SIPP vs Stakeholder Pension: Which Is Right for You?
By Team SalaryCalculate · 7/9/2025
Choosing between a Self-Invested Personal Pension (SIPP) and a Stakeholder Pension depends on how hands-on you want to be with your retirement savings. Both are personal pensions with tax advantages, but they suit different types of savers.
In this guide, we’ll compare SIPPs and stakeholder pensions side by side — helping you decide which one fits your goals, experience, and contribution style.
What Is a Stakeholder Pension?
A Stakeholder Pension is a simple, flexible pension designed to be accessible for all income levels. Introduced by the government, it ensures:
- Low minimum contributions (often from £20/month)
- Capped annual charges (usually no more than 1%)
- Flexible payments — you can stop, start, or change them without penalty
- Default investment options managed on your behalf
It’s designed for ease of use, especially for new savers or those with irregular income.
What Is a SIPP?
A Self-Invested Personal Pension (SIPP) is a more advanced personal pension that gives you full control over your investments. Instead of relying on a default fund, you choose where to invest your contributions — including:
- Shares
- Funds and ETFs
- Investment trusts
- Bonds
- Commercial property (in some cases)
SIPPs are best suited to people who are confident making their own investment decisions. If you need help understanding SIPP investment choices and tax benefits, read How Does a SIPP Work?.
Note: If you’re looking for help opening a SIPP, see our step-by-step setup guide.
SIPP vs Stakeholder Pension: Key Differences
| Feature | SIPP | Stakeholder Pension |
| Investment Choice | Wide — DIY (shares, funds, etc.) | Narrow — typically a default fund |
| User Control | High — you choose and manage everything | Low — fund is managed for you |
| Charges | Varies by provider and investments | Capped — typically no more than 1% |
| Minimum Contributions | Often £50–£100 | Usually from £20/month |
| Flexibility | Flexible but more complex | Very flexible and simple |
| Best For | Confident, active investors | Beginners and low contribution savers |
When a Stakeholder Pension Might Be Right for You
Consider a stakeholder pension if:
- You want a low-maintenance pension
- You're contributing small or irregular amounts
- You value fee transparency and capped costs
- You’re not comfortable making investment decisions
Stakeholder pensions work well for freelancers, young savers, or those building a retirement fund gradually without active management.
When a SIPP Might Be Right for You
A SIPP could be a better fit if:
- You want a hands-on approach to managing your pension
- You're already familiar with investing or portfolio strategy
- You plan to consolidate multiple pensions
- Your contributions (or pot size) are large enough to justify more choice
A SIPP is essentially a do-it-yourself pension wrapper for investors who want control and flexibility.
Can You Have Both?
Yes. You can contribute to both a stakeholder pension and a SIPP — as long as you stay within the annual contribution allowance (currently up to £60,000 or 100% of earnings, whichever is lower). This can be useful if:
- You start with a stakeholder pension for ease, then switch to a SIPP later
- You want to separate actively and passively managed pots
Final Thoughts
There’s no universally “better” option — it depends on your confidence with investing, your income, and how much flexibility you want.
| Prefer Simplicity? | A stakeholder pension keeps it easy with capped charges and managed funds. |
| Want More Control? | A SIPP gives you the freedom to shape your investments and strategy. |
Still unsure which is right for you? You might consider speaking with a financial adviser, especially if you’re planning to transfer existing pensions or make large contributions.