Choosing the right SIPP is a far from straightforward exercise. There are many different options and a direct comparison can often be difficult. In this post, we attempt to cut through the mass of detail to summarise the key points to consider.
A Self Invested Personal Pension (SIPP) is a form of personal pension which allows you to save for retirement by giving you the freedom to choose and manage your own investments. A SIPP offers all the tax advantages of any other personal pension arrangement.
The keywords are ‘Self Invested.’ It is your responsibility (and/or your advisers) to manage your investments appropriately. A SIPP is only one of many pension options. It is not the right approach for everyone and it is important to consider the benefits and risks.
SIPP Benefits and Risks
The benefits of SIPP’s are:
- They are mobile (they stay with you if you move jobs).
- Their flexibility (the types of investments they will accept).
- Control (you are in complete control of your pension fund).
It is also important to consider the risks, specifically:
- The overall level of charges.
- Management time/expertise. Unlike a traditional DC pension scheme, you are in charge of your investments.
- Investments can go down as well as up and mistakes can be costly.
Choosing A SIPP
The majority of investors invest in SIPP’s via a platform (often known as supermarkets). These offer access to a wide range of investments and are a relatively simple way to manage those investments. They deliver a range of facilities including buy, sell, switching and valuation all via online portals. The choice of platform can often be just as difficult as choosing the SIPP.
The key points to consider when trying to choose the right platform for the SIPP are:
- The available investment options.
- The level of service/support available.
- The fund management including background and experience
- the overall financial strength of the provider.
What Investment Options Are Available
In principle, a SIPP can hold a wide range of investments such as but not limited to
- Commercial property (such as offices, shops or factory premises)
- Unit Trusts
- Investment Trusts
- Some National Savings and investment products
- Traded Endowment Policies
- Individual stocks and shares quoted on a recognised UK or overseas stock exchange
These aren’t all of the investment options and different SIPP providers will offer different investment options and some SIPP’s will not hold the full range available. For example, some will not allow you to invest in shares and investment trusts directly.
Considering the range of assets available in a SIPP gives an indication of risk. A SIPP that offers a wide range of investments is likely to be less at risk of potential financial problems than one that only invests in only a few (perhaps higher risk) investments.
Does The Service Level Match Your Requirements
We would all like a SIPP provider to provide excellent telephone support, educational programmes and seminars and personalised help and support but that all comes at a cost. If you are a more experienced investor why pay for what you don’t need but if you are new to investment paying for high levels of support could be worth every penny.
There is a wide range of SIPP’s on the market. Some are provided by the major pension companies. Others are delivered by specialist, much smaller, businesses.
Choosing a SIPP from a smaller or newer player in the marketplace is not necessarily a problem. Some may have advantages over the more established players but it is important to do your homework and evaluate the risk. Smaller providers could be at risk if some of the investments held fail.
This can be the most difficult item to compare. Not all costs are transparent, it can be difficult to compare like against like and charging models may be based on a SIPP/platforms target market.
Typically there are four main charges to consider when choosing a SIPP
- Administration and set up fees.
- Dealing charges
- Fund Manager and other fees.
- Financial Adviser charge (if you do not want to manage the investment yourself)
Should you have any questions give us a call or Email us and we will be happy to help without cost or obligation. Or, to request a call back complete the form below.
This blog is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investment or course of action. The past is not a guide to future performance. The value of investments can go down as well as up and you may not get back the full amount you invested. Tax and financial regulations can change. Any figures quoted above are correct at the date of publication.