Hargreaves Lansdown set the cat amongst the pigeons when it launched the first low cost SIPP back in 2003. Since then business has blossomed, but competitors have sprung up too. So, does the Vantage SIPP still offer a great deal?
Investment choice is more or less on a par with competitors and should keep most investors happy. You can buy eligible shares listed on the London Stock Exchange and larger companies listed in Europe or the US, as well as gilts, corporate bonds, ETFs, investment trusts, PIBs and covered warrants. In addition you can choose from around 2,000 funds.
There is no charge to open a Vantage SIPP and no annual administration fee provided you buy funds that pay a trail commission. However, buy funds that don’t pay trail commission (such as some trackers) or other investments and you’ll pay an annual fee of 0.5%* capped at £200* - a big turn off if you plan to hold such investments. Hargreaves Lansdown’s loyalty bonus doesn’t apply to its Vantage SIPP either, so you won’t benefit from fund trail commission rebates – disappointing. On the plus side dealing charges don’t apply to funds, most of which have no initial charge.
Online dealing charges for non-fund investments range from £9.95 to £29.95 depending on the amount invested. While reasonable, they compare unfavourably to Sippdeal when investing £500 or more. Telephone deals cost 1% with a minimum of £10 and maximum of £50. In any case, dealing costs make monthly savings (minimum £50 gross) a non-starter unless you buy funds in which case it's good value.
Cash must be held in the Vantage cash account which pays (at the time of writing) dismal interest rates of between 0% - 0.25%. Sadly this seems to be the norm for low cost SIPPs as it’s a great source of profit for providers, but it’s still no excuse for giving customers such a raw deal on cash.
Buying an annuity costs £150* although it’s free if bought through Hargreaves Lansdown (they’ll benefit from receiving commission from the annuity provider). Drawing a retirement income via an unsecured pension simply costs £75 every time you review income levels, which is very reasonable. Transferring to another provider costs £75* plus £20 per holding unless first converted to cash.
The Hargreaves Lansdown Vantage SIPP remains a competitive option for many smaller fund investors, especially monthly savers, but falls down versus the likes of Sippdeal if you want to hold other investments or funds that don’t pay trail commission. And larger fund investors are likely to profit from the atractive trail commission rebates offered by Alliance Trust Savings and Cavendish Online.
(* plus VAT)