility: Encourages proactive retirement planning.

    Despite these benefits, personal pensions come with their own set of risks, such as investment risk and management fees, which you should consider carefully. 

    It’s advisable to consult a financial advisor to help you understand whether a personal pension is suitable for your individual circumstances.

    What Are the Risks of Personal Pensions?

    The risks of personal pensions include investment risk and longevity risk.

    Drawbacks of personal pensions:

    • Investment Risk: Fluctuating values.
    • Management Fees: Impact on returns.
    • Inflation Risk: May not keep pace with living costs.
    • Annuity Rates: Unfavourable rates reduce income.
    • Lack of Guarantees: No income level assurance.
    • Longevity Risk: Outliving finite savings.
    • Flexibility Risks: Discipline needed for contributions.
    • Complexity: Overwhelming investment choices.
    • Regulatory Risks: Changing policies impact planning.
    • Lack of Employer Contributions: No employer input.
    • Opportunity Cost: Miss other investment opportunities.
    • Liquidity Constraints: Funds accessible from age 55.

    Before investing in a personal pension, it’s advisable to consider these risks carefully and consult a financial advisor to ensure that this type of product aligns with your overall financial goals and retirement strategy.

    What are The Different Types of State Pension?

    The state pension’s the UK’s government-provided pension and serves as a fundamental pillar of retirement income for many.

    What Are the Benefits of the State Pension?

    Benefits of the state pension include its simplicity and its ‘triple-lock’ protection feature.

    Advantages of the State Pension:

    • Guaranteed Income: Reliable retirement income, immune to market risks.
    • Inflation-Proofing: Annual increase through “triple lock” mechanism.
    • Universal Eligibility: Entitlement based on National Insurance contributions.
    • Simplicity: No active management, payments directly to your account.
    • No Management Fees: Full amount available, no fees.
    • Financial Planning: Simplifies retirement planning.
    • Survivor Benefits: Spouse can inherit part of the pension.
    • No Longevity Risk: Income for life, no risk of outliving savings.
    • Not Means-Tested: Unaffected by other income or savings.
    • Global Payments: Paid to eligible recipients abroad.
    • No Investment Risk: Government-funded, no market exposure.
    • Supports Lower Earners: Credits for those with low earnings or employment gaps.

    While the State Pension offers these various benefits, it’s generally not sufficient for a comfortable retirement on its own. 

    Most financial advisors recommend having additional forms of retirement income to supplement the State Pension.

    What Are the Risks of the State Pension?

    Risks of the State Pension include not receiving enough of a monthly income and the possibility of future changes to the pension age.

    More drawbacks and risks:

    • Insufficient Income: Often inadequate for a comfortable retirement.
    • Policy Risk: Subject to government policy changes.
    • Inflation Risk: Future inflation impact uncertain.
    • Uncertain Uprating Overseas: No guaranteed increases abroad.
    • Eligibility Criteria: Not everyone gets the full pension.
    • Delay in Pension Age: Rising retirement age delays benefits.
    • Tax Implications: State Pension is taxable income.
    • No Early Access: Not accessible before designated age.
    • No Passing On: Not inheritable by heirs.
    • No Investment Growth: Fixed amount, no investment returns.
    • Fiscal Sustainability: Concerns about long-term sustainability.
    • No Lump Sum Option: Paid as regular income, no lump sum.

    Given these risks and limitations, it’s generally recommended to have additional forms of retirement income to supplement the State Pension. 

    Consulting with a financial advisor can provide tailored guidance on how to plan for a secure retirement.

    What are The Different Types of Annuities? 

    Annuities are purchased using pension savings to provide a guaranteed income for life or a set period.

    What Are the Benefits of an Annuity?

    Benefits of an annuity include its tax efficiency and receiving a guaranteed income for life.

    Benefits of annuities:

    • Guaranteed Income: Reliable financial security.
    • Inflation Hedging: Option to maintain purchasing power.
    • Tax Efficiency: 25% tax-free lump sum, manageable tax.
    • Simplicity: Hassle-free, automated payments.
    • No Investment Risk: Shielded from market fluctuations.
    • Flexible Options: Guarantee periods, joint-life options.
    • Access to Higher Rates: Enhanced rates for certain conditions.
    • Estate Planning: Death benefits for beneficiaries.
    • For Risk-Averse: Certainty over market uncertainty.
    • No Longevity Risk: Guards against outliving savings.

    While annuities offer these benefits, they aren’t suitable for everyone and come with their own set of limitations, such as inflexibility once purchased and the potential for lower overall returns compared to other investment options. 

    Therefore, it’s generally advisable to consult a financial advisor to see if an annuity fits into your overall retirement planning strategy.

    What Are the Risks of an Annuity?

    Risks of an annuity include its inflexibility once bought and inflationary risk.

    Risks and drawbacks of annuities:

    • Lack of Flexibility: Irrevocable terms and rates.
    • Opportunity Cost: Miss potential higher returns.
    • Inflation Risk: Fixed payments may erode purchasing power.
    • Interest Rate Risk: Rates at purchase affect income.
    • No Capital Access: Limited access to lump sum.
    • Longevity Risk (Short-term): Risk of outliving income.
    • Lower Estate Value: Limited inheritance without options.
    • Counterparty Risk: Potential insurer financial issues.
    • Complexity and Costs: Added options may reduce income.
    • Health and Lifestyle Changes: Accuracy crucial for income.
    • Missed Enhanced Rates: Failing to explore higher rates.
    • Taxation: Annuity income is taxable, impacting overall income.

    Before purchasing an annuity, it’s advisable to consult with a financial advisor to fully understand these risks and how an annuity fits into your overall financial and retirement strategy.

    What are Lifetime ISAs? 

    A government-supported savings product that can be used for retirement planning, with annual limits on contributions.

    Each of these alternatives has distinct characteristics and may be more or less suitable depending on an individual’s personal financial situation, retirement goals, and risk tolerance.

     What Are the Benefits of a Lifetime ISA?

    Benefits of a Lifetime ISA include the government contribution to your investment and tax-free growth on investments.

    Advantages of a Lifetime ISA:

    • Government Bonus: 25% bonus, up to £1,000 per year.
    • Flexibility: Use for a first home or retirement.
    • Tax-Free Growth: No income or capital gains tax.
    • Investment Options: Choose cash or stocks and shares.
    • First Home: Efficient deposit saving with a bonus.
    • Retirement Savings: Complements long-term savings.
    • Compound Growth: Bonus and growth lead to compounding.
    • Tax-Free Withdrawals: Tax-free for home purchase or at age 60.
    • Individual Ownership: You control investments and timing.
    • Partial Withdrawals: Non-disruptive access for qualified needs.
    • Estate Planning: Part of your estate, but not tax-free on death.

    It’s important to note that there are penalties for non-qualifying withdrawals, and Lifetime ISAs may not be suitable for everyone. 

    For instance, if your are looking to buy a home in less than a year, or if your are older than 39, a Lifetime ISA may not be the best option. As always, consulting a financial advisor can provide tailored advice.

    What Are the Risks of a Lifetime ISA?

    Risks of a LIfetime ISA include investment risk and being limited to making contributions up to the age of 50 only.

    Potential Risks and Drawbacks of a Lifetime ISA:

    • Withdrawal Penalties: 25% charge for non-qualifying withdrawals.
    • Opportunity Cost: Miss employer contributions to a pension.
    • Limited Contribution Age: Only available from 18 to 39, with contributions until 50.
    • Investment Risk: Stocks and shares ISA value can fluctuate.
    • Long-Term Commitment: Designed for long-term saving.
    • Tax Implications: Counts toward inheritance tax.
    • Limited Property Price: Property purchase capped at £450,000.
    • Inflation Risk: Cash ISA interest may not beat inflation.
    • Complexity: Managing multiple savings accounts can be complex.
    • Rule Changes: Government rules may change.
    • Account Fees: Some providers charge management fees.
    • Lack of Guarantees: No guarantees on returns.

    Given these risks and limitations, it’s crucial to carefully consider whether a Lifetime ISA is suitable for your financial goals and circumstances. Consulting a financial advisor can offer you personalised advice tailored to your needs.

    What is Property Investment?

    Property investment involves purchasing properties to generate income through rental payments or capital appreciation.

    Buy-to-Let Properties

    Buy-to-let properties11 are residential properties bought to generate an income from rentals. 

    The rental income can provide a regular source of income, and the property may also appreciate in value over time.

    Real Estate Investment Trusts (REITs)

    REITs12 are investment vehicles that allow individuals to invest in a diversified portfolio of income-generating real estate properties. 

    You can buy shares in a REIT, and the income generated from the properties is distributed to shareholders.

    Property Crowdfunding Platforms

    Property crowdfunding platforms13 allow multiple investors to pool their money together to invest in real estate projects. 

    This allows individuals to access property investments with lower capital requirements and spreads the risk across multiple properties.

    What are Stocks & Shares Investment?

    Stocks and shares investment involve buying and selling individual company shares or investing in funds that hold a diversified portfolio of stocks.

    Individual Stocks & Shares Investments

    Investing in individual stocks involves purchasing shares of specific companies. 

    This approach requires research and monitoring of individual companies and their performance.

    Investing in stocks and shares carries risk and should be approached with caution and proper planning. 

    Investment Funds (Unit Trusts & OEICs)

    Investment funds pool money from multiple investors to invest in a diversified portfolio of stocks and shares. 

    Unit trusts and open-ended investment companies (OEICs) are common types of investment funds.

    Exchange-Traded Funds (ETFs)

    ETFs are investment funds, representing a basket of securities, that are traded on stock exchanges.14

    They aim to track the performance of an underlying index or asset class. 

    ETFs can offer diversification, flexibility, and liquidity.

    Common Questions

    Are ISAs a Good Alternative to SIPPs?

    What Are the Advantages of Workplace Pension Schemes?

    How Do Personal Pension Plans Differ From SIPPs?

    Are Investment Bonds a Suitable Alternative for Retirement Savings?

    What Are the Risks and Benefits of Property Investment?

    How Do Stocks and Shares Investments Compare to SIPPs?

    What Are the Best SIPP Alternatives for Retirement?

    How Do SIPP Alternatives Compare in Terms of Returns and Risks?

    Which SIPP Alternatives Offer the Most Flexibility for Withdrawals?

    Are There Any Tax Benefits Associated with SIPP Alternatives?

    What Are the Costs and Fees Associated with SIPP Alternatives?

    In Conclusion

    While SIPPs offer a flexible and versatile route to building your retirement nest egg, the breadth of SIPP alternatives available on the UK pensions market, each bringing unique benefits and potential drawbacks, can’t be overlooked. 

    Some popular SIPP alternatives include workplace pensions, personal pensions, and the state pension, each catering to different needs and circumstances.  

    By carefully considering these SIPP alternatives in light of your financial situation, retirement goals, and risk tolerance, you can sculpt a retirement savings strategy that offers security, growth, and peace of mind.

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