How to pick a Sipp

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Keep an eye on costs – they can soon add up

Choose your Sipp provider carefully: saving on fees can make a big difference to your fund.

When it comes to picking a company that offers self-invested personal pensions (Sipps), it’s not quite as straightforward as choosing the one known to be the cheapest. Providers charge in several different ways. Moreover, the most cost-effective provider for you will largely depend on the size of your pension fund and how you want to invest it.

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. Some providers have negotiated cheaper fees on underlying funds, although they don’t always pass these on in full.

On smaller pension funds, percentage-based charges, rather than fixed cash fees, typically work out more cheaply. On this basis, research just published by personal finance site Money to the Masses singles out

AJ Bell Youinvest as offering particularly good value for savers with pension funds of £100,000 or less. For larger funds, by contrast, providers such as Alliance Trust Savings, Halifax Share Dealing and Fidelity begin to look more competitive.

Add in the effect of drawdown charges, and the picture changes again. You’ll still be paying for the Sipp, but many providers levy additional fees on investors as they move into the decumulation phase of their retirement planning (withdrawing money).

Looking across combined Sipp and drawdown charges, research conducted by consultancy The Lang Cat suggests AJ Bell is still cheap for small pension funds – those of £50,000 or less – but that Halifax Share Dealing is slightly better value.

Halifax also takes first place for pension funds worth £100,000, according to The Lang Cat, but for larger funds other providers move up the ranks. These include Fidelity, The Share Centre, Alliance Trust Savings and Interactive Investor.

Interestingly, Hargreaves Lansdown (HL) scores poorly on The Lang Cat’s analysis of charges, except for small pension funds, but Money to the Masses puts it top for tools and functionality.