What Is a SIPP? UK Pension Types Explained for US Expats

A SIPP is a UK private pension you control yourself. An ISA is a UK savings account that's tax-free in Britain and not remotely tax-free once the IRS gets involved. A workplace pension is whatever your UK employer set up, usually without you choosing much of anything. Three different accounts, three very different outcomes on a US tax return.

SIPP — Self-Invested Personal Pension

A SIPP is a personal pension wrapper where you pick the investments yourself — individual shares, funds, ETFs — rather than being defaulted into whatever your employer's pension provider offers. Contributions get UK tax relief added automatically: put in £800, the government tops it up to £1,000. Access normally starts at 55, rising to 57 from 2028.

For US tax purposes, a SIPP is treated reasonably well. Under the US-UK tax treaty, investment growth inside the SIPP generally isn't taxed by the US while it stays in the pension — similar treatment to a 401(k). Withdrawals are taxable, usually in your country of residence at the time you take them, though the exact allocation depends on the treaty article and your residency.

ISA — Individual Savings Account

An ISA is a UK account where growth and withdrawals are tax-free — in the UK. That protection doesn't cross the Atlantic. The US taxes ISA dividends, interest, and capital gains exactly as if the account's UK tax-free status didn't exist. Worse: if the ISA holds UK-domiciled mutual funds or ETFs rather than individual shares, it very likely qualifies as a PFIC — a Passive Foreign Investment Company — under US tax law.

The practical fix most cross-border advisers suggest: hold individual shares or US-domiciled ETFs inside the ISA wrapper instead of UK funds, which sidesteps PFIC classification while keeping the UK tax-free treatment intact. It's a narrower investment menu, but it avoids a genuinely unpleasant filing situation.

Workplace pension

Set up by an employer, usually as a defined contribution scheme where both employee and employer pay in, invested in a small set of default funds chosen by the provider — not something you actively pick, unlike a SIPP. Auto-enrollment means most UK employees end up with one automatically unless they opt out.

US tax treatment mirrors the SIPP in most respects: growth generally isn't taxed while it stays in the pension, treaty rules apply to withdrawals. The complication is usually the underlying investment funds — if they're UK-domiciled collective funds rather than segregated pension assets held directly, the same PFIC concerns that apply to ISAs can, in some structures, apply here too. It depends on how the specific scheme is set up, which is exactly the kind of detail worth confirming with an adviser rather than assuming either way.

Side by side

None of this changes what the accounts do for retirement income once you're actually drawing from them — a SIPP and a workplace pension both function as real retirement income sources, and modeling them alongside a US 401(k) or Social Security is exactly what a multi-country calculator is for. The US Social Security + UK State Pension calculator guide covers combining state pension income specifically; SIPPs and workplace pensions get added as regular investment or DB accounts alongside them.

For the fuller cross-border tax picture — QROPS transfers, the 2027 UK pension inheritance tax change, US foreign tax credits — see the expat retirement planning guide.