Reader's Question
What SIPP provider will mean the lowest fees for an investor in funds only?
My Response:
A good question.
Just to fill in a few blanks for other readers a SIPP is a Self Invested Personal Pension. They differ from normal personal pensions and stakeholder pensions by offering greater flexibility and control of your pension fund, both in terms of investment as well as when it comes to drawing benefits.
The flip side of this is that they are more expensive. So generally unless you are a more sophisticated or savvy investor the additional cost may not be worth it.
But there is a lot more to consider when choosing a particular SIPP product as it's not all about cost alone. Think of it like buying a car, there's no point splashing out on a Ferrari if you never plan to take it out of the garage. Similarly, there's no point buying a mini if you have a wife and fours kids to ferry about.
Costs to check
But in answer to your specific question on cost, there are a number of things to check when making a comparison between different SIPPs.
- What is the set-up fee? Usually it's a few hundred pounds.
- What is the SIPP's annual management fee? This is a small percentage based fee that the SIPP provider will take from your pension fund, based on its size. The larger it is the slower your fund will grow, or worse still the faster your fund will shrink.
- How much are the investment fund charges? Annual management charges (AMCs) are applied to the individual funds which you invest in within the SIPP. So the actual overall cost of your SIPP will depend on these fund management charges. Some SIPP providers negotiate discounts on funds as they can buy in bulk. Make sure you now which funds are discounted and which aren't. Also check the initial charge that will be applied to your investment into each of your desired funds.
- What are the dealing charges on shares? If you plan on investing in something other than unit trusts then check how much they will charge you to do so.
- Finally check other charges such as exit charges (you may want to move your money elsewhere in the future) as well as those that will be applied when you start drawing your pension.
The cheapest?
Try looking at the SIPPs provided by Hargreaves Lansdowne, Alliance Trust or James Hay, with the former particularly popular for those investing in just unit trusts/OEICS due to its reduced charges. However, if you want to invest in other instruments such as shares then it becomes much more expensive.
Good luck.
