Fancy some free money? Who doesn’t! Well, that’s one of the claims commonly made for setting up a Self-Invested Personal Pension (SIPP).

Free money sounds too good to be true. Is it?

Money for nothing

In this case, no. It’s true. But – inevitably – there are some strings attached. After all, as the old saying goes, there’s no such thing as a free lunch. So let’s get into things in more detail.

A SIPP’s basically an investment vehicle, like an ISA (though the two have some big differences). It’s possible to have both a SIPP and an ISA. In fact, many people do – I’m one of them.

The appeal for many investors of a Stocks and Shares ISA is that capital gains and dividends inside it aren’t taxed.

That’s also the case for a SIPP, though unlike a Stocks and Shares ISA there are restrictions about when money can be withdrawn. When it is, apart from a tax-free allowance, the remainder could be subject to tax.

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.

But a SIPP comes with something an ISA doesn’t: tax relief on the money invested. Basically that means that the Exchequer tops up the money someone puts in, at a level designed to negate the impact of having paid income tax on it in the first place. For higher and additional-rate taxpayers, that relief will be even more lucrative.

In practice, this is free money.

Put £20k into a Stocks and Shares ISA and you have £20k to invest (depending on the fee structure of your chosen Stocks and Shares ISA, of course). Put £20k into a SIPP and, again, depending on the fees of the SIPP provider – you have £25k to invest. Simple as that.

There’s more than one type of ISA and I am focusing here on Stocks and Shares ISA (a Lifetime ISA can also offer free money in the form of tax relief, though again, like a SIPP, that platform structure has its own specific strings attached).

More money can mean… more money!

Of course, the SIPP itself (or ISA, come to that) is only the first step. Having set one up, the question then becomes how to invest. Over the long term, of course, that’s where the free money of a SIPP could be useful – providing more capital, hopefully to help the SIPP gain even greater value over the long run.

One of the shares I hold in my SIPP is Greggs (LSE: GRG). The past couple of years have seen Greggs’ shares lose their former popularity with many investors. No wonder, the share price has tumbled 21% in the past year alone.

Investors fret about possible market saturation, rising energy costs, rising wage costs and weakening consumer sentiment. That is before even taking into account Greggs’ poor demand planning that led to a shock profit warning last summer.

But while there are risks, I think Greggs remains a tremendous business. It has a strong brand and compelling value proposition that’s helped it build a loyal, large customer base. The bakery chain’s growing on a like-for-like basis, with plentiful new shop openings adding further growth.

It’s profitable and cash generative, helping support a 4.1% dividend yield. I see it as a share for investors to consider.

Should you invest £5,000 in Greggs Plc right now?

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Christopher Ruane owns shares in Greggs.