Picking a self-invested personal pension (Sipp) can be challenging. With hundreds of products out there, it can be hard to know where to start, or even what to factor in when deciding which Sipp is best for you.
Picking the accounts with the lowest fees is a good place to begin, but providers often charge different fees for different services and the most cost-effective provider will largely depend on the size of your pension fund.
“Choosing the best Sipps provider can make a significant difference to individual retirement savings, particularly in terms of maximising the value of your portfolio and minimising fees,” says Jo Groves, investment specialist at Kepler Partners. “It’s worth carefully weighing up the pros and cons of different pension providers to find the best option to meet your needs.”
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Opening a SIPP can pay dividends in later life, providing a welcome boost on top of your state pension entitlement as well as your workplace pension and life savings. But the fees you pay for your SIPP could eat into your retirement pot.
“Over the long term, even small differences in fees can reduce the value of a portfolio by thousands of pounds – the difference between a flat fee and a 1% platform fee could be £150,000 over a 30-year period,” says Groves.
We explain the fees you need to keep an eye out for and platforms to consider.
Comparing Sipps: the top Sipps for low fees
Broadly speaking, Sipp charges during the accumulation phase (when you're building up the fund) fall into three categories. You need to consider the administration charge that the provider charges for the plan itself; dealing fees incurred when you buy and sell various investments; and the charges on the underlying funds in your Sipp.
Recent research from Kepler Trust Intelligence puts Interactive Investor at the top of the pile in terms of underlying fees for portfolios worth £100,000 or £150,000. Based on the fixed fees for its Sipps, this does make the cost of a small SIPP (worth less than £28,752 for Pension Essentials customers, or 62,352 for Pension Builder customers) higher at Interactive Investor than the equivalent-sized portfolios with AJ Bell.
Portfolio value | £20,000 | £100,000 | £250,000 |
|---|---|---|---|
interactive investor | £120 | £204 | £204 |
AJ Bell | £89 | £284 | £472 |
Charles Stanley Direct | £180 | £300 | £600 |
Fidelity | £135 | £310 | £385 |
Hargreaves Lansdown | £162 | £497 | £834 |
Bestinvest | £150 | £430 | £1,030 |
Source: Kepler Trust Intelligence
Comparing Sipps: the top Sipps for customer service
Despite being edged into second place on price, AJ Bell is ranked highest among SIPP providers for customer service. Groves bases this mainly on its “easy-to-use app” and provision of customer support both online and via phone, though she also references the range of stocks and shares that can be bought on the platform.
“It should also be commended on the quality of its research, together with its regular webinars and podcasts, and scores particularly highly for customer service with a rating of 4.8 on Trustpilot, the highest among our group,” adds Groves.
The overall rankings for different SIPP providers according to Kepler are as follows:
Provider | Score out of 5 |
|---|---|
interactive investor | 5 |
AJ Bell | 5 |
Fidelity | 4.5 |
Charles Stanley Direct | 4.0 |
Hargreaves Lansdown | 4.0 |
Bestinvest | 4.0 |
Source: Kepler Trust Intelligence
How much can I contribute into a Sipp?
Like any pension, Sipps carry financial benefits in the form of tax relief on your contributions.
These take the form of a 25% government top-up on any contributions you make, provided that these don’t exceed the annual pension limit of £60,000 (including employer contributions) or 100% of your earnings.
“What’s more, if you pay higher rates of tax, you might be able to claim an extra 20% or 25% of the total contribution (your payments plus the government top up) via self-assessment – helping to trim your annual tax bill and put more money towards your future,” says Craig Rickman, pension expert at Interactive Investor.
For a full breakdown of the tax benefits available, see the table below.
SIPP Value | Basic-rate | Higher-rate | Additional-rate |
|---|---|---|---|
How much each person pays into their SIPP | £8,000 | £8,000 | £8,000 |
How much the Government adds | £2,000 | £2,000 | £2,000 |
How much can be claimed back via a tax return | £0 | £2,000 | £2,500 |
Total SIPP tax relief | £2,000 (20%) | £4,000 (40%) | £4,500 (45%) |
Total amount each person pays out for their £10,000 SIPP contribution | £8,000 | £6,000 | £5,500 |
Source: Bestinvest
If you earn over £260,000, including bonuses and employer pension contributions, your pension allowance will taper down by £1 for every £2 of adjusted income.
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