If you’re one of the growing number of savers with a self-invested personal pension (Sipp), make it a new year’s resolution to check you’re getting value for money on your plan.
The long-term impact on your pension of even small differences in charges will be significant and in a Sipp, you are simply paying for an administrative service – you choose the investments – so it’s vital to shop around.
In broad terms, Sipp providers charge their customers in one of two different ways: some levy a percentage fee on the value of their pension each year, while others deduct a fixed flat fee.
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Generally speaking, the first of these approaches makes sense for savers with smaller pensions. On larger funds, however – worth more than £50,000, say – a fixed fee can be more economical. The good news, however, is that competition in the Sipps market is fierce. America’s Vanguard, the world’s second-biggest asset-management group, launched its first Sipp last year, with an annual charge of 0.15% a year, though its choice of investment funds is limited.
AJ Bell charges 0.25% a year and offers greater investment choice. In the fixed-fee category, Interactive Investor charges only £120 a year for its Sipp.
In practice, you may need to do some calculations, taking into account other potential costs. Some providers charge dealing fees when you change funds or trade shares.
Others have different costs when you begin to draw down an income. Comparison sites such as moneytothemasses.com can help you tailor your search according to your individual circumstances.
Finally, don’t get too fixated on securing the absolute cheapest deal – quality of service is also an important consideration. A recent Financial Times survey of readers picked out Bestinvest, Charles Stanley Direct, Fidelity and AJ Bell as the best providers on this measure.
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