Pension fees

SIPP vs workplace pension — fees and employer contributions.

The answer depends on pot size, employer contributions, salary sacrifice, old-pot status and provider fee model. This page compares the moving parts without recommending a transfer.

By Pension Bible editorial team·Last reviewed 11 May 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 charge comparisons:

For an active contributor whose employer has negotiated a good workplace pension rate, a retail SIPP may not be lower cost on total charges alone.

When a SIPP can be lower cost

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

Large accumulated pots. Workplace default funds often 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 about £252/year is roughly 0.05% before fund charges. The difference can compound materially over a 10–20 year horizon, which is why some savers compare old workplace pension balances against capped or flat-fee SIPP platforms while continuing active workplace contributions.

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 comparing a specific passive tracker, sector allocation, or alternative investment not available in the workplace scheme, a SIPP or another personal pension route may be relevant. 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, consolidation can reduce admin and may cut total fees. A SIPP is one possible consolidation route, but transfer charges, protected benefits, guarantees and advice requirements need checking first.

Self-employed or no employer scheme. If you don't have access to an employer scheme, a SIPP is one common personal-pension route. 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 2026/27 auto-enrolment rules, the minimum employer contribution is 3% of qualifying earnings. At higher salaries or with employer schemes that exceed the minimum, the contribution can be materially larger.

This employer contribution can be more valuable than a fee saving. For an active employee, any SIPP comparison needs to include the employer contribution and any salary sacrifice benefit, not just the platform fee.

The relevant comparison is therefore not only "SIPP vs workplace pension" as a binary choice. It is also whether active contributions, old dormant pots and additional voluntary contributions need different treatment.

Running both in parallel

Some employed savers compare using both routes for different jobs:

1. Workplace pension for active employer contributions. If your employer matches above the minimum, the value of that match needs to be included before comparing fees.

2. Old, dormant workplace pots as a separate comparison. Pots from previous employers earn no further employer contributions. These are often where SIPP consolidation is compared, subject to transfer checks.

3. Active workplace pensions need extra caution. Changing an active workplace pension can affect employer contributions, salary sacrifice, investment options and payroll administration.

For old-pot modelling, use the pension consolidation calculator. For provider fees, compare the provider directory, pension fee calculator, and SIPP hub at /guides/sipps.

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

This is factual information, not financial advice. If you need a personal recommendation, speak to an FCA-regulated financial adviser.