A Self-Invested Personal Pension (SIPP) is a brilliant way to save for retirement. Investors get upfront tax relief on their contributions, dividend income and share price growth rolls up free of tax, and 25% of the pot can be taken tax-free from 55 (rising to 57 from 2028).

Thereafter, withdrawals are taxable, although the bill can be managed by making smaller annual withdrawals, rather than a one-off lump sum that risks pushing them into a higher bracket.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Tax-efficient pension saving

The tax benefits complement those on the Stocks and Shares ISA, so the two work well in tandem. But how much do investors need in a SIPP to enjoy a little comfort and security in their final years?

According to the Retirement Living Standards survey, a single person needs £13,400 a year to secure a ‘minimum’ living standard. For a ‘moderate’ standard of living, they’ll need £31,700, and £43,900 for a ‘comfortable’ one.

Let’s assume an investor gets the full new basic state pension, currently worth £12,547 a year. For a moderate living standard, they’d need a further £19,153 annually.

Now let’s say they built a portfolio of FTSE 100 dividend stocks with an average yield of 5% a year. In that scenario, they’d need a whopping £383,060 in their SIPP. I’m afraid a £100k SIPP won’t deliver a ‘moderate’ retirement, let alone a ‘comfortable’ one. That requires £627,060. Unless the investor has other sources of income, such as an ISA, a buy-to-let, part-time job and so on. Or they could withdraw some of their capital each year as income.

Combines nicely with an ISA

If someone has £100k in their SIPP at age 53, and plans to retire at 67, they’re in a better position. If they invest £300 a month (which only costs a 40% taxpayer £180 a month, with relief), and their pot grows at 8% a year, they’ll have £387,867 by retirement.

Investing in a balanced spread of FTSE 100 shares can help investors deliver both the growth and income they need to fund that retirement. Insurer and asset manager Aviva (LSE: AV) has done well on both fronts lately. The Aviva share price is up 22% over the last year, and 55% over five years. All dividends are on top, and today it has a bumper trailing yield of 6.3%.

Aviva’s an established blue-chip that serves around 25m customers across its core markets of the UK, Ireland and Canada. It offers a broad spread of life insurance, wealth and retirement services, and its acquisition of Direct Line has strengthened its general insurance offer. On 5 March, it reported a 25% increase in full-year operating profit to £2.2bn. The board also increased the final dividend by 10%, and launched a new £350m share buyback programme.

No stock’s without risk. Aviva was in the doldrums for years, before the recent surge. It’s Canada division needs to play catch-up with the rest of the group. A wider stock market crash would cause damage. But I think it’s well worth considering with a long-term view, as part of a balanced spread of stocks in an ISA or a SIPP, or ideally both.