Thankfully, the self-invested personal pension (SIPP) came out of the Autumn Budget largely untouched today (26 November).
Beforehand, there were rumours that the 25% tax-free lump sum might be in danger. But the major announcements related to inheritance tax on unspent pension pots. So for investors wanting to build a chunky pot for later in life, the path is still open.
Here, I’ll take a look at how someone starting with £5k in a SIPP today could end up with an attractive sum.
Snowball effect
For simplicity’s sake, let’s assume that this investor is a basic-rate taxpayer. Their £5,000 contribution is topped up by HMRC, becoming £6,250. And if they contributed a further £100 every month, the tax relief would turn this into £125 (or £1,500 per year).
Given that this is a pension account, where the investing runway is likely going to be decades, I don’t think there’s any point in taking excessive risk by swinging for the fences. So an 8% average annual return is a realistic goal, in my opinion.
Yet these modest figures could quietly snowball into something surprisingly meaningful. After 35 years, the SIPP would grow to roughly £360,360, excluding platform fees.
At this point, an investor could choose to draw down 5% per year, equivalent to £18,900 (or £1,575 per month). And while inflation will naturally chip away at spending power over 35 years, it still underlines just how worthwhile a SIPP can is for long-term investors.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Outperforming growth stock
This is why I put bits and bobs into my own SIPP when I can, taking advantage of the tax relief. One stock I have bought a couple of times over the past year is Nu Holdings (NYSE:NU).
It’s up 65% year to date.
So, what does Nu Holdings do? Well, this is the holding company behind Nubank, which is the leading digital bank in Latin America (and now one of the largest fintech platforms globally).
In Q3, Nu reported that its customer base swelled to 127m. But the incredible thing is that it still only operates in three countries — Brazil, Mexico, and Colombia.
| Customers (Q3 2025) | Year-on-year growth | |
|---|---|---|
| Brazil | 110.1m | +11.5% |
| Mexico | 13.1m | +47.2% |
| Colombia | 3.8m | +90% |
| Total | 127m | +15.8% |
In Brazil, an astonishing 60% of the adult population are Nu customers. However, in Mexico and Colombia, the population penetration rate is still low. Just 14% and 10%, respectively.
This highlights the growth potential ahead in those two countries, never mind worldwide (Nu has ambitious global expansion plans).
Turning to the financials, Q3 revenue jumped 39% to a record $4.2bn, while net income also increased 39% to $783m. Adjusted net income was $829m. This demonstrates how Nu is becoming very profitable as it scales.
Total deposits reached $38.8bn, up 34%, and the credit portfolio expanded 42% to $30.4bn. While this is highly encouraging, it would be naive to assume that Latin America is Switzerland. Inflation, currency risks, and political instability are all risks.
On the other hand, tens of millions of Latin American consumers are accessing financial services for the first time. Traditional banks have not been customer-friendly (high fees, poor customer service, etc), and this is making Nu’s seamless digital banking experience a far superior proposition.
Given the long runway of growth ahead, and excellent profitability and management team, I think the stock is worth considering. I reckon it will continue doing the business in my SIPP over the long run.
