I've just overhauled our low cost SIPP comparison (long overdue!) and it makes for interesting reading.
There's a brief summary below, although please do take a look at the full comparison (and to understand the assumptions I used).
I divided the comparison into three scenarios: investing in funds only, shares only and a mix of the two. This should hopefully make the comparison more relevant for you - as a SIPP that's good value in one scenario isn't necessarily so in another.
Interactive investor has recently changed its SIPP fee structure quite significantly, and now rebates all commission and its platform fee (i.e. the money it receives from fund managers for inclusion on its SIPP fund platform). Despite an annual SIPP fee of £120 & VAT and £10 dealing charge, the SIPP offers excellent value for money unless you only plan to hold a few thousand pounds. There is however a nasty potential sting in its tail - a £300 & VAT charge if you decide to transfer your pension elsewhere in future.
Alliance Trust Savings also offers full commission and platform fee rebates, with overall savings more or less on a par with Interactive Investor.
The other low cost SIPP providers look rather expensive by comparison, primarily because their trail commission rebates are lower. And Hargreaves Lansdown props up the bottom of the table due to offering no trail commission rebates at all - potentially costing customers tens of thousands of pounds more over time versus Interactive Investor and Alliance Trust. However, Hargreaves does offer a reasonable deal if you only plan to invest a few thousand pounds - as at this level the superior commission rebates offered by competitors don't necessarily outweigh their annual SIPP and/or dealing fees.
Sippdeal tops this category hands down thanks to a modest £9.95 dealing charge and no annual SIPP fee. Bestinvest also deserves a mention for a low £7.50 dealing charge and reasonably competitive £120 annual SIPP fee.
Barclays and Hargreaves Lansdown look the most expensive, largely due to high annual SIPP charges when holding shares.
Funds & shares
This is probably the most common scenario, especially with the growing popularity of exchange traded funds (ETFs), which require a share trading facility.
Interactive Investor and Alliance Trust likely offer the best overall deal for most investors, again thanks to full trail commission and platform fee rebates. So the greater the proportion of your SIPP you hold in funds, the greater the potential saving versus competitors.
If you only plan to invest a few thousand pounds then SIppdeal could prove good value thanks to no annual SIPP fee. But their fund commission rebates are a bit stingy, reducing competitiveness as fund portfolio size grows..
Hargreaves Lansdown is again the least competitive for many due to their refusal to rebate any trail commission. It's ironic that the company which started the low cost SIPP boom is now amongst the most expensive...
What's the best deal for you?
It's hard to say for certain, as the best deal will ultimately depend on exactly what you hold within your SIPP. Nevertheless, our comparison should help steer you in the right direction, as it's pretty clear which providers tend to be best value for funds, shares and both. Of course, price isn't the only consideration: service is important too and you might place value on the research offered by Bestinvest and Hargreaves Lansdown. But it's nevertheless an important factor when making your decision.
Beware appalling cash rates
There's one major annoyance and potential drawback with low cost SIPPs - they pay little or no interest on cash balances. So if you want to sit on cash during difficult markets you'll probably earn diddly squat. Don't expect matters to improve either, this is a major cash cow for providers (as they can earn interest on the money meanwhile) so they're reluctant to change. James Hay in the one exception in low cost SIPP land, as it offers access to some decent fixed rates from a few banks, but the minimum investment for these tends to be £50,000.
Should SIPPs be the pension of choice for everyone?
Given there are now competitive offerings whether you want to invest a few thousand or a few hundred thousand pounds, SIPPs are arguably a pension for the masses. However, in practice it's not that straightforward. There's little point using a SIPP if you only wish to hold a couple of general funds and don't invest in shares - it would be like buying a sports car to pop to the shops - a stakeholder pension is likely to be more appropriate. And making the most from a SIPP requires some effort and expertise, as there's such a wide universe of investments from which to choose. Plus, of course, if you have an occupational pension you probably don't access to a SIPP in any case.
But for those with tens of thousands of pounds in personal pensions and a willingness to take an active role in looking after their pension (or using an adviser to do so) SIPPs should now be a serious candidate for their retirement pot.
What is a SIPP?
Ok, I should have covered this at the beginning, but didn't want to detract from the main article - plus I'm guessing most of you know what a SIPP is. But in case you don't...
SIPPs (self-invested personal pensions) allow you to hold pretty much any allowable investment within your pension. This includes funds, shares and cash, although some SIPPs restrict access to funds only. The big potential advantage is that you're not limited to a pension providers own range of funds. If you want a fuller explanation, please take a look at our SIPPs page.