Find the best broker for your Sipp portfolio

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The 25th anniversary of the first self-invested personal pension (Sipp) launch had just passed when the radical pension ‘freedoms’ took effect in 2015. Those changes took Sipps to a new level of popularity among DIY investors, as inherent Sipp flexibility met increased demand from investors wanting to control their own retirement funds, both by building and running their pension pot and by drawing an income from it.

However, with greater flexibility has come increased complexity. Working out which platform provider was cheapest or most suitable wasn’t especially straightforward before the reforms. Now, with a growing number of investors using pension drawdown, there’s even more to think about when comparing the various options.

So how do you go about identifying which direct investment platform best suits your Sipp requirements? One way to start is to make sense of the fees platforms charge.

We asked platform consultancy the Lang Cat to provide Sipp charging information for 15 of the leading direct-to-consumer platforms, in the form of ‘heat map’ tables that make it easy to compare different costs at different levels of investment.

The heat maps employ a traffic light key to pricing. The colour green indicates the less expensive options, and the colour coding turns redder incrementally as the costs mount up.

It’s important to remember that the heat maps are peer-based – providers are compared with each other and not with other benchmarks. The tables start at the £50,000 mark, reflecting the likelihood that, even in the postfreedoms era, few investors will be drawing down from investments of less than that amount.

SIPP ADMINISTRATION CHARGES
Provider £50k £100K £250K £500k £1m
Portfolio size as a percentage
AJBell Youinvest 0.25% 0.25% 0.25% 0.18% 0.14%
Alliance Trust Savings 0.50% 0.25% 0.10% 0.05% 0.03%
Tilney Bestinvest 0.30% 0.30% 0.30% 0.25% 0.23%
Charles Stanley Direct 0.25% 0.25% 0.25% 0.22% 0.19%
Fidelity Personal Investing 0.35% 0.35% 0.20% 0.20% 0.20%
Halifax Share Dealing 0.18% 0.18% 0.07% 0.04% 0.02%
Hargreaves Lansdown 0.45% 0.45% 0.45% 0.35% 0.30%
Interactive Investor 0.35% 0.18% 0.07% 0.04% 0.02%
iWeb 0.18% 0.18% 0.07% 0.04% 0.02%
Saga Investment Services 0.30% 0.30% 0.30% 0.25% 0.23%
TD Direct Investing 0.78% 0.54% 0.40% 0.30% 0.17%
Telegraph Investor 0.49% 0.30% 0.12% 0.06% 0.03%
The Share Centre 0.35% 0.27% 0.11% 0.05% 0.03%
Trustnet Direct 0.44% 0.30% 0.12% 0.06% 0.03%
Willis Owen 0.66% 0.48% 0.31% 0.23% 0.19%
Provider Portfolio size in sterling
AJBell Youinvest £125 £250 £625 £875 £1,375
Alliance Trust Savings £252 £252 £252 £252 £252
Tilney Bestinvest £150 £300 £750 £1,250 £2,250
Charles Stanley Direct £125 £250 £625 £1,125 £1,875
Fidelity Personal Investing £175 £350 £500 £1,000 £2,000
Halifax Share Dealing £90 £180 £180 £180 £180
Hargreaves Landsown £225 £450 £1,125 £1,750 £3,000
Interactive Investor £176 £176 £176 £176 £176
iWeb £90 £180 £180 £180 £180
Saga Investment Services £150 £300 £750 £1,250 £2,250
TD Direct Investing £390 £540 £990 £1,490 £1,740
Telegraph Investor £246 £300 £300 £300 £300
The Share Centre £173 £269 £269 £269 £269
Trustnet Direct £221 £296 £296 £296 £296
Willis Owen £332 £482 £782 £1,157 £1,907

The table above shows Sipp platform charges as they rise or fall according to the amount invested – the first table is in percentages and the second in pounds and pence. We’ve compiled another table (below) that incorporates drawdown costs, given the increasing demand for flexible income facilities in the post-freedoms era.

Countering the complexity

These tables include the initial and ongoing fees charged for drawdown, where applied, which we’ve also provided in a separate column. There will sometimes be extra charges for drawdown functions such as setup, exit and transferring out, which we’ll touch on a little later. We haven’t included fund switching charges, as investors are unlikely to be changing things around much when they’re in drawdown, but we do show the initial charge and the ongoing administration charges.

Note that these tables are simply a snapshot in time, based on what you would have paid if you were looking at Sipp options in August. It’s an evolving market in which charges change regularly, and consolidation speculation is rife in the industry. Moreover, new pricing propositions are probably on the way, not least from newly merged Interactive Investor and TD Direct Investing (which joined forces earlier this year to create the UK’s second-largest investment platform).

Remember, finally, that while price is a good place to start when comparing options – particularly given the impact that excessive charges can have on retirement savings – it’s just one piece of the jigsaw. When we look at the core platform administration charges for Sipps, the cheapest option across the board is Halifax Share Dealing (and iWeb, which it runs). The platform administration fee for Sipps at £50,000 and above is just £90, rising to £180 at £100,000 and above.

But the platform that’s most cost-effective for you will depend to some extent on the amount you intend to invest. Interactive Investor (ii) is the current outlier here, as it has a flat fee structure that means the cost remains the same even as the investment pot grows.

The impact on the heat maps is as you would expect: ii is more expensive at low investment levels but becomes more cost-effective relative to its peers as the amount invested increases. So while percentage-based (ad valorem) fees tend to benefit those with smaller Sipps, the flat fee model is more generous to those with large portfolios.

Also making a play for the bigger Sipp pots are Alliance Trust Savings, Trustnet Direct and Telegraph Investor, all of which are at the more expensive end for smaller investors.

For investors with Sipps in the region of £50,000-£100,000, a few basis points here and there can make a significant difference to the charges paid. The pounds and pence table in particular shows how big a bite administration fees take out of modestly sized Sipps.

The 0.78 per cent platform fee for Sipp investors with TD Direct Investing may not look enormous, but they’re paying £300 more every year than those with iWeb/Halifax Share Dealing. It can balance out more when other fees are added in and intangible features come into play. But enough to offset a difference of £300 a year?

We’ve reviewed the charges applied to Sipps held on platforms, but investors in (or planning to enter) flexi-access drawdown (FAD) will also need to consider a raft of additional charges. From our tables overpage, it’s clear that the impact of drawdown costs is sufficient in some cases to influence the choice of platform.

Several platforms charge specifically for income events, which means investors will see costs rise quite sharply once they shift from investing for retirement to taking a flexible income from their funds. Just three of the providers in our table charge no additional fees for drawdown. If the costs that jump once you begin drawing an income begin to hurt, there may be good reason to review your reasons for being in drawdown and what you want from it.

For instance, AJ Bell Youinvest asks for £25 plus VAT for one-off income payments such as taxfree lump sums, income withdrawal, small lump sums and uncrystallised funds pension lump sums (UFPLS), as well as a £100 plus VAT drawdown administration fee. But even when these are added to the Sipp administration costs, the provider remains among the cheaper options, except at the £250,000 level. Similarly, iWeb/Halifax Share Dealing remain at the lower end of the cost scale, even with a £180 annual charge for FAD (although they ask for £300 a year from age 75).

Investors may enter more expensive territory when drawdown costs are factored in. Charles Stanley Direct charges £150 plus VAT for each benefit crystallisation event (moving into FAD or taking an UFPLS), plus an annual fee of £50 plus VAT for regular income payments. When we compare the table showing pure administration charges with a version that includes drawdown costs, we can see that the drawdown fees move Charles Stanley from the cheaper to the more expensive end of the scale.

Fees for drawdown have a similar effect on Tilney Bestinvest, which is at the lower to middle part of the scale on a pure administration fee basis but among the most expensive from £100,000 and upwards when its initial and ongoing income charges are added into the equation.Willis Owen also changes colour on our heat maps when the cost of taking income is reflected in its charges. Its income drawdown fee of £132 – the same as its annual administration fee – makes it one of the most expensive options right through from £50,000 to £1 million and above.

Poor platform choices can stunt pension fund growth

It’s clear that your choice of platform can make a big difference to the charges you pay and therefore the extent to which your fund continues to grow. For example, a £1 million Sipp portfolio with Hargreaves Lansdown would cost £3,000 a year (there is no additional charge for drawdown). The same amount with drawdown facilities would attract a charge of just £342 at Alliance Trust Savings (due to its flat fee structure), £360 at iWeb/Halifax Share Dealing and £380 at Interactive Investor. A drawdown investor who switched from the most expensive option to the cheapest would make a saving of £2,658 a year – more than the charges on the next most expensive.

Such comparisons can be slightly crude, however. The platforms without additional charges for drawdown are Fidelity Personal Investing, Hargreaves Lansdown and Saga Investment Services. While that still leaves Hargreaves looking more expensive than its peers at £250,000 and above, the all-inclusive nature of the charging structure can make it suitable for customers taking maximum advantage of Sipp flexibility.

COMBINED SIPP AND DRAWDOWN CHARGES
Provider £50k £100K £250K £500k £1m
Portfolio size as a percentage
AJBell Youinvest 0.55% 0.40% 0.31% 0.21% 0.15%
Alliance Trust Savings 0.68% 0.34% 0.14% 0.07% 0.03%
Tilney Bestinvest 0.78% 0.41% 0.34% 0.27% 0.24%
Charles Stanley Direct 0.73% 0.49% 0.35% 0.27% 0.21%
Fidelity Personal Investing 0.35% 0.35% 0.20% 0.20% 0.20%
Halifax Share Dealing 0.54% 0.36% 0.14% 0.07% 0.04%
Hargreaves Lansdown 0.45% 0.45% 0.45% 0.35% 0.30%
Interactive Investor 0.76% 0.38% 0.15% 0.08% 0.04%
iWeb 0.54% 0.36% 0.14% 0.07% 0.04%
Saga Investment Services 0.30% 0.30% 0.30% 0.25% 0.23%
TD Direct Investing 0.96% 0.63% 0.43% 0.32% 0.18%
Telegraph Investor 0.90% 0.50% 0.20% 0.10% 0.05%
The Share Centre 0.81% 0.50% 0.20% 0.10% 0.05%
Trustnet Direct 0.85% 0.50% 0.20% 0.10% 0.05%
Willis Owen 0.93% 0.61% 0.37% 0.26% 0.20%
Provider Portfolio size in sterling
AJBell Youinvest £275 £400 £775 £1,025 £1525
Alliance Trust Savings £342 £342 £342 £342 £342
Tilney Bestinvest £390 £408 £858 £1,358 £2,358
Charles Stanley Direct £365 £490 £865 £1,365 £2,115
Fidelity Personal Investing £175 £350 £500 £1000 £2,000
Halifax Share Dealing £270 £360 £360 £360 £360
Hargreaves Landsown £225 £450 £1,125 £1,750 £3,000
Interactive Investor £380 £380 £380 £380 £380
iWeb £270 £360 £360 £360 £360
Saga Investment Services £150 £300 £750 £1,250 £2,250
TD Direct Investing £480 £630 £1,080 £1,580 £1,830
Telegraph Investor £450 £504 £504 £504 £504
The Share Centre £407 £503 £503 £503 £503
Trustnet Direct £425 £500 £500 £500 £500
Willis Owen £464 £614 £914 £1,289 £2,039
Provider Drawdown charges
AJBell Youinvest £25 + VAT one-off income payment. £100 + VAT annual regular income payment
Alliance Trust Savings £23.75 + VAT a month (increasing from £17.50 + VAT while you are still saving)
Tilney Bestinvest Portfolios under £100k: £100 + VAT initial calculation fee, £100 + VAT annual income charge. Portfolios £100k plus: £90 + VAT initial calculation fee only
Charles Stanley Direct £150 + VAT for each benefit crystallisation event. £50 + VAT annual payroll fee
Fidelity Personal Investing No additional charges for drawdown
Halifax Share Dealing £180 a year
Hargreaves Lansdown No additional charges for drawdown
Interactive Investor £170 +VAT a year
iWeb £180 a year
Saga Investment Services No additional charges for drawdown
TD Direct Investing £75 +VAT a year
Telegraph Investor £170 +VAT a year
The Share Centre £195 + VAT; annual setup for the first event is free
Trustnet Direct £204 + VAT a year
Willis Owen £132 for each event
note: Includes initial and ongoing drawdown charges. Assumes investments in funds with no buys or sells. Source:The Lang Cat, as at August 2017

Similarly, the absence of drawdown fees on the Fidelity account make it cheaper at the £50,000 level than iWeb and Halifax, and they are undercut at both £50,000 and £100,000 by Saga.

If there’s one standout conclusion from all this, it’s that the amount you invest and the level of income flexibility you want will determine which services are most suitable for your needs.

‘Our research shows that only a handful of providers offer drawdown functionality bundled in with the overall platform fee,’ says Steve Nelson, head of research at the Lang Cat. ‘So it’s worth considering any additional drawdown costs if you are placing money in a Sipp and plan to withdraw it at some stage in the near future.’

There is conversely almost always merit in investors looking at the savings they can make by switching. ‘It can pay to do your sums and look at things in detail, as it might still be cheaper to be in drawdown with an extra explicit drawdown charge, if the platform plus drawdown charge is less than just the platform charge elsewhere,’ explains Nelson.

If you do want to switch, there are other costs to think about: exit fees, most notably. While some providers, including Fidelity, have no exit charges, others charge more than £300 for transfers out as cash and more than £400 for moving funds as they are (in specie). There are account closure fees too. Hargreaves Lansdown, for instance, charges £25 to close a Sipp account, plus a further £25 to transfer cash and £25 for each investment transferred in specie.

It's not just about price

Investors need to look past charges if they’re to find the most suitable platform for their needs, according to Justin Modray, director at Candid Financial Advice. He says: ‘It’s important not to ignore other factors, since these could prove an irritant or even costly in future if overlooked.’

The emphasis will depend largely on what you want from your platform. For example, investment choice will be a priority if you want exposure to the more esoteric end of the funds universe. Most platforms offer a wide choice of funds, and cater for a broad cross-section of investors and risk appetites. But if your fund requirements are varied and lean towards the adventurous, it’s a good idea to make sure that the funds you might want are actually available on the platform you are considering using before you make your choice.

‘A few platforms, notably Fidelity, don’t offer a share trading facility, which could prove restrictive if you want to hold individual shares or some investment trusts and exchange traded funds,’ says Modray.

The most important intangible feature for many people will be service. This is hard to measure, and user experience obviously varies, but an online search could help you identify recurring issues with particular providers.

‘Although you should be able to deal with any platform almost exclusively online, in practice most still rely on paper forms for some processes and none is immune from error,’ Modray points out.

So if you face problems such as a platform forgetting to pay your pension income or losing your application, you need to be confident that you will be able to speak to someone who will deal with your difficulty quickly.

For many investors, however, the decision on which platform they will use will be dictated to a large degree by how much they’ll pay in charges. ‘Cost is only one factor in platform selection, but it’s fair to say that significant savings can be made if you are particularly cost conscious,’ says Nelson. 

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