Pensions explained: workplace pensions, SIPPs and tax relief (2026/27)
How UK pensions work: auto-enrolment minimums, employer contributions, tax relief, SIPPs for the self-employed, when you can access your pension and the changes coming in 2027 and 2028.
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Why pensions are so powerful
Pensions combine three boosts that no other saving gets together:
- Tax relief on what you pay in
- Employer contributions at work, which is free money
- Tax-free growth inside the pension
Workplace pensions and auto-enrolment
If you are aged 22 or over but under State Pension age, earn more than £10,000 a year and work in the UK, your employer must enrol you in a workplace pension.
Minimum contributions for 2026/27 are worked out on your earnings between £6,240 and £50,270:
| Who pays | Minimum |
|---|---|
| Your employer | 3% |
| You (including tax relief) | 5% |
| Total | 8% |
Many employers pay more, or match extra contributions from you. If yours matches, paying in enough to get the full match is one of the best returns available anywhere.
How tax relief works
- Basic rate: pay £80 and £100 goes into your pension.
- Higher rate: you can claim back another £20 through Self Assessment or your tax code, so £100 in costs you £60.
- Salary sacrifice: you give up some salary and your employer pays it into your pension, saving National Insurance too. From April 2029 the National Insurance saving will only apply to the first £2,000 a year sacrificed.
You can get tax relief on contributions up to 100% of your earnings or the £60,000 annual allowance, whichever is lower.
SIPPs: pensions for the self-employed
A self-invested personal pension (SIPP) is a personal pension you open yourself with an investment platform. It gets the same tax relief and suits:
- The self-employed, who do not get a workplace pension
- People who want more choice of investments
- People combining old pensions into one place
You choose the investments, often a low-cost global fund.
When can you access your pension?
- From age 55 now, rising to 57 from 6 April 2028.
- Usually 25% can be taken tax free, up to a lifetime limit of £268,275.
- The rest is taxed as income when you take it.
Changes to know about
- From 6 April 2027, most unused pension funds will count towards your estate for inheritance tax.
- From April 2029, the salary sacrifice National Insurance saving is capped at £2,000 a year.
Common questions
Should I opt out of my workplace pension?
Usually not. Opting out means giving up your employer's contribution and tax relief, which is effectively part of your pay.
Can I have a workplace pension and a SIPP?
Yes. Your total contributions across all pensions count towards the annual allowance.
How do I find an old pension?
Use the free government Pension Tracing Service on GOV.UK to find contact details for old workplace schemes.
This is general information, not personal tax or financial advice. Tax rules change and depend on your circumstances, so check GOV.UK or speak to an accountant before acting.