In the press release promoting Bestinvest's new 'Select SIPP', CEO Peter Hall claims the new service will "offer investors value that blows our competitors out of the water". I think he might be exaggerating - both Alliance Trust Savings and Sippdeal offer cheaper overall deals for the majority of us, especially when the SIPP holds a combination of investments that do and don't pay trail commission. Nevertheless, how does it fare overall versus the best on the market?
The Bestinvest Select SIPP is part of their new 'Select' service, which basically means you can get partial trail commission rebates instead of advice (paid by the trail commission).
Like most low cost SIPPs, you can invest in a wide range of unit/investment trusts and shares (including ETFs), with most funds having no initial charge. The standard online dealing fee is £12.50, but this falls to a very competitive £7.50 if you have at least £50,000 invested in the Select service, dealing by phone is £75. Unlike some competitors, the dealing fee doesn't apply to funds - good news.
However, if you hold any investments that don't pay trail commission (e.g. investment trusts/shares/ETFs) Bestinvest will charge you £100 (+ VAT) a year. This is expensive compared to Sippdeal, who throw in the SIPP wrapper for free, but cheaper than Alliance Trust Savings at £125 (+ VAT) - although Alliance Trust generally offers far more competitive commission rebates. On the bright side, there's no annual fee when drawing income during retiement.
When holding tens of thousands of pounds in a SIPP that's largely invested in unit trusts, trail commission rebates will likely have a far bigger impact on overall costs than annual charges and dealing fees. So how do Bestinvest's rebates stack up?
I picked a trio of popular funds to find out:
|Annual trail commission rebate|
|Fund||Alliance Trust Savings||Bestinvest||Cavendish Online*||Hargreaves Lansdown||Sippdeal|
|Aberdeen Emerging Markets
|Invesco Perpetual High Income
|* discount broker rebate via FundsNetwork SIPP.|
Bestinvest certainly scores more highly than Hargreaves Lansdown (who still refuse to give trail commission rebates on their Vantage SIPP), is more or less on par with Sippdeal and a fair way behind Cavendish Online and Alliance Trust Savings.
The table below should help put all the various charges and commission rebates into context, assuming you hold at least one non trail commission paying investment (a fair assumption in this day and age):
|Value after 10 years assuming 7% annual growth before charges|
|Alliance Trust Savings||Bestinvest||Hargreaves Lansdown||Sippdeal|
|Figures assume money split equally between Aberdeen Emerging Markets, Invesco Perpetual High Income, M&G Recovery and iShares FTSE 100 ETF. Commission rebates assumed to reduce annual charges.|
Putting all this together, the Select SIPP is reasonably competitive, but lags the markets leaders in terms of rebates.
However, unlike the cheaper rivals, Bestinvest offers good quality fund research and suggested 'model' portfolios as part of the deal. So you'll need to judge how much, if anything, these feature are worth to you when comparing overall value for money.
As for cash, Bestinvest pays 0.25% (as of 24 May 2011) on balances of more than £25,000 and nothing if you hold less than this. While little different from competitors, I wish low cost SIPP providers would stop fleecing customers who choose to hold cash in their SIPP.
All in all the Bestinvest Select SIPP is a mixed offering. The charging structure could be simpler and looks unappealing unless you have enough money to qualify for trail commission rebates. And, even with the rebates, it's still unlikely to trouble the cheapest SIPP providers in the market.
But if you qualify for the rebates, won't hold a large cash balance and place importance on fund research and guidance, then it should prove good value overall.