Selecting a SIPP Provider
If you decide a SIPP is the right vehicle for you, you will need to decide whether you are best served by a low cost SIPP, a full SIPP or a hybrid SIPP; even then you will find quite some variation between providers, and a little time invested up front can prevent time consuming and potentially expensive remedial action down the line.
In most cases the low cost SIPP will deliver a more than adequate platform to the DIY investor with sophisticated online tools and data available at very reasonable cost.
Since RDR online brokers have changed their pricing models, with most charging a percentage fee based upon the value of the assets held within an account; some still charge flat fees and percentage based fees can sometimes be capped, so it is important that you compare various platforms based upon your own predicted trading activity and that you ensure that you are not penalised for becoming successful.
‘In most cases the low cost SIPP will deliver a more than adequate platform to the DIY investor’
By and large, the broader the choice of investments, the higher the fees levied by the SIPP, and higher levels of service and sophistication also tend to come at a premium; why not call customer services and ask a few choice questions? Those that you deal with will be the ones you rely upon should things go awry, so upfront is probably the time to reassure yourself.
However, headline fees and commissions may be only part of the consideration and it is well worth seeking out the opinions and experiences of those that have had experience of a particular provider, including on the community pages of this site.
The government’s 2012 Retail Distribution Review prevented investment platforms from earning ‘trail commission’ from investment managers for selling their funds and instead they were required to charge transparent fees for their service.
Since then, most have opted for either a percentage or flat-fee based administration charge, and it is worth making sure that you are fully au fait with the charges that may accompany your SIPP before signing on the dotted.
Some SIPPs come with higher fees than a comparable ISA or dealing account, often charging set up fees and extra for cash movements in or out of an account.
However, it is worth shopping around as platforms are not averse to offering cash bonuses or reduced fees in order to attract what is lucrative long term business for them.
On top of management and account fees, platforms will usually charge dealing commissions and again it is worth finding the one that offers the best deal on the investments you are likely to make – some allow you to trade funds for free but charge for shares and investment trusts; others make you pay for both.
Platforms that charge a percentage based management fee tend to offer free or cheaper fund dealing, whilst those charging a flat-fee load on fund dealing charges; in addition to the mix of your investments it is worth considering the ‘consequences’ of building up a sizeable pot on a particular platform.
As a rule of thumb, percentage-based fees with no fund dealing charges tend to be best value if you’ve less than £50,000. Fixed-fee SIPPs with fund dealing charges can be cheaper if you’ve more than £50,000, depending on how often you switch funds.
‘percentage-based fees with no fund dealing charges tend to be best value if you’ve less than £50,000’
Another charge to consider is the annual management fee charged by fund managers, and again it is worth shopping around as some of the larger fund supermarkets are able to negotiate some or much of this away by virtue of their buying power.
You may also find some ‘nasties’ hidden away in a platform’s small print for services such as transfers out, printed contract notes, paper statements, or converting your fund into income in retirement.
When choosing a SIPP provider there is no right or wrong, the challenge is to find one that offers the best combination of online functionality, customer service and investment choice at a price that you find acceptable, and then keep a watching eye on activity in the sector to ensure that your provider continues to be the best fit for your requirements.