Your guide to self-invested personal pensions (SIPPs)

A Monzo Pension is a self-invested personal pension (or a SIPP). This guide breaks down the things you need to know about a SIPP, and more importantly the SIPP you can open with us - what it is, who it's for, rules around SIPPs, plus so much more.

It's packed full of important stuff to help you get a better understanding of this type of pension. So settle down with a cuppa. Take a sip. And let's get into SIPPs.

A SIPP is a type of personal pension that gives you a way to save, invest and grow your money for retirement. You have the ability to control how much goes in and when. 

You can start taking the money in your SIPP when you turn 55, going up to 57 from 2028. 

And you can have a SIPP alongside other investments, such as ISAs and workplace pensions. 

FNZ Securities Limited is the pension provider for the Monzo Pension. They operate and administer your SIPP – meaning they take care of the day-to-day running of your pension. This includes following FCA rules for pension scheme operators, and HMRC rules for administrators.

When you open your pension with us and agree to the terms, you’re agreeing for us to act as your agent. This simply means we can deal with FNZ Securities Limited on your behalf.

For those who want another way to save for the future

If you have a workplace pension, a SIPP can complement and work alongside it. Self employed? Then a SIPP is one way for you to save for your retirement.

It can also work alongside other savings and investments you have, such as ISAs. They work in different ways and you can use both to grow your money for retirement. See the difference between SIPPs and ISAs below. 

Are there risks involved?

With a stocks and shares ISA and a SIPP, you'll be investing your money. So with both, the value of your investments could go up or down and you could get back less than you put in.

How soon should you open one?

With both ISAs and SIPPs, the sooner you start, the more you'll benefit from compounding. This is when you earn a return on the returns you've already made.

For those who want more control

With a SIPP, you’re free to add money to your pension whenever you want – by transferring other pensions into it, making regular payments into it, or adding lump sums.

For now, you can only transfer your old pensions into a Monzo Pension, but you can't contribute (meaning add new money) to it just yet – but we're working on letting you do this.

For those who want to combine their pensions

Every new job you have usually means a new workplace pension. Over the years, these can rack up quite a bit. Combining them into a single pension makes your future money easier to manage. Plus you get a clearer view of your future – and can make changes to help you reach your goals. 

You can combine your pensions into one using a Monzo Pension. 

Although combining pensions might be right for some people, it may not suit everyone. It’s important to think about the fees you currently pay versus what you’ll be paying if you choose to combine your pensions.

And you should think about any benefits you may have with your old pensions too – whether that’s protections that can’t be transferred, like the right to start taking your pension earlier. Or being able to choose from a wider choice of investment options. At the moment, we only offer target date funds. 

It’s known as tax relief. When you pay money into your SIPP, the government gives you money too. You get this tax relief on what you add to your pension, up to £60,000 or 100% of your salary each year (whichever is lower) – this is known as your 'annual allowance'. 

This limit applies across all of the pensions you contribute to. This doesn’t include when you transfer your pension to a new provider, as the government would have already given you tax relief when you originally added that money to your pension.

The amount of tax relief you get depends on the rate of income tax you pay. Tax rates and tax bands are different in Scotland – so the tax relief you get on pension contributions can be different too. Learn more about income tax in Scotland on the government website.

You get 20% tax relief

As long as you’re a UK resident and under 75, the government will give you 20% tax relief when you add money to your pension. You’ll get this even if you don’t pay tax or are a non-earner, but it’ll be limited to 20% tax relief on the first £3,600 paid into a pension.

Let’s take a look at an example:

You’re a basic rate taxpayer and you add £100 to your pension. You've already paid 20% tax on that £100. If you hadn't paid tax on it, it would have been £125. So, the government tops up your pension by the amount you originally paid in tax – in this case, £25. In total, that’s £125 in your pension – nice.

Higher and additional-rate taxpayers get extra tax relief

If you’re a higher-rate taxpayer, you can get up to 40% tax relief. And if you’re an additional-rate taxpayer, you can get up to 45% tax relief. (You must pay enough tax at the higher or additional rate to claim the full 40% or 45% tax relief.)

The government will add 20% tax relief to your pension, but you’ll need to submit a self-assessment tax return to claim the extra tax relief. 

Let’s see how that looks with some examples:

A basic rate taxpayer would need to add £80 of their own money to get £100 into their pension. That's because they get £20 back from the government.

Now, if you’re a higher rate taxpayer, you'd only need to add £60 of your own money to get the same £100 in your pension.

And if you’re an additional rate taxpayer, paying in £55 of your money would mean £100 in your pension. 

In both of these instances, the taxpayer would have to submit their self-assessment tax return to get that extra tax relief.

When someone dies, the money in their SIPP isn’t usually part of their estate, so it can be passed on without any inheritance tax.

Generally, if someone dies before age 75 then this money can be paid to the people they’ve left their pension to (known as beneficiaries) without tax. But if they die after age 75, then their beneficiaries may need to pay income tax on the money. There are some exceptions though, so speak to a tax advisor if you're unsure.

What you can invest in with your SIPP depends on what your provider offers. 

With a Monzo Pension, your money will be invested into a target date fund. The target date funds we offer are designed and managed by BlackRock, one of the world’s largest fund managers.

The funds are smartly designed to balance the risk they take as you get closer to retirement. 

Using the age you aim to retire as a guide, they automatically shift from higher to lower risk investments. They invest in a mix of shares, bonds and other smaller investments, carefully changing how much they're investing in each of these things over time.

What you’ll pay for your pension, and the investments in it, vary from provider to provider. 

For a Monzo Pension, there are no hidden fees or charges. You’ll pay 0.63% of your investments’ value in fees annually (that’s a 0.45% platform fee and 0.18% fund fee). That’s it. 

Got £10,000 in your pension? You’d pay £62.91 a year (with no growth or withdrawals). Plus, Premium, Perks or Max subscriber? Then you’ll pay a lower annual platform fee of 0.35%.

Your fees accrue daily, and are charged monthly.

There are other costs to think about too. If you’re transferring your pension, your old provider may charge an exit fee.

You can start taking money from your SIPP once you reach 55 (going up to 57 from 6 April 2028). There are instances where you can take the money sooner, such as if you’re suffering from serious ill health.

Depending on your pension provider, there are four different ways you can start taking your pension – we only offer two of these options.

Two options we offer

Guaranteed retirement income (known an an annuity)

This means you can choose to take up to 25% of your pension tax-free and then use the rest of your pension to buy an annuity. This guarantees you an income for the rest of your life or for a fixed period.

Lump sum (known as UFPLS - or uncrystallised funds pension lump sum)

You can take your entire pension in one lump sum. 25% is tax-free, and you'll pay income tax on the rest. 

If you access some or all of your pension by buying an annuity or setting up flexible-access drawdown (see below), then you "crystallise" your pension (or the part of it you've accessed). UFPLS is a lump sum that can be taken from an "uncrystallised" pension – in other words, a part of your pension that you haven't accessed already.

Two options we don't offer

If you have a pension with us and you want to choose one of these options, we can help you move to a provider that offers them in the future:

Number of lump sums (known as partial UFPLS)

You can take smaller chunks from your pension until you run out. Your 25% tax-free amount isn’t paid in one lump sum but rather you get it over time. Up to 25% of each lump sum is tax-free and the rest is taxed as earnings.

Flexible-access drawdown

This means you can take up to 25% of your pension as a tax-free lump-sum, and keep the rest invested to give you an income.

For all the options, there are limits to the 25% tax-free lump-sum. For more details, go to the government website. The taxes you pay depend on your circumstances and rules could change in the future.

Everyone’s circumstances are different. This guide highlights some of the key things you need to know about SIPPs, but you need to consider your individual needs to decide if it’s right for you.

You can only take your money after 55, going up to 57

The earliest you’ll be able to take the money in your SIPP is from 55, going up to 57 in 2028. Think you’ll need access to money sooner than that? Then you may also want to explore other ways to grow your money for your future, such as investments and saving.

We have limited options for you to invest and to take your money

With a Monzo Pension, we currently only offer target date funds as a way to grow your money. And when you’re ready to take your pension, you can only have two options: take a lump sum or choose a guaranteed retirement income.

Consider paying into workplace pension first

If you have a workplace pension already, it’s smart to continue paying into that, rather than paying into a SIPP instead. Your employer pays into your workplace pension – if you stop paying in, you’ll lose out on their contributions. And as many employers will match your contributions up to a certain level, if you increase the amount you pay in, they may increase the amount they pay in too. Workplace pensions usually have lower fees than SIPPs too.

There are always risks when investing

The money in your SIPP will be invested. As with all investments, the value could go up or down and you could get back less than you put in.

Speak to a financial adviser

If you’re unsure about what’s right for you, speak to a regulated financial adviser. They’ll be able to guide you through your options and give you advice based on your personal circumstances. 

You can find regulated and impartial advisers through the MoneyHelper website. Or, if you’re over 50 you can get free and impartial guidance through Pension Wise.

Can I have more than one SIPP? 

Yes, you can have multiple SIPPs. If you have several SIPPs, plus a few workplace pensions from old jobs, it can become tricky to keep on top of everything. If you’d prefer, you can combine them into a single pension, such as a Monzo Pension.

Once I’ve opened a SIPP, can I close it? 

Under FCA rules, all providers must let you cancel your pension within 30 days of opening it. You can also cancel transfers-in within 30 days. If that happens, we’ll close your pension and try to return the value of cash and investments back to your previous provider. They don’t have to accept the transfer-back though – and if that happens, you’ll have to say where you want us to transfer your pension to.

With us, if it’s been over 30 days, you won’t be able to cancel your SIPP (or transfer-in), but you can transfer it to another provider.

Is a Monzo Pension protected? 

As well as being a registered pension scheme, a Monzo Pension is also protected by the Financial Services Compensation Scheme (FSCS) up to £85,000 per person. This limit is shared across Monzo Investments and the Monzo Pension. See full FSCS information. 

Learn more about a Monzo Pension

The value of your pension could go up or down and you could get back less than you put in. The taxes you pay depend on your circumstances and could change in the future.

iShares® and BlackRock® are trademarks of BlackRock, used under licence. BlackRock has no obligation or liability in connection with any product or service offered by Monzo.

For more help on how to get started and FAQs, visit our Help Centre. 

You need a Monzo current account to open a Monzo Pension. 18-70 years old only. UK residents only. Ts&Cs apply.