You have a self-invested personal pension (SIPP) and you’d like your employer’s pension contributions to go into it instead of the workplace scheme. This article is for employees and explains what to check and how to ask. If you’re an employer, see our separate article for employers.
Table of contents
1. The short answer
You can ask, but your employer doesn’t have to say yes. They choose the workplace scheme, and you can’t insist on a different one. Some employers will agree, and the sections below help you find out whether yours can. ajbell
2. Why your employer might hesitate
Paying into your SIPP is more work for them than paying into the workplace scheme. Every employee’s SIPP is a different provider to pay, and they’ll usually need to complete the provider’s forms and set up a direct debit or bank transfer. ajbell ajbell
They also need a written agreement with your provider. A SIPP can replace the workplace scheme only if it meets the legal minimum standard for workplace pensions, and some providers don’t treat their SIPPs as workplace schemes. One major provider says SIPPs are not usually suitable for this. Your employer will normally need your provider to say yes first. ajbell aviva
If they do agree, they still have to meet the same minimum as for the workplace scheme, which is at least 3% of your qualifying earnings, a band of your pay set by the government. thepensionsregulator
3. What about costs?
Workplace pensions have a charge cap of 0.75% a year. It only covers the default fund, which is the fund you’re placed in if you don’t choose one. In a SIPP you choose your own investments, so the cap doesn’t apply and there’s no limit on what they cost. That makes it worth checking the costs before you commit. sackers
Costs can go either way. A large employer can negotiate a lower rate than an individual pays with the same provider, and large workplace schemes often charge well under the cap. A SIPP adds layers: a platform charge on top of the charges on the funds you hold. Flat-fee platforms can work out cheaper on large pots. SIPP vs Workplace Pension — Fees, Employer Contributions and Transfers +3
Work out the total yearly cost of your SIPP on the pot you expect to have, and compare it with your workplace pension’s default charge. Ask your provider for the full breakdown in writing. If you have coaching through Maji, your Maji coach can talk through the costs with you, and whether the SIPP is better value for you than the workplace pension.
4. Other things to weight
A workplace default fund is chosen for you. In a SIPP, the decisions are yours, and SIPPs are generally aimed at people with some investing experience. If you’re not confident, talk it through with your Maji coach, if you have coaching available. ajbell
Changing your contributions later may take longer. Providers usually want changes notified in writing, and some ask your employer for a new contribution form each time. hlcurtisbanks
Your existing workplace pot isn’t affected. It stays invested where it is unless you choose to transfer it. nowpensions
5. How to ask
- Ask your SIPP provider whether they accept employer contributions, and what your employer would need to complete.
- Work out the costs, as above.
- Put your request to your employer in writing, with your provider’s name and details.
- Expect them to check with the provider and possibly take advice. Be ready for them to say no.
6. If you’ve just started a job
Your employer can delay enrolling you for up to three months, which may give them time to set this up. If it isn’t ready in time, you’ll normally be put into the workplace scheme first. Your employer can’t make this a condition of the job. thepensionsregulator
7. Before you decide
This is general information, not financial advice. If you have coaching through Maji, talk your decision through with your Maji coach.
