What is a Sipp?
Some people don't want a pension company deciding how their savings are invested - they want to control where their money goes and how it grows. This is where self-invested personal pensions (Sipps) come in.
A Sipp is basically a do-it-yourself pension. You'll be taking on responsibility for choosing and managing your own investments, so you'll need to have the time and confidence to do this.
Like other types of defined contribution pension, the income you’ll receive when you retire depends on how much you contribute, how well the underlying investments perform and how you decide to access your money.
Do Sipps benefit from tax relief?
Sipps enjoy the same tax benefits as other types of pension: not only are your investments exempt from capital gains tax and income tax, but you also get tax relief on your contributions up to your salary or £40,000, whichever is higher. This means that for every 80p basic-rate taxpayers pay in, the government pays in 20p.
Your options for turning your pot into an income at retirement are the same, too.
When you reach the age of 55, you can take up to 25% of your pot as a tax-free lump sum. You can then take the rest of it in cash, too (either in one go or in chunks), use some or all of your pot to buy an annuity or keep some money invested and take an income as you wish (known as pension drawdown).
What types of Sipp are there?
These offer the widest choice of investment options, including commercial property and commodities. Full Sipps are more expensive as they come with a greater level of investment support. These high charges make them more suitable for savers with relatively large pension pots.
Fees: Can be flat or a percentage of the amount invested. Some full Sipps have an initial set-up fee, an annual management charge (usually 1% for a £50,000 pot) and trading charges. Many providers will also ask for a minimum contribution per month.
DIY or 'lite' Sipps
DIY Sipps are offered by investment platforms and are more suitable for people with smaller pension pots. They are normally ‘execution-only’, which means you take no advice from the firm. This makes the charges lower.
Some platforms offer more support by steering you towards a limited range of ready-made portfolios and then managing the money on your behalf.
In general, DIY Sipps give you access to a wide range of investments, but in some instances you can only invest in funds, not individual shares.
Fees: You can pay a fixed admin charge or a % platform fee, of a combination of both. There are also usually dealing costs for buying and selling shares. See our full analysis of fees and charges below.
What can Sipps invest in?
A Sipp gives you the choice of a wider range of investment options than other types of pension. These include:
- Stocks and shares
- Investment trusts listed on any stock exchange
- UK government bonds (gilts), and bonds issued by foreign governments
- Unit trusts
- Open ended investment companies (Oeics)
- Corporate bonds
- Exchange traded funds (ETFs) traded on the London Stock Exchange or other European markets
- Bank deposit accounts including non-Sterling accounts
- Commercial property
- Real estate investment trusts listed on any stock exchange
- Offshore funds
Who should consider a Sipp?
Generally, Sipps are suitable for:
- People who are confident making their own investment decisions and who want a wider range of investments
- People with a financial adviser making decisions on their behalf
- People looking to consolidate all of their pensions into one place
- People who want to keep their money invested after they retire so that they can draw down an income
How much do Sipps cost?
How much you pay in charges is important. They are deducted from your pot regardless of how your investments perform and can dampen your returns. Over the long term, high fees can cost you thousands of pounds and limit the amount of money in your final retirement fund.
Unfortunately comparing Sipp charges isn't straightforward, as companies take different approaches: you might pay a fixed admin fee or a platform fee calculated as percentage of the amount you’ve invested, or sometimes a combination of both.
Our table shows how much it will cost over a year to manage your Sipp with 12 leading providers. Figures include platform and administration fees as a total value and as a percentage of the total pension value. Our calculations assume that the money is invested entirely in funds and no trades are made.
|Company||Fee structure||Total cost - £100k pot||Cost as a % of pot (£100k)||Total cost - £250k pot||Cost as a % of pot (£250k)||Total cost - £500k pot||Cost as a % of pot (£500k)|
|AJ Bell Youinvest||Platform fee only||£250||0.25%||£625||0.25%||£875||0.18%|
|Aviva||Platform fee only||£375||0.38%||£900||0.36%||£1,525||0.31%|
|Barclays||Fixed admin and platform fee||£350||0.35%||£650||0.26%||£1,150||0.23%|
|BestInvest||Fixed admin and platform fee||£400||0.40%||£1,000||0.40%||£1,500||0.30%|
|Charles Stanley Direct||Platform fee only||£350||0.35%||£875||0.35%||£1,375||0.28%|
|Close Bros||Platform fee only||£430||0.43%||£805||0.32%||£1,430||0.29%|
|Fidelity||Platform fee only||£350||0.35%||£500||0.20%||£1,000||0.20%|
|Halifax||Fixed admin fee only||£180||0.18%||£180||0.07%||£180||0.04%|
|Hargreaves Lansdown||Platform fee only||£450||0.45%||£1,125||0.45%||£1,750||0.35%|
|Interactive Investor||Fixed admin fee only||£156||0.16%||£156||0.06%||£156||0.03%|
|Moneybox||Platform fee only||£450||0.45%||£675||0.27%||£1,050||0.21%|
|Vanguard||Platform fee only||£150||0.15%||£375||0.15%||£375||0.08%|
Rates were correct as of June 2022. Interactive Investor calculations uses the Pension Builder plan. The Aviva figures are for its Platform Sipp (OIS).
Interactive Investor’s low monthly fee of £12.99 regardless of Sipp size makes it significantly cheaper than competitors in most cases. The exception in our table is the £100,000 pot, where fellow WRP Vanguard’s low percentage charge of 0.15% works out £6 cheaper over a year.
Halifax Share Dealing’s low fixed fee (£45 a quarter on pots above £50,000) also makes it very competitive across different pot sizes.
At the other end of the scale, Hargreaves Lansdown is the most expensive DIY platform in our table. It charges 0.45% on the first £250,000 and 0.25% up to £1m, meaning a £500,000 Sipp will cost you £1,750 over a year
Which are the best Sipp providers?
We asked thousands of Sipp customers to rate their providers in a range of categories, including customer service, investment choice and value for money.
Using this information we've created a Which? customer score, showing you the best and worst investment platforms for Sipp customer satisfaction.
We've combined this with our analysis of charges, and the firms that combine high customer satisfaction (a score of 72% and above) with competitive charges have been awarded our coveted Which? Recommended Provider status.
|Sipp provider||Online tools||Customer service||Investment information||Available investments meet my needs||Value for money|
Source: Online survey of 2,317 members of the general public, conducted in February 2022.
The customer score is based on satisfaction with the brand and likelihood to recommend.
Sample sizes for Sipp providers as follows: AJ Bell Youinvest 159, Barclays Smart Investor 202, Fidelity 123, Halifax Share Dealing 73, Hargreaves Lansdown 540, Interactive Investor 87, Standard Life 159, Vanguard 136, Aegon 63, Moneybox 50
Should I transfer existing pensions into a Sipp?
It’s up to you whether you hold a Sipp alongside your other pensions or you transfer existing pots into a Sipp so you can keep track of all your retirement savings in one place.
If you're currently paying into a workplace defined contribution scheme, check if your employer will agree to make contributions into your Sipp instead before going ahead with a transfer. Some employers will only pay contributions into the workplace scheme.
If you have a final salary workplace pension - also known as a defined benefit (DB) pension - you'll benefit from a guaranteed income in retirement. For this reason, it's unlikely that transferring to a Sipp will be the right decision.
Is a Sipp right for me?
Sipps are best suited to savers who have the time and knowledge to pick and monitor their own investments.
If you like the idea of taking more control of your pensions but feel uncertain about investing, then it’s best to get independent financial advice.
If the costs of advice are a barrier for you, take a look at the ready-made portfolios offered by some Sipp providers, which simplify the investment decisions you’ll have to make.