Why allow only an ever-smaller annual drip into my SIPP?

End the Twenty-Five Year Freeze!

In my previous blog post I described my struggles trying to get a fund and retail platform to accept part of this tax year’s SIPP [Self-invested personal pension]contribution allowance of £3600 (£2880 net, plus £720 tax relief for those not in paid employment).

I started to reflect on the limitations of such a small incentive to enhance my pension. 

To my amazement, that particular SIPP allowance has stayed the same in nominal terms since 6^th April 2001 when the Stakeholder Pension Regulations of 2000 came into effect – twenty-five years ago.

To have kept pace with inflation since then the original £3600 allowance would need to have risen to about £7700 in 2026.

It’s worth noting this was a Labour government introducing a measure to help people save more for their old age. The original legislation highlighted the flexibility of the tax regime aimed to make the stakeholder pension “a worthwhile, friendly and mass market product”.

In this post I propose returning to that simple goal by increasing this particular SIPP contribution limit at minimal initial cost to the Treasury, and start a campaign to end the twenty-five year freeze!

Doing this would reanimate an overlooked allowance, whose potential to be used by everyone not in paid employment, including children, could form part of a much-needed campaign to encourage people to invest for their old age.

The tiny annual drip into my SIPP

As of tax year 2026/7 the maximum amount someone under the age of 75 and not in paid employment can contribute to a SIPP is £2880, which the government then tops up by £720 to make a gross total of £3600 a year, the equivalent of £300 a month.

Imagine someone starting a SIPP today at age 55, and continuing until the current age limit of 75.

Under the current allowance, two decades from now, assuming 3% annual inflation and an unchanged contribution limit, £3600 will have a purchasing power of about £1993, 45% of its real terms value depleted.

Assuming positive inflation, each yearly payment between now and the end of two decades is lower in real terms, thus able to buy fewer carer hours, less care home time, less medical treatment, fewer prescriptions when those needs crowd in all at once towards life’s end.

The ideal solution would be to increase the contribution limit, say to £5000, and the 20% tax relief commensurately to £1250 raising the overall limit to £6250, and uprating it over time in line with inflation.

However, in the current and future political climate, that is unrealistic - the Treasury would baulk at such largesse.

So why not increase the annual SIPP contribution limit for non-employees to £5000, but cap the tax relief at the current £720 per annum, raising the overall limit to £5720 per year?

The magic of compound interest over two decades means even this small increase in the contribution allowable each year, despite no additional tax relief, could make a huge difference to the final SIPP lump sum.

Worked Examples

Simplifying drastically to make the overall point: assume 7% annual growth rate of investments, a lump sum invested at the start of each tax year, no withdrawals until the end of 20 years.

1. Twenty years under the Existing limit

£3600 gross invested at the start of each tax year, 7% p.a. growth

Final lump sum: £157,914.64

25% tax free lump sum: £39,478.66

75% potentially taxable: £118,435.98

2. Sipp contribution limit raised to £5000, tax relief capped at the existing £720

£5720 gross invested at the start of each tax year, 7% p.a. growth

Final lump sum: £250,908.81

25% tax free lump sum: £67,727.20

75% potentially taxable: £188,181.61

Under this proposal the final pension pot is nearly £100,000 larger than under the current system, despite only just over £2000 per year additional contributions permitted, and no additional direct tax relief.

The Treasury would instinctively shudder at the prospect of expanding an existing tax-free umbrella, however modestly, if only to the extent that even with my proposal of retaining the existing £720 tax relief cap, investments within SIPPs would still be exempt from capital gains tax and dividend tax before drawdown.

Against that, with my proposal of a higher contribution limit each year the larger final pot taxed at 75% would generate higher tax revenue. Also, with pensions now subject to inheritance tax, higher final pension pots left unspent at death would increase inheritance tax revenue.

A larger contribution limit could increase the supply of risk capital

Another potential positive spill-over, using my case as an example: having a higher contribution limit would enable me to take more risk at the margin, potentially funding growth-focused investments like smaller companies to a greater extent than the current restrictive limit allows.

Higher pension contributions would also generate higher fees for retail platforms and investment managers…!

Highlighting Junior SIPPs for building wealth on the far horizon

An Enhanced Junior SIPP contribution allowance could highlight ultra-long-term saving for children. One concern many parents have about the Junior ISA is that at age 18 any funds become immediately accessible to the children.

With a Junior SIPP, although the pot reverts to the child’s control at 18, it would not be accessible until about forty years later under current rules.

The Treasury might again step in and query why they should enhance an allowance likely to be ‘maxed out’ by the more affluent. But why not look at it another way? Even a modest one-off contribution from a less affluent family left to grow for fifty years could make a significant boost in later life.

Example 1: If an older relative or family friend contributed a mere £800 to a Junior SIPP (grossed up to £1000 with tax relief) at age 10, and nothing else was added, if allowed to grow until aged 60, assuming 7% p.a. growth, the final sum would be £29,400.

Example 2: Were the full revised contribution limit I suggest of £5720 (£5000 contribution limit plus relief capped at £720) invested at age 10, and nothing else added, the final sum over 50 years at 7% growth p.a. would be over £168,000.

Such a move, if marketed astutely, might help assuage some of the recent disquiet at the reduction of the cash ISA limit from £20,000 to £12,000.

If the forthcoming restrictions on cash-like investments in ISAs are not applied to Junior SIPPS then family and friends, grandparents and godparents who are risk-averse could feed some of their otherwise blocked out ISA cash savings to the younger generation.

The enhanced Junior Sipp’s ultra long-term commitment and time horizon, augmented by the 20% tax relief, could provide a personal finance education opportunity.

What are the chances…?

Given the changing temper of the times, even this small opening of a greater window for self-reliance and self-provisioning may have little hope of success.

Indeed, it’s possible merely mentioning the allowance for non-working people may prompt some bright spark in a Labour think tank or the Treasury to propose abolishing it, given the current seemingly exclusive focus on 'working people'.

I simply offer the proposal as a way of offsetting my anxiety at what I fear is the regime change about to once again make providing for one’s own old age an even harder struggle.

An ironic coda

One ‘ironic’ consolation arises from the more likely policy change of the government increasing income tax rates by 2% to 22% to more than fund a 2% reduction in employee National Insurance rates, as has been mooted by several Left-leaning think tanks such as The Resolution Foundation.

Were that to happen, assuming the SIPP limit stays at £3600 gross, I would only need to contribute £2808 per year, because of the higher rate of taxation at 22%, a saving of £72.

I suppose the Treasury could take a leaf out of my book, and leave the tax relief fixed at £720.

A challenge for Starmer’s successor

Increasing the SIPP contribution allowance in the way I suggest will cost virtually nothing in the short term, indirectly aid growth, and potentially reduce future late age pensioner dependence on benefits, and thus public expenditure.

Presented as part of a package to encourage more people, in this case mainly children and older people, to invest for the long-term in a SIPP, the relatively minor concession could provide a useful counterbalance to the increased restrictions and taxations about to disturb an already fragile and under-developed investment landscape.  

I will judge the post-Starmer government in part by whether it responds to what I hope is a simple, imaginative and low initial cost proposal to end the Twenty-Five Year Freeze on SIPP contributions for those not in paid employment.

‘Non-working’ people need help as well!

Active fund management: an industry that turns customers away?

Two themes recur on this blog:

1. My building of a SIPP portfolio for 2042, to cover potential care costs when I turn 75.

2. My frustration at the lack of non-UK micro-cap investment strategies accessible to me as a UK retail investor.

As has become usual since 2022, the spring/summer period involves a search for new SIPP investments for the allocation of the £2880 (plus £720 tax relief) contribution limit applicable in the UK to someone under 75 and not in paid employment.

In searching the database of the retail platform I use (AJ Bell) I was intrigued to see the Berenberg European Micro Cap Fund seemingly available to invest in.

Why micro-caps at all? Because as Kepler Trust Intelligence reports, between 1955 and 2025, UK micro-cap stocks returned 15.6% a year, small caps gained 14.1%, mid-caps 13% and large caps 11.2%.

As this SIPP portfolio is a long-term endeavour, stretching to 2042, and in part a real life experiment in the relative merits of small cap investing, value investing, and mitigating political risk through geographical diversification, I was eager to explore how ‘micro’ this European Micro fund actually was before investing. 

I already hold estimable UK micro cap trusts such as River UK Micro Cap and the Onward Opportunities Trust, and given ever-intensifying UK political concerns, I wanted some geographical diversity within micro-caps.

Encouragingly, according to Morningstar’s portfolio analysis of the European Micro Cap fund, the fund's holdings were smaller than most: 56% being classed as ‘small’, 44% as ‘micro’ in Morningstar’s categorisation; with an average market cap of 489m Euros.

This is a significantly smaller small cap fund than an obvious alternative such as The European Smaller Companies Trust.

According to Morningstar, this trust's portfolio is weighted a little higher up the market cap scale: 

46% small; 23% micro; average market cap 1.35bn Euros.

Although the medium term performance of the Berenberg fund has not been stellar, down 6% over 5 years, more recently it has improved, up 20% in the year to May 15^th 2026.

I initiated a small buy order through the AJ Bell Platform, as the fund appeared available to purchase. A couple of days later, to my great surprise, I received this reply:

“Please be advised that your order to invest into Berenberg European Micro Cap Fund M has been rejected by our dealers as this fund is currently not set up on the platform. For our team to enquire into setting this up, we have a minimum commitment of £85,000 to invest should we be successful.”

Given the annual SIPP contribution limit of £2880 (about which more in a future blog) the fund thus lies beyond my investable universe.

It's not entirely obvious whether the £85,000 minimum comes from AJ Bell or the fund management company (Berenberg/Universal Investment Luxembourg), and for the purposes of this blog it doesn’t matter.

The Berenberg fund (and AJ Bell) may feel relieved to not have to deal with a measly £1000 or £2000.

But when you consider that under current SIPP limits I have 15 more years of SIPP contributions to come, up to £54,000 of investment over the next decade and a half into one of the very rare non-UK micro-cap strategies on the market is seemingly not possible.

At a time of severe threat from passive investments, can the active fund management industry afford to turn away willing customers?

Taxing Times: 6th April 2026

For UK investors the 6^th of April has more of a New Year feel than the 1^st of January, marking the start of a new tax year, and prompting reflections on taxes to pay, ISA and SIPP accounts to review and augment.

In my last post in January I described myself as “troubled” by what the near and far future might hold. Just three months later Donald Trump’s ill-considered ventures in Iran have dented both my portfolio performance and whatever sense of well-being last year’s strong showing created.

That said, taking a longer view, my ‘2042’ SIPP portfolio is still ahead of realistic expectations, with value-tilted funds such as Kopernik Global All-Cap, and Overstone Global Smaller Companies still significantly ahead of last year’s purchase prices. Likewise, I am still up on purchases made last year of Mkango Resources and East Star Resources, maintaining my belief that an overweight to commodities is justified in the more fraught geo-political context of the late 2020s.

Fresh Prospects

For my annual spring/summer SIPP allocation over the next few weeks and months, I am tending towards the following funds:

1. Fidelity Nordic

Fidelity Nordic is a small/mid cap value inflected fund I once held briefly in my general investment account some years ago. With the benefit of hindsight I should have held onto it, as under the same fund manager for over a decade it has been a consistent performer, with the Y ACC SEK class returning over 14% p.a. over the last ten years.

With significant weightings to Nordic nations such as Norway and Sweden which seem to be better managed politically and economically than many of their Southern European counterparts, with the additional bonus of exposure to Norway’s oil industry, this fund is a strong candidate for a long-term investment.

2. Matthews China Discovery

Another regret from an earlier stage of my investment career is not investing in a Chinese smaller companies fund then managed by Tiffany Hsiao for Matthews Asia.

Just as her performance from 2018-2020 peaked she left Matthews for Artisan, investing in private equity, and thus became unavailable to UK retail investors.

In late 2025 she returned to Matthews, and is now running the renamed Matthews China Discovery Fund.

I realise any investment in China is high-risk - Chinese smaller companies particularly so - indeed this fund fell by over 10% in March 2026.

However, with a time horizon stretching to the early 2040s, and daily evidence that political risk is at least as prevalent in the West as the East, a small allocation is in order. If you’re going to take risks, at least make sure some of them are uncorrelated, and a Chinese smaller companies fund is unlikely to be highly correlated with most Western economy investments.

3. This year’s ‘pure’ value fund: Redwheel?

I like to invest at least a third of my annual SIPP allocation in the most value-like fund available at the time. I might simply top up one of my existing SIPP holdings, the aforementioned Kopernik or Overstone funds. I already hold Ranmore Global and De Lisle America in my general investment account.

Having had a good run with Temple Bar investment trust in my ISA, I may turn to the same managers' global value fund: Redwheel Global Intrinsic Value, although the 20% weighting to the UK in this fund may mean some overlap with Temple Bar.

A reminder about political risks in the UK

Whatever my (and your) political views, it gives me a little pleasure as an investor to note that in spring 2026 the likeliest outcomes in UK politics over the coming months, years, possibly decades is a more left-wing replacement for Keir Starmer, and thereafter a semi-permanent radical centre-left coalition government.

This has been pre-figured in previous blog posts, notably 

- November 2025: More tax rises to come - 

- June 2024: This could 'HIRT' - Higher Intervention Regulation Taxation 

- April 2022: 2024 as 1974 revisited 

It could well be 2028/9 rather than 2024 that turns out to be 1974 revisited, and as I wrote in April 2022:

"I'm not saying 2024-2028 will be an action replay from 1974-1978, but in both sport and political economy the possibilities of outcomes deemed unlikely but hugely consequential should be contemplated before not after they happen."

2025 Portfolio Review

 

Pan African Resources +250%; DGI 9 -69%

FTSE 100+21.7%; FTSE World +12.6%;

FTSE Small Cap +11.9%; FTSE Aim +9.8%

2025 was a strange year. Despite the expenses of moving home (and now in 2026 renovating the flat I’ve purchased), I finished the year in a stronger financial position than at the start.

Yet I feel somewhat unnerved by the scale of some portfolio successes, and troubled by what the next few months and years might bring.

For context, key indices in 2025 returned:

FTSE 100 +21.7%; 

FTSE Small Cap ex investment trusts +11.9%;

FTSE Aim All Share +9.8%

US S&P 500 +16.4%

MSCI World +21.6%

MSCI Emerging Markets +34.4% 

Personal Portfolio Detractors

One of my biggest investment mistakes has been an investment in the internet infrastructure company Digital 9. So poor has it been (now barely five pence in the pound initially invested) that I’ve written it off to zero. As a certificated holding costly to sell, it may be better to hold on for whatever crumbs remain on wind-up.

An inherited certificated holding in Mobico, the former National Express coach and bus company, is also tending inexorably towards zero.

A further inheritance from my late parents’ portfolio, the drinks company Diageo may be an intriguing recovery opportunity. In free fall since touching nearly £40 in late 2021, to below £16 four years later, Diageo has started to appear among the holdings of ‘value’ fund managers, e.g. Ranmore Global Equity fund. The former Tesco chief executive, Dave Lewis, has recently joined Diageo, so there may well be developments…

Portfolio Disappointment

A small initial holding in Artemis UK Future Leaders (AFL) established in spring 2025 when the former Invesco Perpetual UK Smaller Companies investment trust changed managers after protracted poor performance has so far failed to fire.

As of 9^th January 2026, the trust languishes on a 12% discount, albeit in the previous couple of days the share price rose out of the £3.70s where it had been stuck for some time.

Key contributors

2025 was the year of commodities and value investment.

A long-standing holding in the Zimbabwean gold miner Caledonia (CMCL) as well as relatively small initial positions in Pan African Resources (PAF) and Thor Explorations (THX)  proved highly geared to the sharp increase in the price of gold.

So rapid was their ascent (three to four-fold within nine months) that towards year end what I hope will prove to be judicious top-slicing has left me with capital to deploy in my ISA in search of dividend paying opportunities.

In the speculative portion of my SIPP, as well as the ‘casino’ portion of my non-ISA, small stakes in Mkango Resources (MKA) and a revisit of East Star Resources (EST) have thus far proved well-merited. 

Commodity-focused companies on the cusp of bringing scarce resources towards production is the thesis here.

Strong performance came from a range of value-tilted funds: Temple Bar (TMPL), Man Income, Ranmore Global Equity, Artemis Global Income, and UK focused investment trusts Onward Opportunities (ONWD) and Lowland (LWI) investment trusts.

2026: on the radar

1. To fuel the dividend engine of my ISA I am currently pondering CMC Markets (CMCX) - to benefit from ongoing market volatility - perhaps a greater weighting to UK cyclicals geared to consumerism and housing (e.g. Dunelm?); for funds I may top up Artemis Global Income, initialise into River Global Growth and Income, and for emerging market income add to Pacific North of South Emerging Equity Income Opportunities.

2. For the growth portion of general investment account, and my SIPP, what I’ve dubbed my 2042 personal care portfolio for when I turn 75, and in which I can take a very long-term view:

I want to combine small caps and value by either adding to, or initiating into:

- River and Mercantile UK Micro Cap RMMC (strong recent performance after acute pain in 2022, still on a wide discount, and a perform by 2028 or wind-up tender in play)

- Onward Opportunities Trust ONWD (possibly the lowest average market cap of constituent portfolio holdings among publicly available UK funds/trusts at £46.4m according to Morningstar); a truly micro-cap investment vehicle.

- Heptagon Global All Cap (perhaps the deepest value and most idiosyncratic global value portfolio available).

- Mirabaud Discovery Europe Ex-UK (for exposure to Nordic and Swiss smaller companies).

- Matthews China Discovery (Chinese smaller companies fund, where Tiffany Hsiao has returned after several years, having produced extraordinary performance during her previous tenure in 2018-2020).

Whatever I decide in 2026 and beyond, I will keep in mind some characteristically wise words of Howard Marks in his December 9^th 2025 memo Is it a Bubble?. 

Marks refers to AI, but the point applies to all investment:

"Since no one can say definitively whether this is a bubble, I’d advise that no one should go all-in without acknowledging that they face the risk of ruin if things go badly. But by the same token, no one should stay all-out and risk missing out on one of the great technological steps forward. A moderate position, applied with selectivity and prudence, seems like the best approach (…)

Intelligent investment in data centers, and thus in AI – like everything else – requires sober, insightful judgment and skilful implementation. "

The '2 and 20' Budget: More Tax Rises on Financial Assets to Come

I’m dubbing last week’s UK Budget the The “2 and 20” budget for two reasons:

Firstly, the increase of 2 per cent in the taxation of income from financial assets.

Secondly, the reduction from 30% to 20% in upfront tax relief on contributions to venture capital trusts.

In themselves, these measures raise limited revenue (the savings interest tax increase of 2% from April 2027 is estimated to raise £525m in 2028/9) and the dividend and savings tax increases might be seen as a left-over of the abandoned plan to increase income tax rates by 2%, but correspondingly reduce employee National Insurance contributions by 2% (which would have raised about £6bn per annum).

However, the justification for the measures in the Budget documents indicates this is just the start, as this extract from the Budget 2025 explanatory document demonstrates:

This framing signals a decisive shift in the balance of taxation. The ultimate goal is to at least match the tax rates on financial assets with income tax and national insurance combined (i.e. 28% for a basic rate tax paying employee).

The think-tank the Institute for Fiscal Studies Green Budget 2025 refers to the “tax penalty on employment” as the taxation of interest and dividends being at a lower marginal rate than income tax and national insurance contributions combined (28% for basic rate income tax payers in employment). Such views are clearly the foundation of government policies towards the taxation of financial assets.

The 2% increases in the 2025 Budget may well be followed up by a 2% increase in each of the next 4 Budgets to bring the tax rate on savings interest and property income to 28%. The basic dividend tax rate increase from 8.75% to 10.75% in the 2025 Budget is also likely to be the first of several such increases.

And who’s to say these increases stop there? Once the principle has been established of a higher rate of taxation on financial assets, memories will be stirred of ‘the investment income surcharge’ which applied an additional 15% surcharge on what was termed ‘unearned income’ until its abolition in 1984.

What such measures overlook is that for savers and investors like myself, the capital generating investment income was very hard-earned, by myself, and my ancestors, and derives from that saved after income had already been taxed.

It is somewhat galling to be taxed again, potentially in the future at higher rates than those in employment, with the proceeds used to support many who have not prudently provided for their own and their families’ futures.

It’s almost as if the government wishes to deter private saving and self-reliance, and instead extend the numbers dependent on the state.

The 2025 UK Budget: For Whom the Bell Tolls

 

Torsten Bell MP

“send not to know

For whom the bell tolls,

It tolls for thee.”

(John Donne)

To continue, and slightly modify, the John Donne reference, no investment portfolio is an island, entire of itself. Context matters.

In the UK this week of November 2025, the annual taxation and public expenditure statement, the Budget, to be given in the House of Commons on Wednesday 26^th November, has been widely trailed to include both an increase in the overall level of taxation, and a significant shift in its burden towards levies on capital and financial assets, rather than labour – hardly surprising for a Labour government.

In a previous blog post I queried whether the Chancellor of the Exchequer, Rachel Reeves, was the most important financial actor shaping the investment landscape. Recent pronouncements leave little doubt that the Budget is now being decisively shaped by pensions minister Torsten Bell MP, recently detailed to ‘assist’ with Budget preparations, and others with a background in the centre-left think-tank the Resolution Foundation.

 

Many of the Resolution Foundation’s policy ideas - as expressed in a September 2025 paper Call of Duties - are now accepted as orthodoxy, the only question being the scale and timing of their implementation. 

Not only do such measures align a beleaguered front bench with increasingly restive backbenchers and capitalism-sceptic Labour party members, they chime in with the UK Treasury's single-minded focus on plugging the fiscal deficit.

Thus, from the next tax year starting April 2026 it is highly likely that:

- Dividend tax and capital gains tax rates will be increased.

- ISA investment rules will be modified, to at the very least channel investments towards UK-listed entities.

- Estates on death, gifts, and pension-related savings will be taxed in higher and most likely more complicated ways.

The investment implications of the Budget of course go well beyond micro-taxation regulations. The extent to which the bond and foreign exchange markets perceive sufficient fiscal consolidation will determine both the near-term and longer-term rates of interest, with potentially cross-cutting impacts on sectors with differential interest rate sensitivity.

It's possible to imagine a scenario where interest rates come down more rapidly than currently envisaged, broadly favouring many equities, so stock market returns could be enhanced, but the post-tax and post-inflation returns investors, especially UK retail investors, reap thereafter may be limited.

More tellingly, the long-term direction of travel of future Budgets will be set: higher taxes on capital will be the first source looked to for higher tax receipts.

Rachel Reeves’s successors as UK Chancellor will be back for more many years into the future, particularly given the growing popularity of the Green Party in the UK which increases the possibility of a long-term centre-left Red-Green coalition being the dominant governing force for decades hence.

In Three Words: What Investors Should Seek

 Scarcity, distinctiveness, undervaluation.