1
interactive investor
Low trading fee for UK & US shares
Flat platform fee of £12.99 per month for Pension Builder plan (new customers)
1
interactive investor
On interactive investor’s Website
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2
Freetrade
No trading fee
Flat platform fee of £9.99 per month for Plus plan
2
Freetrade
On Freetrade’s Website
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Our Pick Of The Best SIPP Providers
We researched a range of providers (March 2023) and have listed our findings below, together with a methodology explaining how we arrived at our rankings.
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BEST ALL-ROUNDER
AJ Bell
5.0
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Trading fee
Funds: £1.50, Shares: £9.95, £4.95 (10+ deals in previous month)
Platform fee
Funds (tiered): 0.25% (up to £250,000), 0.10% (£250,000 to 500,000), no charge (£500,000 plus), Shares: 0.25% (capped at £10 per month)
Customer experience rating
66%
Trading fee
Funds: £1.50, Shares: £9.95, £4.95 (10+ deals in previous month)
Platform fee
Funds (tiered): 0.25% (up to £250,000), 0.10% (£250,000 to 500,000), no charge (£500,000 plus), Shares: 0.25% (capped at £10 per month)
Customer experience rating
66%
Why We Picked It
AJ Bell is a FTSE 250 company with over 440,000 clients. Other accounts include a general investment account, ISA, Lifetime ISA and Junior ISA.
Charges a small trading fee for buying funds and one of the higher trading fees for buying shares online. However, one of the lowest platform fees (of up to 0.25%) and the platform fee for shares is capped at £10 per month.
No charge for transferring pensions in or out of AJ Bell. No fee for flexi-access drawdown or lump sum payments.
Choice of 8,200 shares and 6,000 funds, ETFs and investment trusts. Offers six AJ Bell funds, four ready-made portfolios and a ‘Favourite Funds’ list of around 80 selected funds.
Pays interest on cash balances (1.86% up to £10,000, 2.63% above £10,000 on a tiered basis).
Comprehensive research offering for both funds and shares along with a range of investing guides and live seminars.
Can trade online, by app or by phone. Minimum lump-sum investment from £500 or £25 for monthly investing (with a reduced trading fee of £1.50)
Extensive customer support available, including a 6-day-a-week telephone service and live chat facility.
Overall, AJ Bell is an excellent all-rounder with one of the lowest platform fees for funds among the mainstream providers and an extensive research offering.
Pros & Cons
- One of lowest platform fees
- Platform fee for shares capped
- No transfer or drawdown fees
- Comprehensive research offering
- Extensive customer support
- High trading fee for shares
- Trading fee charged on funds
Typical fees
Portfolio of £20,000: £110
Portfolio of £100,000: £305
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interactive investor
5.0
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Trading fee
Funds and shares: £5.99 for UK shares and funds and US shares (£3.99 for Super Investor plan) and £19.99 for other international shares, Free trades (1-2 per month) available via Investor & Super Investor accounts.
Platform fee
Flat fee of £12.99 per month for Pension Builder plan. Or additional fee of £10 per month to add a SIPP to the Investor & Super Investor plans.
Customer experience rating
62%
On interactive investor's Website
Trading fee
Funds and shares: £5.99 for UK shares and funds and US shares (£3.99 for Super Investor plan) and £19.99 for other international shares, Free trades (1-2 per month) available via Investor & Super Investor accounts.
Platform fee
Flat fee of £12.99 per month for Pension Builder plan. Or additional fee of £10 per month to add a SIPP to the Investor & Super Investor plans.
Customer experience rating
62%
Why We Picked It
interactive investor has over 400,000 clients and was recently bought by FTSE 100 fund manager abrdn. Other accounts include a general investment account, ISA and Junior ISA.
Charges a high trading fee for funds but one of the lower trading fees for UK and US shares. However, customers adding a SIPP to either the Investor or Super Investor plans can use the free monthly trade(s) for their SIPP.
Fixed, rather than proportional, platform fee may appeal to investors with higher-value portfolios.
No charge for transferring pensions in or out of ii. No drawdown fees.
Choice of over 40,000 investment options, including over 4,600 funds, ETFs and investment trusts.
Pays interest on cash balances held (1.51% for up to £10,000, 2.53% above £10,000).
Offers five ready-made portfolios, along with a ‘Super 60’ list of selected funds. It does not offer financial advisory services but provides comprehensive fund and share research.
Can trade online, by app or by phone. No minimum lump-sum investment amount and £25 for monthly investing (no trading fee for monthly investing).
Good support available, including a 5-day-a-week telephone service and messaging facility.
Overall, interactive investor may appeal to investors with higher-value portfolios due to the flat platform fee, in addition to the wide range of investments offered.
Pros & Cons
- Flat platform fee
- Low trading fee for UK & US shares
- No transfer or drawdown fees
- Comprehensive research offering
- Good customer support
- Trading fee charged on funds
- Platform fee expensive for small portfolios
- Lowest customer experience rating
Typical fees
Portfolio of £20,000: £192
Portfolio of £100,000: £192
(For Pension Builder plan)
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Freetrade
5.0
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Trading fee
No fee
Platform fee
Flat fee of £9.99 per month for Plus plan (increasing to £11.99 in May 2023)
Customer experience rating
72%
On Freetrade's Website
Trading fee
No fee
Platform fee
Flat fee of £9.99 per month for Plus plan (increasing to £11.99 in May 2023)
Customer experience rating
72%
Why We Picked It
Freetrade is a privately-owned UK company with over one million customers. The Plus plan includes a general investment account and ISA.
Charges no trading fee for funds or shares. Fixed, rather than proportional, platform fee may appeal to investors with higher-value portfolios.
No charge for transferring pensions in or out of Freetrade. Does not currently offer drawdown on retirement meaning that customers will need to transfer their pension to another provider.
Choice of over 6,000 shares, ETFs and investment trusts.
Pays interest on cash balances (3.00% for up to £4,000).
Does not provide any ready-made portfolios and only offers ETFs and investment trusts, rather than OEIC funds. It does not offer financial advisory services and has a more limited research offering. However, it provides a well-supported community forum for investors.
Can only trade via app. Minimum lump-sum investment from £2 with no option for monthly investing.
Support only available by email although our queries have been answered promptly.
Overall, Freetrade offers a low-cost SIPP, particularly for higher-value portfolios. It may also appeal to younger investors due to the need to transfer the pension for drawdown on retirement.
Pros & Cons
- No trading fee for funds or shares
- Flat platform fee
- No transfer fee
- Highest customer experience rating
- High interest rate on cash
- Well-supported community forum
- Platform fee expensive for small portfolios
- No (OEIC) funds
- Drawdown not currently offered
- Can only trade via app
Typical fees
Portfolio of £20,000: £120
`Portfolio of £100,000: £120
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Bestinvest
4.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Trading fee
Funds: no charge Shares: £4.95, no fee for US shares
Platform fee
Funds and shares (tiered): 0.40% (up to £250,000), 0.20% (£250,000 to £500,000), 0.1% (£500,000 to £1 million), no charge (over £1 million)
Customer experience rating
N/A
Trading fee
Funds: no charge Shares: £4.95, no fee for US shares
Platform fee
Funds and shares (tiered): 0.40% (up to £250,000), 0.20% (£250,000 to £500,000), 0.1% (£500,000 to £1 million), no charge (over £1 million)
Customer experience rating
N/A
Why We Picked It
Bestinvest is owned by wealth management firm Evelyn Partners (previously Tilney Smith & Williamson) and has over 46,000 clients.
Other accounts include a general trading account, ISA and Junior ISA.
Charges no trading fee for funds and one of the lowest share trading fees. However, one of the highest platform fees for funds and no cap on platform fee for shares. Minimum platform fee of £120 per year for SIPPs.
No charge for transferring pensions in or out of Bestinvest. No drawdown fees.
Choice of over 1,100 shares (UK only) and 2,200 funds, ETFs and investment trusts.
Offers 15 ready-made portfolios, along with ‘The Best™ Funds List’ of around 120 funds, ETFs and investment trusts. Bestinvest also charges a lower platform fee for its ready-made portfolios (0.2% up to £500,000, 0.1% above £500,000 and no charge over £1 million).
Pays interest of 3.1% on cash balances.
Also offers a financial advisory service including a free one-to-one coaching session. Provides comprehensive fund and share research.
Can trade online, by app or by phone. No minimum for lump-sum investments and £50 for monthly investing (no trading fee for monthly investing).
Extensive support available, including a 6-day-a-week telephone service and live chat facility.
Overall, Bestinvest may appeal to investors wanting a low-cost, ready-made portfolio, along with financial coaching. However, it offers a more limited selection of shares relative to other providers.
Pros & Cons
- No trading fee for funds
- Low trading fee for shares
- No transfer or drawdown fees
- High interest rate on cash balances
- Good research offering
- High platform fee of up to 0.40%
- No cap on platform fee for shares
Typical fees
Portfolio of £20,000: £150
Portfolio of £100,000: £430
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Hargreaves Lansdown
4.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Trading fee
Funds: no charge Shares: £11.95 (0-9), £8.95 (10-19), £5.95 (20+) Based on trades in previous month
Platform fee
Funds (tiered): 0.45% (up to £250,000), 0.25% (£250,000 to £1 million), 0.10% (£1 million to £2 million), no charge (£2 million plus) Shares: 0.45% (capped at £200 per year)
Customer experience rating
67%
Trading fee
Funds: no charge Shares: £11.95 (0-9), £8.95 (10-19), £5.95 (20+) Based on trades in previous month
Platform fee
Funds (tiered): 0.45% (up to £250,000), 0.25% (£250,000 to £1 million), 0.10% (£1 million to £2 million), no charge (£2 million plus) Shares: 0.45% (capped at £200 per year)
Customer experience rating
67%
Why We Picked It
Hargreaves Lansdown is a FTSE 100 company with over 1.7 million clients. Other accounts include a general investment account, ISA, Lifetime ISA and Junior ISA.
No trading fee for funds but one of the highest share trading fees. Also one of the highest platform fees (of up to 0.45%) although platform fee for shares is capped at £200 per year.
No charge for transferring pensions in or out of HL. No drawdown fees.
Choice of over 8,500 shares and nearly 5,000 funds, ETFs and investment trusts.
Offers four ready-made portfolios, along with a ‘Wealth Shortlist’ of over 70 selected funds. Also offers a financial advisory service.
Comprehensive research offering for both funds and shares.
Pays interest on cash balances (1.00% for up to £10,000, 1.25% to 2.00% above £10,000 on a tiered basis).
Can trade online, by app or by phone. Minimum lump-sum investment from £100 or £25 for monthly investing (with reduced trading fee of £1.50).
Extensive support available, including a 6-day-a-week telephone service and secure messaging facility.
Overall, HL may be a good option for investors willing to pay for a premium service, with an excellent choice of investments, research offering and customer service.
Pros & Cons
- No trading fee for funds
- Platform fee for shares capped
- Comprehensive research offering
- Excellent customer support
- High trading fee for shares
- High platform fee of 0.45% (under £250,000)
Typical fees
Portfolio of £20,000: £162
Portfolio of £100,000: £497
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Aviva
4.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Trading fee
Funds: no charge Shares: £7.50
Platform fee
Funds (tiered): 0.40% (up to £50,000), 0.35% (£50,000 to £250,000), 0.25% (£250,000 to £500,000), 0% (above £500,000). Shares and ETFs: 0.40%, capped at £120 per year
Customer experience rating
65%
Trading fee
Funds: no charge Shares: £7.50
Platform fee
Funds (tiered): 0.40% (up to £50,000), 0.35% (£50,000 to £250,000), 0.25% (£250,000 to £500,000), 0% (above £500,000). Shares and ETFs: 0.40%, capped at £120 per year
Customer experience rating
65%
Why We Picked It
Aviva is a FTSE 100 insurance group with over 18 million customers.
Charges a mid-range share trading fee, although there is no trading fee for funds. One of the higher platform fees of up to 0.40% although this is capped at £120 per year for shares and ETFs.
No charge for transferring pensions in or out of Aviva. No drawdown fees.
Choice of over 800 shares, 660 ETFs, 160 investment trusts and 4,700 funds.
Pays interest of 3.23% on cash balances held in a SIPP.
Choice of five ready-made portfolios. along with an ‘Experts’ Shortlist’ list of 85 selected funds. Also provides financial advisory services and a decent range of investment guides.
Can only trade online although portfolio can be viewed on the app. Minimum lump-sum investment from £5,000 (reduced to £1,000 if monthly investing as well) or £25 for monthly investing (with a reduced trading fee of £2).
Support includes a 5-day-a-week telephone service, in addition to email.
Overall, Aviva is a good all-rounder with competitive fees and a decent range of investments.
Pros & Cons
- No trading fee for funds
- Platform fee for shares capped
- No transfer or drawdown fees
- High interest rate on cash balances
- One of higher platform fees
- Cannot trade by app
Typical fees
Portfolio of £20,000: £125
Portfolio of £100,000: £225
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Fidelity
4.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Trading fee
Funds: No charge Shares: £7.50
Platform fee
Shares and funds (not tiered): 0.35% (regular savings plan) or £90 (no regular savings plan) (up to £25,000), 0.35% (£7,500-£250,000), 0.20% (£250,000-£1 million), 0.20% (0.20% on first £1 million then no further charge)
Customer experience rating
64%
Trading fee
Funds: No charge Shares: £7.50
Platform fee
Shares and funds (not tiered): 0.35% (regular savings plan) or £90 (no regular savings plan) (up to £25,000), 0.35% (£7,500-£250,000), 0.20% (£250,000-£1 million), 0.20% (0.20% on first £1 million then no further charge)
Customer experience rating
64%
Why We Picked It
US fund giant Fidelity has 1.5 million clients in the UK. Unlike many of its fund manager peers, clients can trade in whole-of-market, rather than just Fidelity investments. Other accounts include a general trading account, ISA and Junior ISA.
Charges no trading fee for funds but one of the higher share trading fees. Has a non-tiered platform fee (meaning that the lower platform fee is charged across the whole portfolio, rather than a different fee for each tier). Platform fee is capped at £90 (per year) for ETFs.
No charge for transferring pensions in or out of Fidelity. No drawdown fees.
Choice of over 2,000 shares and 3,800 funds, ETFs and investment trusts.
Offers a ready-made portfolio, along with a ‘Select 50’ list of selected funds, ETFs and investment trusts. Also provides financial advisory services and a good level of fund and share research.
Pays interest of 2.10% on cash balances held.
Can trade online, by app or by phone. It has a high minimum investment of £1,000, but a lower amount of £25 for monthly investing (with a reduced trading fee of £1.50).
Extensive support available, including a 5-day-a-week telephone service, messaging facility and face-to-face investor centre in London.
Overall, Fidelity may appeal to investors with higher-value portfolios due to the non-tiered platform fee, but is a more expensive option for trading and holding shares.
Pros & Cons
- No trading fee for funds
- Non-tiered platform fee
- No transfer or drawdown fees
- Comprehensive research offering
- Excellent customer support, including face-to-face investor centre
- High platform fee of up to 0.35%
- No cap on platform fee for shares
- High minimum investment of £1,000 (unless investing monthly)
Typical fees
Portfolio of £20,000: £147
Portfolio of £100,000: £395
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Halifax
4.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Trading fee
£9.50, no fee for international shares
Platform fee
£22.50 per quarter (up to £50,000), £45 per quarter (above £50,000)
Customer experience rating
67%
Trading fee
£9.50, no fee for international shares
Platform fee
£22.50 per quarter (up to £50,000), £45 per quarter (above £50,000)
Customer experience rating
Why We Picked It
Halifax is owned by Lloyds Bank, a FTSE 100 company. The SIPP is administered by investment platform AJ Bell. Other accounts include a general trading account and ISA.
Choice of over 1,300 shares, 500 ETFs, 300 investment trusts and 2,600 funds.
Charges one of the higher share trading fees, although this is waived for international shares. Fixed, rather than proportional, platform fee may appeal to investors with higher-value portfolios.
Charge of £60 for transferring pensions into Halifax (capped at £300) but no fee to transfer out. Fee of £180 per year for flexi-access drawdown.
Pays interest of 2.45% on cash balances held in a SIPP.
Does not offer a ready-made portfolio but customers can choose from over 60 “Select Funds” selected by third party FE fundinfo.
Provides a basic level of research.
Can trade online, by the banking app or by phone. Minimum lump-sum investment from £100 or £50 for monthly investing (with a reduced trading fee of £2).
Support includes a 5-day-a-week telephone service, in addition to live chat and secure messaging facilities.
Overall, Halifax may appeal to existing Halifax customers wanting to hold their accounts with one provider.
Pros & Cons
- Non-tiered platform fee
- No trading fee on international shares
- Trading fee charged on funds
- Platform fee expensive for small portfolios
- Fee for transfers-in
- Fee for drawdowns
Typical fees
Portfolio of £20,000: £147
Portfolio of £100,000: £237
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Close Brothers
4.0
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Trading fee
Funds: no charge Shares: currently no charge (otherwise may be up to £8.95)
Platform fee
Annual admin fee of £150 plus VAT plus (tiered) platform fee of 0.25% (up to £500,000), 0.20% (£500,000 to £1 million), 0.10% (£1 million to £1.5 million), 0% (above £1.5 million)
Customer experience rating
Trading fee
Funds: no charge Shares: currently no charge (otherwise may be up to £8.95)
Platform fee
Annual admin fee of £150 plus VAT plus (tiered) platform fee of 0.25% (up to £500,000), 0.20% (£500,000 to £1 million), 0.10% (£1 million to £1.5 million), 0% (above £1.5 million)
Customer experience rating
Why We Picked It
Close Brothers is a FTSE 250 merchant bank, with over three million customers.
Charges one of the higher trading fees, although there is no trading fee for funds. One of the lower platform fees, however, additional annual administration fee of £150 (plus VAT).
No charge for transferring pensions in or out of Close. Fee of £75 (plus VAT) for setting up drawdown.
Choice of over 1,000 shares, in addition to 2,400 funds, 80 ETFs and 220 investment trusts.
Pays interest on cash balances held as follows: 0% (up to £25,000), 0.35% (£25,000 to £100,000) and 0.8% (over £100,000).
Choice of 15 ready-made portfolios. along with an ‘Discovery Shortlist’ list of selected funds. Also provides financial advisory services and a decent level of market analysis.
Can trade online or view SIPP portfolio by app. No minimum for lump-sum investment and £50 for monthly investing.
Support includes a 5-day-a-week telephone service, in addition to an email facility.
Overall, Close may appeal to investors wanting to trade shares regularly due to the zero trading fee. However, the annual administration fee means that the overall platform fee is at the higher end.
Pros & Cons
- No trading fees
- No transfer fees
- No drawdown fees
- One of higher platform fees
- Cannot trade by app
- Low interest rate on cash
Typical fees
Portfolio of £20,000: £230
Portfolio of £100,000: £430
Methodology
To come up with our list of best SIPP providers, we applied three main criteria. Our focus was on whether providers:
- charged competitive trading and platform fees
- offered a wide range of investments from third parties
- scored a star rating of at least three by research firm Fairer Finance
We also considered other features such as the range of investments on offer and whether ‘ready-made’ portfolios were available. We’ve also listed each provider’s customer experience score, as determined by Fairer Finance.
We asked whether interest was paid on uninvested cash balances and considered the options for trading (online or by app), the level of customer support and the quality of research on offer.
In addition, we checked whether the provider was authorised by the Financial Conduct Authority (FCA), the UK’s financial watchdog. Using FCA data, we also reviewed customer complaints levels.
Combining the above with editorial judgment, we arrived at our Forbes Advisor star ratings.
What assumptions did we use?
We calculated trading and platform fees based on the following assumptions:
- portfolio value: £20,000 and £100,000
- portfolio split: 50% funds, 50% UK shares
- frequency of trading: 12 trades a year split equally between funds and UK shares
What is a SIPP?
A self-invested personal pension (SIPP) is a pension ‘wrapper’ that allows individuals to build up a pot of money for retirement.
It’s a type of personal pension which gives more flexibility over the types of investments than a standard pension which tends to offer a set of pre-selected funds.
What are the benefits of a SIPP?
- Any UK resident under 75 can open one, irrespective of whether they also have a workplace or other private pension scheme.
- SIPPs can be used to consolidate other pensions in one place.
- Individuals receive tax relief on their pension contributions, usually at least 20%, and up to the highest rate of income tax paid (subject to certain limits).
- Individuals have the flexibility to choose their own investments, such as shares and funds, rather than being limited to a set of pre-selected investments.
- Investments held in SIPPs are free from income and capital gains tax (while they remain within the SIPP).
- Up to 25% of the SIPP can usually be withdrawn as a tax-free lump sum.
- Investors can often hold their SIPP with the same provider as their ISA and general investment account, which may be easier to manage.
What are the drawbacks of a SIPP?
- Fees are charged on SIPPs, which can vary significantly between providers.
- Not all individuals have the financial expertise to choose their own investments and, as with other investments, they may lose some, or all, of their money.
- The money can’t be accessed until 55 (rising to 57 by 2028), unlike other forms of tax-efficient investments such as an Individual Savings Accounts (ISAs).
- After taking the 25% tax-free lump sum, individuals will typically have to pay income tax on withdrawals from the SIPP (above their personal allowance).
- The lifetime allowance may be reinstated in the future, meaning that individuals are taxed on any excess above this amount.
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Frequently Asked Questions (FAQs)
How much can be paid into a SIPP each year?
Individuals can pay 100% of their earnings into a SIPP each tax year, subject to the annual allowance (£40,000 in the 2022/23 tax year, rising to £60,000 in the 2023/24 tax year).
There is a tapering of the annual allowance for people earning over £200,000 a year. The annual allowance is reduced by £1 for every £2 of ‘adjusted income’ (which includes bonuses and employer pension contributions) above £240,000, subject to a minimum allowance of £4,000.
However, individuals also have the option to carry forward unused annual allowances from the last three tax years, subject to certain conditions. This can allow them to receive tax relief on pension contributions that exceed the annual allowance.
Tax-relief will be received on pension contributions, depending on the highest rate of income tax paid by an individual:
- Basic-rate (20%) tax-payers would need to contribute £8,000 to make an overall contribution of £10,000 to their pension, with the government topping up their contribution by £2,000.
- Higher-rate (40%) tax-payers would only need to contribute £6,000, with the government topping-up their contribution by £4,000.
- Additional-rate (45%) tax-payers would need to contribute £5,500, with the government contributing £4,500.
- Basic-rate tax relief is claimed by the pension provider and automatically added to the pension. Higher-rate tax-payers will have to claim the additional tax-relief through their annual return or by contacting their tax office.
Non tax-payers are also able to receive basic-rate tax-relief on SIPP contributions. They can make SIPP contributions of up to £2,880 a year, which the government tops up to £3,600. Children can benefit from the same tax-relief on contributions into Junior SIPPs.
Who offers SIPPs?
A number of the mainstream investment platforms offer SIPPs, including Hargreaves Lansdown, AJ Bell, interactive investor and Freetrade. These offer a wide range of investments, although a few platforms, such as Vanguard, only offer their own funds.
Another option is robo-adviser platforms, such as Nutmeg and Wealthify, which we cover in more detail in our pick of the best robo-adviser platforms. Robo-advisers choose an investment portfolio for individuals, based on their financial goals and attitude to risk.
What fees are charged on SIPPs?
There are various types of fees charged by SIPP providers:
Trading fee
This is a flat fee charged by the SIPP provider when individuals buy or sell investments. Some SIPP providers do not charge for trading shares, while others charge a fee of £5 to £10 per share trade. Many SIPP providers do not charge for buying or selling funds.
Platform fee
This is an annual fee charged for holding the shares and funds in the SIPP. Some providers charge no fee for this, others charge a flat fee and some charge a percentage, typically 0.25% to 0.45%, of the value of a portfolio.
These fees will usually be taken out of any cash held on account. Alternatively, fees can be paid directly by debit card. Where fees remain unpaid, a provider is likely to sell a proportion of a customer’s investments as a last resort.
It’s also worth looking at the types of investments that incur a platform fee as some providers charge for holding funds, but not for shares. Where a platform fee is charged for holding shares, this is sometimes capped at a maximum amount, generally around £150-200 per year.
There are two types of percentage-based platform fees:
- Tiered fee: this is the most usual type of platform fee, whereby individuals pay different fees on different ‘slices’ of a portfolio. For example, for a portfolio worth £400,000, individuals might pay 0.45% on the first £250,000, then 0.25% on the next £150,000.
- Non-tiered fee: only one of the providers (Fidelity) charges a non-tiered fee, whereby the same fee is paid across the whole portfolio. For example, with a portfolio of £400,000, 0.2% is applied to the whole £400,000.
Investment fee
This is charged by the manager of the underlying investment for funds, investment trusts and exchange-traded funds.
Actively-managed funds typically charge an annual management fee of 0.5% to 1.0%, compared to 0.1% to 0.3% for passively-managed (tracker-type) funds.
Other fees
Some of the providers charge other fees, including fees for transferring SIPPs between providers and fees for trading by telephone.
For individuals who buy or sell shares denominated in a currency other than pounds sterling, nearly all of the providers charge a foreign exchange fee. This is also referred to as a foreign currency conversion fee and typically varies from 0.5% to 1.5%. Some providers also charge a higher trading fee for overseas shares.
How can a SIPP be opened?
Most of the SIPPs offered by the mainstream providers can be opened online or over the phone.
However, individuals with a limited understanding of the stock market should consider consulting an independent financial advisor before opening a product of this sort. Bear in mind that advisors will charge a fee for their services, which they should disclose upfront.
What’s a ‘defined contribution’ scheme?
A SIPP is a type of ‘defined contribution’ scheme, meaning that individuals build up a pot of money which they can choose to take in various ways on retirement.
This differs from a ‘defined benefit’ or ‘final salary’ scheme which pays out an annual income on retirement. Many of these schemes have been phased out by employers over the last decade.
Can cash be held in SIPPs?
Yes. Individuals may hold cash in their SIPP when they want to use their annual allowance in a tax year but wait to invest the cash at a later point. All of our featured providers pay interest on uninvested cash held in SIPPs.
Can other pensions be transferred into SIPPs?
Other pensions can typically be transferred into SIPPs (as with ISAs). However, individuals should check with their existing provider that they will not be losing any valuable benefits or guarantees and the cost of any exit fees.
Additional rules apply for the transfer of certain ‘final salary’ or ‘defined benefit’ schemes into a SIPP, whereby advice must first be sought from a qualified financial advisor.
However, pensions are a complex area and it’s worth seeking financial advice before deciding to make any transfers into a SIPP.
What happens to SIPPs on retirement?
There are different options available on retirement, which can be ‘mixed and matched’. Individuals can take up to 25% of the SIPP as a tax-free lump-sum.
In terms of the balance remaining in the SIPP, individuals can choose to leave their SIPP invested and take lump-sum payments or draw-down an income (by withdrawing some of the returns made on investments, or by selling a proportion of their investments).
Another option is to use some, or all, of the remaining funds to buy an annuity, which pays a regular income for the rest of an individual’s life.
Is inheritance tax paid on SIPPs?
On an individual’s death, the SIPP can typically be passed to their beneficiaries (usually a spouse or children) without paying inheritance tax.
If the individual dies before 75, withdrawals by the beneficiaries will usually be tax-free. However, if they are 75 or older, any withdrawals will be taxed as their income.
How do I choose the right SIPP?
Although there is a wide choice of SIPP providers, it’s worth taking the time to review the fees charged, along with the range of investments.
As discussed above, individuals looking for help with managing their SIPP portfolio might want to consider a robo-advisor, or one of the ready-made portfolios offered by the mainstream platforms.