Switching DIY pension providers could save you as much as £23,000 in the run-up to retirement, Which? research reveals.
Self-invested personal pensions (Sipps) have become a popular way for savers to build and manage their own retirement pot, often at a cheaper price than traditional pension providers.
But you’ll still need to keep a close eye on charges, as they can vary considerably. To help you choose the right Sipp for you, we’ve assessed providers based on both customer satisfaction and costs.
How Sipps work
Sipps share much in common with other types of defined contribution (DC) pension. The key difference is that with a Sipp you have more control over how and where your money is invested.
You are able to choose from a much wider range of investments, including individual shares, gilts and bonds, funds and commercial property.
If you’ve built up several DC pensions and like the idea of being able to manage the money yourself in one place, a Sipp offers a neat way of doing this. But they’re best suited to proactive investors who have the time and expertise to pick and monitor their own investments.
- Find out more: how much will you need to retire?
Understanding what you’ll pay
Differences between charging structures used by Sipp providers can make comparisons tricky.
You’ll typically be charged either a fixed annual administration fee or an annual platform fee, which is levied as a percentage of the amount you’ve invested. Some investment platforms charged both admin fees and platform fees.
Companies that charge low percentage fees are most competitive for smaller pots, while fixed-fee providers are most cost-effective for larger pots.
Bear in mind that Sipp charges don’t generally include the fees charged by individual funds you choose to invest in.
Save thousands of pounds in charges
We analysed the core fees charged by popular Sipp providers and found that annual costs for a £100,000 pot ranged from £150 to £450, while for a pot worth £250,000, switching from the most to the least expensive Sipp would save you almost £1,000 a year.
A Halifax Share Dealing customer would have paid charges of £180 after a year compared with £1,125 with Hargreaves Lansdown.
Which? estimates that a saver starting with £250,000 in a Sipp aged 50 could end up with £22,800 more in their pension pot by the age of 65 by choosing the most cost-effective provider over the most expensive.
The difference for those lucky enough to have a pension pot worth £500,000 is even starker. Savers could be £1,570 better off a year by switching to the cheapest provider, with Halifax Share Dealing again charging just £180 compared with Hargreaves Lansdown’s £1,750.
Hargreaves Lansdown told us: ‘Our market-leading digital wealth management service offers great value for its comprehensive offering, which includes Active Savings and our award-winning app, and one of the simplest and most transparent charging structures.’
- Find out more: compare DIY Sipp costs
Fidelity rated highest by Sipp customers
As part of our analysis, we also surveyed more than 1,200 people about their Sipp providers and asked them to rate platforms across a range of factors, including investment information and online tools, as well as whether they would recommend it to others.
Fidelity topped the table after it received an excellent overall customer score of 75%. It was named a Which? Recommended Provider alongside Vanguard (customer score 72%) and AJ Bell (72%), and was rated four stars out of five by respondents for all the aspects we looked at.
Fidelity customers were full of praise for their provider, with one describing it as ‘pretty faultless – reliable, trustworthy and great value’. Another said that it offered ‘an excellent online platform with good investment data’.
Despite its low-cost offering, Vanguard investors only have access to a limited own brand selection of funds, not shares or investment trusts.
Although Barclays Smart Investor (73%) pipped Vanguard and AJ Bell on customer score, it was relatively expensive for certain pot sizes and so wasn’t eligible to be a Which? Recommended Provider.
Aegon had the lowest customer score (59%) in the survey, receiving just two stars for investment information.
- Find out more: Sipp providers rated by their customers
First featured in August’s Which? Money magazine
Magazine subscribers also get access to tailored one-to-one guidance from the Which? Money Helpline.