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Cheapest SIPPs

Cheapest SIPPs

Build a low-cost DIY pension

Clare Casalis
Clare Casalis | Edited by Johanna Noble
Updated 6 April 2022

If you want to take more control of the money you're saving for retirement, a self-invested personal pension (SIPP) might be right for you. SIPPs are DIY or personal pensions which allow you to choose your own investments. Our guide looks at the key need-to-knows plus platforms you could try.

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What is a SIPP?

A self-invested personal pension (SIPP) is essentially a do-it-yourself pension. You choose how much you want to contribute and either select your own investments or opt for a platform that chooses for you, usually based on your attitude to risk. Either way, the aim is to build a sum of money to provide an income for your retirement.

It's a type of private or personal pension and can be run alongside the state pension and, or instead of, a workplace pension for employees. See our pension need-to-knows guide for more.

A SIPP could therefore be an option if, for example, you've maxed how much you can put into a workplace pension and want to save further for your retirement or you're self-employed and want to manage your pension yourself. You could also choose to run a SIPP with a portion of your pension savings, and keep the rest elsewhere.

Warning: there are no guarantees when you're investing

Many pension schemes involve an element of risk, as the value of the underlying investments can go down as well as up. However, as the investments are usually over decades rather than months or years, the typical trend is you get back more than you put in

Though this is not guaranteed – if stock markets hit a downturn just before you're about to retire or access your pension money, you can be left with a lot less than you were expecting. 

Should I invest in a SIPP?

This really is a personal call – we can't tell you whether investing is right for you. But if you're going to do it, and are okay with the risks that come with investing, here are some key points to consider. (First-time investor? Read our beginners' guide to investing to get a broader idea of what's involved).

  • DIY SIPPs are for people who understand investing, are prepared to do research and happy to spend time managing retirement savings. If you make the wrong investment choices, you've only got yourself to blame, so you must feel comfortable managing your own investment portfolio. Investments can go down as well as up, and you’ll be in control of riding that storm when it happens. If the thought of losing money on your investments will keep you awake at night in a cold sweat, this responsibility is probably not for you.

    An alternative option is to opt for a robo-adviser platform, which selects and manages investments for you, based on your attitude to risk. Whilst you'll still need to research the platform to go for (and investments can of course still go up or down), it requires less in terms of an ongoing time commitment.

  • Most SIPPs are managed using an online investment platform, so you'll need to be relatively tech-savvy. Usually you'd need to buy and sell investments, and keep an eye on how they’re doing via an online account, just as you'd check accounts with online banking. Phone and postal services may be an option, but make sure you check with the provider to see if it costs more.

  • You'll need to factor in fees, as these can eat into your investment. You need to look at how much the SIPP will cost you while you're putting money into it, and then how much the platform will charge you when you want to get access to your money again. There's no point having a really cheap platform for your money on the way in, which costs you the earth when you come to take it out. 

How do I invest in a SIPP?

The cheapest route for investing in a SIPP is to use an online platform (see platforms to try below) – a one-stop shop for investing, enabling you to buy, hold and sell.

You can either start your SIPP from scratch with money that hasn't been held in a pension, or you can move it from an existing pension.

  • New contributions. If you don't have a pension already and decide you want to start investing in a SIPP, you can open one either by making monthly contributions or with a lump sum.
  • Transfers from other pensions. If you already have a few pension pots, you can consolidate some or all of them into a SIPP so they're in one place. Though be careful as you could face penalties for leaving your existing pension and it may be better off leaving it where it is. If you're in any doubt, it's worth seeking the help of a financial adviser before doing anything. 

New rules to prevent scam transfers

The Financial Conduct Authority (FCA) has put rules in place to try and prevent fraudulent pension transfers. So if your pension provider is suspicious of a transfer request, it can pause or even stop the transfer until you can prove you've taken scam-specific guidance from the Money and Pensions Service. A green flag – in other words, a transfer without any scam checks – will now only apply to public service pension schemes, master trust schemes and collective money purchase schemes.

What can I invest in?

Almost anything, including keeping a proportion as cash, though here are some of the most common types of investment: 

  • Shares. Here you own a direct stake in a business, the size determined by how many shares you buy. Their value rises and falls in line with the company's performance, general market conditions and/or expectations of future business performance. 
  • Funds. Instead of buying shares in a company directly, you give your cash to a specialist manager who pools it with money from other investors (like you) to go and buy a job lot of shares in a stock market.
  • Gilts and corporate bonds. A bond is a loan you make to a company (called a corporate bond) or government (called a gilt in the UK) to help it raise funds. In return, you'll get a steady income from the company or government, plus the initial sum you lent it back at a fixed date.

What charges do I need to pay?

The main fees you need to keep an eye out for are:

  • Platform charge: You may be charged a monthly, quarterly or annual account fee – either as a flat fee or as a percentage of your investments (the larger your funds, the more it'll cost).
  • Selling/buying shares and funds: The fee you pay each time you buy or sell – you'll often find discounts for frequent traders.
  • Fund manager/annual management charge: If you invest in funds, there's a percentage fee attached to each fund (calculated yearly) to cover the management costs, usually up to 1%.
  • Transfer out fee: Some platforms charge if you want to transfer your investments to a different provider, usually per holding.
  • Income drawdown charges: There's sometimes a cost to take out the money and is typically anything up to £300 for the initial set-up, then up to £150 a year in ongoing charges.

SIPP need-to-knows

  • 1. A SIPP has tax benefits – you can invest up to 100% of your salary tax free, up to £40,000/year

    Just like any other type of pension, the SIPP wrapper protects your money from the taxman. Money you invest in your SIPP will be topped up 20% by the taxman, and higher or additional-rate taxpayers can claim back a further 20% or 25% respectively.

    This tax relief is limited by your annual earnings and the pension annual allowance (£40,000/year):

    • Earners. You can contribute 100% of your annual earnings before tax up to a limit of £40,000 for 2022/23. If you earn more than £240,000, the amount you can contribute is gradually reduced at a rate of £1 for every £2 earned over £240,000, until the tax-free limit hits £4,000.

    • Non-earners. You can contribute up to £3,600 per tax year and still get basic-rate tax relief. So, non-workers can pay in £2,880 per tax year, to which the taxman will add £720.

    The below table shows how three investors paying different income tax rates get tax relief on a £12,500 contribution into a SIPP.

    Tax relief on a £12,500 contribution into a SIPP
      Basic-rate (20%) Higher-rate (40%) Additional-rate (45%)
    Your contribution £10,000 £10,000 £10,000
    Government contribution (20%) £2,500 £2,500 £2,500
    How much you can claim back £0 £2,500 (20%) £3,125 (25%)
    Total tax relief £2,500 (20%) £5,000 (40%) £5,625 (45%)
    Total cost of the £12,500 contribution £10,000 £7,500 £6,875

    In addition, as with any other personal or workplace pension, income and profits in your SIPP roll up tax-free. Then, when you come to take your money – anytime from age 55 – you can usually take up to 25% tax free and the rest will be taxed as income. 

  • 2. You can opt for a low-cost DIY SIPP, or a full SIPP if you're an experienced investor wanting more choice

    SIPPs are often categorised as 'low-cost' or 'full' – here are the main features: 

    1. Low-cost DIY SIPPs. With low-cost SIPPs you don't get advice from the SIPP company – you're in charge. These are the SIPPs we list as platforms to try. 

    When choosing a SIPP provider, it's good to think about how involved you want to be with your investment choice and what level of service you want from your platform. Some platforms, for instance, provide ready-made portfolios for those who don't want to take command of their investment decisions. 

    Some platforms pride themselves on a high level of service with all the mod cons in terms of apps and ability to make trades on the go. While others are more 'no frills' and what you see is what you get – this sometimes means slightly cheaper charges, but you have to weigh up whether you'd be better paying slightly more for a more comprehensive service.

    2. Robo-adviser SIPPs. This is a variation on the DIY SIPP, as here you tell the platform your investment goals and attitude to risk (usually in the form of a questionnaire) and it selects the investments for you.

    Fees are typically higher than DIY platforms, to account for this extra service. See Robo SIPPs to try.

    3. Full SIPPs. A full SIPP offers the widest choice of investments, including commercial property, but are usually best for people with relatively large pension funds. You'll usually have access to a team who can help make decisions on what investments to hold in your SIPP and help administer more complex investments such as commercial property. But they typically come with higher charges.

    Investing isn't our area of expertise at MoneySavingExpert, so we don't feature any of these sophisticated pension vehicles on these pages. If this is what you're looking for, a financial adviser should be able to help you. 

  • 3. You can gain access to the money in your SIPP from age 55 – usually up to 25% tax free

    There used to be restrictions to how you could take your pension money, but since April 2015, you can take money from your pension from age 55 when you want, how you want.

    For a lot of people, gaining access to their pension at age 55 will be too early, so you can just keep it in your pension until you need it. However, some people will want to take all their pension money at once. If you do this, the first 25% will be a tax-free lump sum and you'll be taxed on the rest as if it were income.

    How to take your money out:

    • Leave it invested in your pension for when you need it. Do this and it’s important to understand that when you withdraw cash you get 25% of each lump sum which you withdraw tax-free. Eg, if you had £100,000 and took £20,000 out you’d get £5,000 of it tax-free, the rest would be taxed at your current rate.
    • Take 25% tax-free, then buy a flexible income drawdown product. This is a product you buy that keeps the rest invested so it can still hopefully grow, but you can also use it to take income when needed. The tax here is different, you get the initial 25% that you withdraw tax-free and then the rest is taxed when you take it – which could be useful if you’re likely to be in a lower-tax bracket once you’re older. 
    • Take 25% tax-free, then buy an annuity. This gives you a guaranteed income each year for the rest of your life. 

    You could also choose to do a combination of all of the above. There are different charges on all of these, and it’s important to check them out and always compare different providers.

  • 4. A SIPP can be inherited by your beneficiaries, but how much tax they'll pay depends on when you die

    If you die before taking any money out of your pension, it'll be passed on tax-free to any beneficiaries. But there are a few caveats:

    • If you die before age 75. Your beneficiaries can take the whole pension fund as a lump sum tax-free. 

    • If you die after age 75. Your beneficiaries have three options:

      1. Take the whole fund as cash in one go: If they choose this, the pension fund will be subject to their income tax rate at the time.

      2. Take a regular income: If they chose this through income drawdown or an annuity (option available only to dependants), they'll pay tax on the pension income at their income tax rate.

      3. Take periodical lump sums: If they choose this, the lump-sum payments will be treated as income, so subject to income tax at their income tax rate at the time.

    For more information on inheritance tax and a full Q&A, read the inheritance tax guide.

  • 5. If a SIPP provider goes bust your money should be protected

    Usually with SIPPs, the investment firm you buy it through, eg, Hargreaves Lansdown, doesn't hold the cash; it simply acts as a conduit for you to put the money into whatever funds or investments you want. Therefore, in the unlikely event the SIPP provider went bust, your money should be okay, and still held by a separate fund manager or bank. 

    If the operator of a fund, unit trust or other investment vehicle you've put money into goes bust, you're eligible to get your money back, up to a maximum of £85,000. If you decide to hold the money as cash within the SIPP, you're also covered under the standard £85,000 per person, per institution rule, for cash savings.

    Ask your SIPP provider which bank the cash is held in (often it spreads it around up to five). Then check whether any other savings you may have are in institutions linked to those used for the SIPP cash, as cumulatively you'll only get up to £85,000 protection in each. See which banks are linked to others.

    If you put money in stocks and shares or funds that invest in them, then you've got a risk-based investment, NOT savings. It's important to understand that any protection only applies if you lose money because the investment's product provider goes bust – in this case the fund manager that you've bought into through the SIPP. 

    However, if the underlying investment goes bust (eg, you have shares in a company and it goes kaput, or you've bought a fund and it performs poorly) then you've no protection as that's the nature of investing.

SIPP platforms to try

Investing isn't MoneySavingExpert's area of expertise. So, we don't tell you here what the 'best' SIPP platform for you is, or give you any top picks. What we've done is pull out some of the cheaper platforms so you have somewhere to start your own research.

There are two main types – those where you make your own investment decisions from a wide range, and robo-investment platforms which do it for you.

'Do-it-yourself' SIPP platforms to try

With do-it-yourself platforms, you need to do your own research before deciding which platform you'll use for your SIPP and what you'll actually invest in – though most tend to invest in funds, shares and bonds. When you're researching platforms and funds, make sure you take all charges into account – including any platform fees, fund charges, trading charges (and exit fees if you needed to transfer out in future).

We list many of these costs, but we haven't taken fund charges into account. These will vary depending on which fund you pick and – to an extent – which platform you choose (some platforms negotiate deals with fund managers for cheaper fees).

Here are some of the cheaper platforms to try, though which works out cheapest for you will depend on what you invest in, how much you have to invest and how often you trade, so you'll need to do some sums...

DIY SIPP platforms

Provider & fee information Other key info

Vanguard - only sells its own funds
 

- 'Platform' fee: 0.15%, max £375/year
- Online buying/selling fees: None or £7.50 for an immediate trade

- Transfer-out fee: £0

- Manage it: online

 Vanguard's not technically a platform, as it only sells its own funds, but it can be a cheap option. due to its relatively low fees - though as the fee is a proportion of your investment, the larger your pension gets, the more you'll pay in fees. Its range of funds generally track various worldwide stock markets. You can't buy funds from other managers or trade shares with Vanguard. 

AJ Bell*

 

- Platform fee: 0%-0.25% (funds) 0.25%, max £10/mth (shares) (i)

Online buying/selling fees: £1.50 (funds), £9.95 or £4.95 if 10+ trades in previous month (shares) 

Transfer-out fee: £0/£9.95 (ii)

- Manage it: online / app

 AJ Bell's Youinvest SIPP offers a wider range of funds from many different fund managers and lets you invest directly in shares too. It's free to set up, but you pay an annual charge for holding funds and shares, so the more you have invested in your pension, the more you pay to the platform. There's also a fee every time you trade.

Hargreaves Lansdown*

 

- Platform fee: 0.1%-0.45% (funds) 0.45%, max £200/year (shares) (iii)

Online buying/selling fees: £0 (funds), £11.95, £8.95 if 10+ trades in previous month or £5.95 if 20+ (shares) 

Transfer-out fee: £0

- Manage it: online / app

 Hargreaves Lansdown's SIPP offers 2,500+ funds and ready-made 'master portfolios', as well as letting you trade directly in shares. Again, you pay a platform charge that grows with the amount you have invested. HL also offers a wealth of information about different funds and shares if you're not sure what to invest in.

Interactive Investor*

 

- Platform fee: £12.99/mth

Online buying/selling fees: £7.99/mth (free for regular investing)

Transfer-out fee: £0

- Manage it: online / app

 Interactive Investor is different to the firms above as it charges a flat platform fee, so it's the same monthly cost whether you've £1,000 or £1 million in your pension. It has 40,000+ investments to choose from.

(i) 0.25% (£0-£250k), 0.10% (£250k-£1m), no charge for amounts above £1m. (ii) £9.95 per holding if doing an 'in-specie' transfer (where you transfer a fund holding to a new platform without selling it for cash). (iii) 0.45% (0-£250k), 0.25% (£250k-£1m), 0.1% (£1m-£2m), no charge over £2m.

Robo-adviser SIPP platforms to try

If you go for a robo-adviser then it will choose an investment portfolio for your pension, based on your attitude to risk and what your investment goals are.

In general, these platforms won't be the cheapest, as they're doing all the work for you. But, often costs are kept relatively low as they tend to invest in funds which have low management charges. 

There are many robo-advisers out there who can help you with a SIPP so always do your own research. Here are a few we've benchmarked which tend to have cheap fees, so you know what to compare against...

Robo SIPP platforms

Provider & fee information Portfolio info

Evestor*

 

- Account fee: 0.35%
- Avg fund manager charges: 0.11% a year

- Transfer-out fee: £0

- Manage it: online / app

 Evestor's robo platform just has three portfolios to choose from – low risk, medium risk and high risk. Though note it doesn't yet support drawdown, so you'd need to transfer it to a new provider if that's how you plan to take your pension (and taking that pension is imminent).

Nutmeg*
 

- Account fee: Free for 1 year for newbies via link, then 0.45% or 0.75% up to £100k and 0.25% or 0.35% on amounts above (i)
- Avg fund manager charges: 0.2% - 0.32% a year (ii)

- Transfer-out fee: £0

- Manage it: online / app

Nutmeg has a choice of portfolios from low-cost ones managed by algorithms to higher cost 'fully managed' portfolios. It will ask you questions to help you understand your risk appetite, to determine which risk portfolio could be right for you. 

 

Plus, via our link, newbies won't pay the platform charge for the first year.

Wealthify*

 

- Account fee: 0.6%
- Avg fund manager charges: 0.16% (original plan), 0.71% (ethical plan)

- Transfer-out fee: £0

- Manage it: online / app

 With Wealthify, there are five portfolios based on your attitude to risk: cautious, tentative, confident, ambitious and adventurous, then you choose between 'original' or 'ethical' investments.
New. If you're thinking of transferring your SIPP to a new provider, until 31 July 2022, Wealthify* are offering cashback for new customers transferring their SIPP via our exclusive link*. Once you've registered your interest, you'll have six months to make the transfer. Cashback will be: £50 for transfers between £5,000 and £9,999, £100 for transfers between £10,000 and £19,999, £200 for transfers of £20,000 or more.

(i) Fully managed/Smart Alpha/socially responsible: 0.75% up to £100k, 0.35% beyond. Fixed allocation: 0.45% up to £100k, 0.25% beyond. (ii) Smart Alpha 0.22%, fixed allocation/fully managed: 0.2%, socially responsible 0.32%.

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