The differences between SIPPs and stakeholder pensions

When planning for retirement, choosing the right type of pension can make a huge difference in your financial security. However, with all the pension options on the market, choosing the right one for you can sometimes feel overwhelming. Understanding the key differences between a self-invested personal pension (SIPP) and a stakeholder pension can help you make the right decision.

Bear in mind that the value of a pension can go down as well as up, and you could get back less than you put in.

A stakeholder pension is a type of personal pension designed to be accessible and easy to use. 

It has low minimum contributions, capped charges and must meet government standards to help ensure that there is flexibility. You can choose when to pay in and how much to pay, so you're in control of your payments. 

However, the investments you get with a stakeholder pension can be more limited than other types of pensions.

SIPPs offer a broader range of investment options than most other pensions. You can invest in stocks  and shares, bonds, funds, and even property.

SIPPs give you the flexibility to manage your investments and have the potential to get higher returns, though this comes with higher risks and, often, higher costs. Find out more about what a SIPP is.

Self-invested personal pensions (SIPPs) and stakeholder pensions each offer unique benefits. Here's how they could work to your advantage.

SIPP benefits

• A wider range of investment options than other pensions, including stocks  and shares, bonds, and property.
• More control over where your money is invested, which is ideal if you want to tailor your portfolio.
• The potential for higher returns by tailoring your portfolio to match the amount of risk you’re happy to take.

Stakeholder pension benefits

• Simple to manage with few decisions to make, making them ideal for new savers.
• Lower and capped charges, so fees don’t eat too much into savings.
• Ideal if you prefer a simple hands-off approach or have lower incomes.
• Flexible minimum contributions, so they’re accessible even with lower monthly contributions. 
• Like SIPPs, stakeholder pensions offer a default investment strategy, which could reduce the risk of poor investment decisions.

Yes, you can transfer from a stakeholder pension to a SIPP. You might want to do this to get more investment control or if you believe you can manage your pension funds better yourself. 

It’s easy to transfer your pension into a new or existing Aviva SIPP. It takes minutes to open an account, you can choose from any of our available investment options, and you can track your progress from anywhere with our award-winning online service.

Before making a decision, it’s important to consider transfer fees and any potential loss of benefits or guarantees from the stakeholder pension. If you're unsure you should speak to an Aviva financial adviser. Alternatively you can find an independent financial adviser unbiased.co.uk. You will have to pay for this advice.

There are a few things to consider before choosing between a SIPP and a stakeholder pension:

• Your investment knowledge and confidence. If you have a good understanding of financial markets and want more control over your investments, a SIPP might be right for you. If not, a stakeholder pension’s simplicity and lower risk could be more appropriate. However, some SIPPs, such as an Aviva SIPP, come with simplified investment options which can make it easier for you to manage.
• Your financial situation and goals. Consider how much you can afford to pay in and your goals for retirement. SIPPs and stakeholder pensions often have minimum contributions, for example, so it’s worth shopping around.

If you're not sure which one is right for you, speak with a financial adviser. They’ll be able to help you make the right decision for your financial situation. You can also find more information about pensions and your investment options on our website