Online investment platform Wealthify has joined the pensions market offering a self-invested personal pension (Sipp) that you can start with just £50.
With many Sipps, you're required to select your own funds, so a level of investment understanding and research is required to make such choices. But the Wealthify Sipp has been designed so that you can select the level of risk you are comfortable with, from 'cautious' to 'adventurous', instead of having to choose your own funds.
The other major draw of the Wealthify Sipp is that it is available both on an app and online where individuals will be able to see what their funds are invested in as well as how their investments are performing. But it's not cheap once you factor in charges and costs - especially if you want to put a lot of money in.
Here, Which? explains how the Sipp works, how the costs compare and whether it's a good option for you.
Sipps are do-it-yourself pensions that allow you to invest in a variety of assets including stocks and shares, investment trusts and exchange-traded funds (ETFs).
Watch our short video below for more info on how Sipps work.
If you choose the Wealthify Sipp, based on the level of risk you choose, it creates a diversified portfolio on your behalf which it manages on an ongoing basis.
There is no start-up fee, and according to the platform it takes 10 minutes to set up and start saving.
It also gives you the option to invest in ethical funds, meaning your money could be invested in funds which could help the environment.
The Sipp also promises pre-funding of 25% tax relief - a government tax top-up on pension savings - every time you make a contribution. This means you don't have to wait for the rebate to come from the taxman, a feature not all Sipps offer.
For example, if you wanted to invest £1,000 and were a basic-rate taxpayer, you'd only need to put £800 in your pot as the government will add 25% of this amount to make up the remaining £200 in tax relief.
If you're a higher or an additional rate taxpayer, you could benefit from an extra boost, but you'd need to contact HMRC to claim your extra top up.
Wealthify charges an annual fee of 0.6% a year for managing the investments plus:
Wealthify aims to 'keep these as low as possible, around 0.22% for original plans and 0.66% for ethical plans', which takes the total yearly cost to 0.82% or 1.26% on average.
For example, if you invest the maximum tax-free of £40,000 or 100% of your earnings (whichever is lower) into a Wealthify pension, you would be charged around £328 a year in costs and charges, according to its online calculator.
Some providers have low management fees but hide extra charges which can impact your returns over time. Hover, Wealthify's deal has no transfer fees, transaction fees or drawdown fees.
That said, there's also no cap on charges so if you had a really large pot you could expect to pay higher fees - it estimates that a pot of £1m would cost around £683 per month or £8,200 a year.
The industry average charge to use a platform service is around 0.35% of assets, according to an independent analysis by Platforum, an investment information company. So Wealthify is pretty expensive.
Even if you have a £1m pot with Vanguard you'll pay the capped amount. Being charged 0.15% on smaller pots will also work out much cheaper than most platforms.
Similarly to Wealthify, the account also has no additional costs such as exit fees, valuation statements or transfer charges.
But you must open an account with a lump sum of £500 or make a £100 a month contribution under a regular savings plan.
It charges 0.25% up to £250,000, 0.10% for £250,000 up to £1m, 0.05% for £1m to £2m, and no charges over £2m invested.
The bottom line is when deciding the right platform for you, you'll need to weigh up how often you're going to be trading, how much you're aiming to have in your pot, and how much you're able to start saving with.
Investment platforms aren't just divided by price however, but also by customer service, investment choice and ease of access.
So you need to make sure the platform you choose is tailored to your needs and wants.
The below table shows projected values for several scenarios, with variables in age and starting amounts, all based on investing in a Wealthify pension, with a 'confident' investment style.
It also takes fees and fund charges into consideration.
Sipp providers give a wider choice of funds than personal pensions and offer you more freedom to choose your own funds.
Sipps can be an attractive home for existing pension pots currently tied up in other schemes.
If you've worked for several employers, you're likely to have multiple pensions, and bringing them together may reduce fees and give access to better investment performance.
They can also be attractive investment vehicles for self-employed workers, who aren't automatically enrolled in a workplace scheme and need to save for retirement.