If your employer paid into a SIPP for you, unless the SIPP was run as a Company ;linked scheme, then yes you would pay from net income having been taxed. However, normally all net payments into a pension are uplifted by the scheme by 20% irrespective of source as they make a claim off the HMRC for you. If you are a high rate taxpayer then you also need to claim the additional 20% taken by your employer from HMRC directly either by filling in a self assessment form each year or simply by writing to them.You will either have your tax code adjusted or get a lumpsum refund.

The savings limit of £2880 (£3600 after 20% tax refund) is only applicable if you have no or low earnings. Otherwise the limit is 100% of earnings.

Essentially most low cost SIPPs are almost the equalivalent of having/running a stocks & shares ISA, except for the pension rules preventing access until 55 and how the money can be ultimately be used (lumpsum + annuity or drawdown).

The main things to look out for are the pre-retirement running costs. Given they really shouldn't be anymore complex than an ISA when simply investing in funds, any charges that are out of proportion to that of an S&S ISA should be avoided. However you need to be careful as some companies offer different SIPPs and some offer plans that isn't really a SIPP. For instance Fundnetworks offers a true SIPP and a personal pension plan which it calls a SIPP, the difference being the charges and the fact that the later cannot be used for drawdown (albeit the funds could be transfered either to the true SIPP or elsewhere at a later date, at a cost)

Although it's impossible to get right given the timeframe involved the post-retirement charges should also look reasonable. ie £75 to setup a drawdown plan doesn't seem that unreasonable given it may take an hour or two of paper work.

At the moment people like Hargreaves or BestInvest, SIPP Deal run SIPPs that are very similar to their ISA and non-ISA investment schemes, including rebating initial and AMC charges etc. In which case it boils down to the type & pattern of investments you are planning as to which might offer the best value.

For instance H_L charges for holding index trackers whereas BI doesn't (at least at the moment).

The final point I'd make particularly as I already have a SIPP with H_L and are in the process of considering whether or not to transfer a personal pension to one or other is the effect RDR might have on future charging. Although execution only propositions, which currently exempts them from the main impact of the initial RDR there are moves to align all types of investments. This would mean rebates effectively vanishing replaced by lower fund AMCs (hopefully) but SIPP providers/platforms charging directly for their services. So what currently looks free (with apparently free money being given to you in the form of a rebate) will become a charge. Chances are most will adopt a scheme either involving making charges to a cash account or cancelling units to cover the costs. The outcome should in theory be the same in terms of investment performance but the charging scheme used by the provider may or may not suit your circumstamces and/or investment style. Rather annoyingly lots seem to be playing chicken with each other to avoid letting their post-RDR offering out of the bag too early.

If you haven't got a SIPP yet it might be worth holding fire until after Jan 2013 to see how the new world looks. Just ask those investors with interactive investor to see how the ground can suddenly move under you.

If it were not for the tax free lump sum, at which point its worth pointing out that pensions are or were designed to be basically tax neutral - so in theory all you are doing is just deferring the income tax bill until later to enable you to generate additional growth from the borrowed money, would anyone bother. The lumpsum is the carrot for giving away your right to spent it early (and that was before the newlt added risks of Government tinkering and retrospective rule changes).

Incidently it's also why the LibDems and Mr Cable have lost all credability with me - he's obviously intelligent enough to know this stuff yet when they talk about it they always framed it as if certain people ie 40% tax payers are scamming the system. Besides at the current rate everyone is likely to be a 40% tax payer before too long.

If the Government scraps the tax free lump sum or puts anymore restrictions in place then I for one will not be carrying on, unless it is within a DB scheme or the Company pays in a significant contribution to a DC scheme.

for basic rate tax payers I tend to advise S&S ISA's for 'retirement' planning. The slight tax advantage of the PCLS from a pension has to be countered with the forced annuitised or drawdown income limits and the other potential death benefits issues. So the tax free 25% isn't that compelling in my opinion.

Unless you are also receiving contributions from an employer via a GPP or Nest contribution, or possibly a salary sacrifice scheme for the extra NIC enhancement, S&S ISA's have much more going for them in terms of access and flexibility.

If you decide later on that a pension is for you the fund can always be paid in as a lump sum (subject to annual limits). So until you hit 40% or have someone else helping with contributions I'd think long and hard about a personal pension.

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