11 min Read
20 Jan 2020

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

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When is the Vanguard SIPP launch date – plus Cheaper alternatives

When will the Vanguard SIPP be released

When is the Vanguard SIPP set for launch?

In this article we explain why the Vanguard SIPP launch has been delayed, when it will be launched and reveal how you can effectively have a cheap Vanguard SIPP right now. You can jump straight to the section 'How to get a Vanguard SIPP right now to find out how'.

Vanguard has been promising a pension product for some time now, with investors having to patiently wait it out. Vanguard launched its Vanguard Investor platform in the UK in May 2017, initially offering an ISA, a junior ISA and a general investment, with the promise of a pension product in the future. Fast forward two and a half years and we finally have a Vanguard SIPP launch date. Well, almost.

Why was the Vanguard SIPP delayed?

Vanguard was fairly open and honest when it came to the reasons surrounding the delay in launching a SIPP. In February 2019, Nick Blake, head of personal investing at Vanguard said "To cut to the chase, while we're continuing to make strong headway, we're not quite there, we will only launch the pension once it is tried, tested and meets the high standards Vanguard clients rightfully expect. We will continue to issue updates on our progress through email and the Vanguard Investor website. We will also disclose the full details of the Vanguard Personal Pension in advance of launch, including pricing, to help investors plan accordingly."

When will the Vanguard SIPP be available?

Vanguard has announced that it will launch its SIPP in 'early 2020' with rumours suggesting a launch by 5th April 2020 is likely. It will have drawdown options for those aged over 55 available from the 2020/21 tax year. Vanguard said 'We are sorry it has taken longer than expected, but we have taken time to build a simple, transparent option for your retirement savings that delivers exceptional value for money'.

In December 2019 I was personally invited into Vanguard's offices in central London in order to take an exclusive look at the Vanguard SIPP ahead of its launch. I talk more about my visit and provide an early review of the Vanguard SIPP in episode 249 of the Money to the Masses podcast. Check it out below (skip to 17 minutes)

What are the costs of the Vanguard SIPP?

The charges for the Vanguard SIPP have been confirmed as follows:

  • annual account fee of 0.15%, capped at £375.
  • ongoing fund charges ranging from 0.06% to 0.80%.

Vanguard has confirmed that it will not charge an annual administration fee, unlike many other SIPP providers that usually charge around £10 per month. In addition, there will be no setup or exit charges which means that the Vanguard SIPP is incredibly cheap. That being said, it is not necessarily the cheapest way to invest in a Vanguard SIPP which we explain in more detail below.

Should I invest in the Vanguard SIPP?

While the Vanguard SIPP is yet to launch in the UK, read our independent Vanguard Investor review, which looks at Vanguard as a platform and how it compares to its competitors. Our independent Vanguard review also looks at the fees, the funds available as well as the fund performance and is an essential read if you are considering investing in the Vanguard SIPP upon launch. If you can't wait until launch then there are a number of ways that you can effectively have a Vanguard SIPP right now. Read on to find out.

How to get a Vanguard SIPP right now

If you like Vanguard funds and are keen to invest in a SIPP then it is possible to create your own Vanguard SIPP by using an alternative platform. In fact, it is likely to be cheaper than investing with Vanguard directly in any event.

Interactive Investor  (also known as ii) is the second largest investment platform in the UK and what makes it attractive is that it operates a fixed monthly fee model, with three different service plans on offer. Most platforms will charge a fee based on a percentage of your holding, with Vanguard itself charging a capped 0.15% fee. Our research shows that if you hold more than £160,000 in Vanguard funds, then investing via an Interactive Investor SIPP would actually be cheaper than investing via a Vanguard SIPP. This is because Interactive Investor charges a monthly fee of £9.99 via its cheapest service plan, plus an administration charge of £120 per year, meaning the maximum total fees you will pay in a given year is £239.88 compared to £375 with the Vanguard SIPP. The other benefit of an Interactive Investor SIPP is that you have access to a wider range of investments (including ETFs, investment trusts and shares) and not just Vanguard funds (the Vanguard SIPP only offers Vanguard funds). Furthermore, in the future you could transfer any money held in your Interactive Investor SIPP to the new Vanguard SIPP once it's launched without any exit fee.

Another, less popular but cost-effective SIPP alternative is iWeb but unlike Interactive Investor it does charge exit fees if you decide to move your money away from iWeb in the future.

Vanguard Investor SIPP vs Interactive Investor SIPP

Interactive Investor has three service plans, charging a monthly fee (regardless of your portfolio size) of £9.99, £13.99 or £19.99, depending on what service plan you choose. Vanguard charges a fixed percentage of 0.15% (capped at £250,000, meaning the maximum is £375 per year). There is also an underlying fund charge, but the charge is the same for both Interactive Investor and Vanguard Investor. So, if you intend to invest more than £160,000 into a Vanguard SIPP, then you may as well invest in Vanguard funds through Interactive Investor's SIPP as it will be cheaper.

Of course, if you never plan to hold more than £160,000 in a Vanguard SIPP then you would be better off investing via Vanguard's own SIPP (when it launches) as it would be cheaper. However, one of the advantages of investing in an alternative platform such as Interactive Investor is that you are able to invest in a wider range of funds. With Vanguard you are limited to Vanguard's own funds. Additionally, investing in a SIPP using a platform such as Interactive Investor will give you access to thousands of investment trusts, ETFs and unit trusts from hundreds of investment companies, as well as access to direct share dealing.

Finally, you need to consider any costs associated with drawdown. The Vanguard SIPP does not charge for going into drawdown, whereas Interactive Investor charges £120 per year. If you enter drawdown using an Interactive Investor SIPP (which is one of the cheapest for drawdown in the market) then costs would rise to £359.88 per year. This means you would need to hold at least £240,000 for Interactive Investor to be cheaper, and even then, you would only be making a saving of £15.12 per year.

Of course, you are free to transfer from one SIPP provider to another prior to going into drawdown if you want to maximise cost savings pre and post-retirement. Remember the cheapest SIPP pre-retirement is not necessarily the cheapest SIPP post-retirement.

Summary

If you like Vanguard funds and are considering investing in a Vanguard SIPP then it may be worth considering opening a SIPP with a platform such as Interactive Investor or iWeb and we have summarised the reasons below:

  • You can invest in a SIPP right now (rather than having to wait)
  • If you have £160,000 or more to invest then it will be likely cheaper to invest in Vanguard funds with Interactive Investor or iWeb than with Vanguard Investor directly.
  • More choice as you are not restricted to just Vanguard funds. Via Interactive Investor or iWeb you can invest in thousands of unit trusts, investment trusts, ETFs and shares.
  • No exit fee with Interactive Investor so if you ultimately decide to invest directly through Vanguard Investor then you can transfer across without penalty. iWeb does charge exit fees, unfortunately.
  • Consider potential drawdown costs before you commit to a provider but ultimately the cheapest SIPP pre-retirement will differ from the Cheapest SIPP post-retirement (see our drawdown comparison article).

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