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Pension charges are now astronomical. Is it worth switching to a SIPP?

10 February 2022

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Question by Jennifer

Pension charges are now astronomical. Is it worth switching to a SIPP?

Answered by Andrew Neligan

Hello Jennifer,

It is interesting to hear you find pension charges astronomical. I wonder what your experience has been? Fortunately, pension charges have become clearer and lower over the past 10-20 yrs, partly due to regulation and partly due to competitive pressures, particularly from online pension providers.

Remember a SIPP is just a different type of pension and so not necessarily cheaper. The SI part stands for 'self-invested', which allows pension savers to invest in direct shares or commercial property, which is not possible with a standard pension personal pension, stakeholder pension or company pensions. However, that functionality is also not required by most people so there is little point in paying for something you don't need.

Some providers, including SIPP providers, charge a fixed fee rather than a % based upon the size of your fund. This can be of value for people with larger pension funds but be mindful of additional charges for extra administration requests such as paying out income or making changes. If you are at the stage of your life where you just want to grow the pension this could be an option for you.

As a rule of thumb, if you are paying an admin fee of 0.3% pa or less your pension is pretty competitively priced. But remember, the cost of funds in which you invest is added on top.

I hope this helps.


Answered by

Andrew Neligan

Chartered & Certified Financial Planner

Typically, I work with individuals and couples who have got to the point in their lives that they have important questions about money they want answering. They may be thinking about retirement in the next 5 to 10 years but they are worried they won’t have enough so they want to make sensible decisions now. Or, they really want to retire sooner, but either they don’t know if they can afford to, or they are afraid they will make decisions that they may later regret.