Pension fees

SIPP vs workplace pension — which has lower charges?

The answer depends on pot size, employer, and whether you're an active contributor. Workplace pensions often win for ongoing contributions; SIPPs often win for large accumulated pots and investors who want flat-fee structures.

By Pension Bible editorial team·Last reviewed 9 April 2026·6 min read

Why workplace pensions are often cheaper

A SIPP (Self-Invested Personal Pension) is a pension you open yourself with a provider of your choice. A workplace pension is set up by your employer, typically as part of an auto-enrolment arrangement.

The cost advantage of workplace pensions comes from scale. When an employer selects a pension provider for their workforce, the provider is bidding for the entire workforce's business — often hundreds or thousands of employees — at once. This bulk negotiating power routinely delivers AMC rates well below what an individual opening a personal pension would get from the same provider.

A large employer might negotiate a workplace pension AMC of 0.2–0.35% for its staff. An individual opening a personal pension with the same provider might pay 0.45–0.55%. The same logic applies to the default fund: workplace default funds are often negotiated to use institutional share classes with lower OCFs than the retail equivalents available to personal pension investors.

Auto-enrolment imposes an additional cost protection: the FCA caps total charges on default workplace pension funds at 0.75% per year. No such cap applies to individual SIPPs or personal pensions.

Typical 2025/26 charge comparisons:

For an active contributor whose employer has negotiated a good workplace pension rate, it's hard for any retail SIPP to beat it on total cost alone.

When a SIPP works out better

The workplace pension cost advantage narrows or disappears in several situations:

Large accumulated pots. Workplace default funds almost always charge a percentage fee with no cap. A 0.4% charge on a £500,000 pot is £2,000/year. A flat-fee SIPP at £5.99/month is £71.88/year. The difference — nearly £1,928/year — compounds materially over a 10–20 year horizon. This is why many higher earners move old workplace pension balances to a SIPP as they accumulate, even while continuing to contribute into the active workplace scheme.

Fund choice. Most workplace default funds offer a limited investment menu, typically a handful of lifestyle/multi-asset profiles. A SIPP gives access to a much broader fund range. For an investor who wants to hold a specific passive tracker, sector allocation, or alternative investment not available in the workplace scheme, a SIPP is the only option. Our guide to SIPPs covers the investment scope in more detail.

Consolidation of old pots. If you have multiple old workplace pensions from previous employers, consolidating them into a single low-cost SIPP reduces admin and often cuts total fees. A SIPP is typically the natural consolidation vehicle.

Self-employed or no employer scheme. If you don't have access to an employer scheme, a SIPP is the default vehicle. There's no alternative bulk pricing mechanism.

The employer contribution advantage

The employer contribution is the most financially significant element of any workplace pension comparison — and it sits entirely outside the fee discussion.

Under 2025/26 auto-enrolment rules, the minimum employer contribution is 3% of qualifying earnings (earnings between £6,240 and £50,270 per year). On an average salary of £34,000, qualifying earnings are £27,760 — making the minimum employer contribution £832.80/year. At higher salaries or with employer schemes that exceed the minimum, the contribution is significantly larger.

This employer contribution is free money. Leaving an employer's workplace pension to chase a lower SIPP fee is financially irrational unless the fee saving exceeds the employer contribution — and it almost never does for an active employee.

The relevant comparison is therefore not "SIPP vs workplace pension" as a binary choice, but rather: how do you structure both to maximise the employer contribution while minimising total costs on the accumulated pot?

Running both in parallel

The optimal structure for most employees with a meaningful accumulated pot is to do both:

1. Contribute to the workplace pension to capture the full employer contribution. If your employer matches above the minimum, contribute enough to get the full match — this is typically the best available return on any financial decision.

2. Transfer old, dormant workplace pots to a low-cost SIPP. Pots from previous employers earn no further employer contributions. They sit accumulating fees without the benefit that made the workplace pension attractive. These are the candidates for SIPP consolidation.

3. Leave the active workplace pension accumulating with employer contributions. Don't transfer it to a SIPP while you're still earning employer contributions on it — unless the charges are genuinely egregious (over 1% combined) and the employer is willing to contribute to an alternative scheme.

A practical rule: contribute to the workplace pension until you've secured all available employer matching. For everything else — old pots, additional voluntary contributions above the employer match threshold — a low-cost SIPP often wins on both cost and flexibility.

Our guide to workplace pensions covers the contribution rules in more detail.

This is factual information, not financial advice. If you're unsure what's right for your situation, speak to an FCA-regulated financial adviser.