AJ Bell Youinvest, Fidelity, Interactive Investor and Vanguard have been named Which? Recommended Providers of self-invested personal pensions (Sipps) for 2022.
Sipps have grown rapidly in popularity since the pension freedoms of 2015. Sales leapt by 15% between 2020 and 2021, going from 740,418 to 851,963.
To help you choose the best providers, Which? surveyed more than 2,000 existing Sipp customers about the level of service they're getting and carried out separate analysis of the fees charged by each Sipp provider.
Here we explain how a Sipp can give you more control over your retirement savings, and how to choose the right one for you.
What sets Sipps apart
A Sipp is a type of defined contribution pension, where the income you’ll receive when you retire depends on how much you contribute, how well the underlying investments perform and how you decide to access your money.
Sipps enjoy the same tax benefits as other types of pension: not only are your investments exempt from capital gains tax and income tax, but you also get tax relief on your contributions. This means that for every 80p basic-rate taxpayers pay in, the government pays in 20p.
What sets Sipps apart is that they give you more control over how and where your money is invested. There are now a wide variety of products to choose from, ranging from ‘full’ advised Sipps through ready-made portfolio providers to so-called ‘DIY’ Sipps.
Our latest analysis focuses on low-cost ‘DIY’ Sipps, offered by investment platforms. In general, DIY Sipps give you access to a wide range of assets and investment options, but in some instances, you can only invest in funds, not individual shares
- Find out more: how much will I need to retire?
Top Sipp providers
To be eligible as a Which? Recommended Provider (WRP), Sipp providers needed a high customer score (72% or more), plus competitive fees across our pricing scenarios.
Vanguard topped our customer score table with an impressive 79% and is a WRP for a third consecutive year, as is AJ Bell Youinvest, matching its 2021 customer score of 72%.
They’re joined by Fidelity (74%) and the second-largest UK investment platform, Interactive Investor (74%).
While customers are impressed by its customer service and value for money, Vanguard's range of investments is more limited than other providers: your choice is limited to a range of its own tracker funds.
Interactive Investor's flat fee of £12.99 a month makes it the cheapest option for most pot sizes.
- Find out more: Sipp costs compared
How a Sipp can save you money
Stick with an advised personal pension or a workplace scheme and you’ll invariably pay more compared with a Sipp, although you’ll also get support from your adviser or board of trustees managing and investing your money. Plus, you can complain if you think you’ve lost out due to bad advice or poor administration of your savings.
Not all Sipps offer great value, though. Our analysis found that a saver with a Sipp worth £268,000 (the average value among Sipp customers we surveyed) would end up with £358,378 in their pot after 10 years – assuming annual investment growth of 3% – if they opt for the cheapest provider (Interactive Investor).
With the most expensive (Hargreaves Lansdown), their pot would be worth £345,498 – almost £13,000 less. After 15 years, and the difference reaches £21,700.
Is a Sipp right for you?
Sipps are best suited to savers who have the time and knowledge to pick and monitor their own investments. It’s up to you whether you hold one alongside other pensions or transfer existing pots into a Sipp so you can keep track of all your retirement savings in one place.
Stock market turmoil and soaring inflation are making life harder for investors, but don’t throw caution to the wind in the hope of growing your pension. Be wary of unusual or high-risk investments, such as overseas property, forestry or storage units, and ‘opportunities’ promising unrealistic high returns. Ignore anyone who contacts you about your pension out of the blue.
If you like the idea of taking more control of your pensions but feel uncertain about investing, then it’s best to get advice. This might mean signing up to a ‘full’ Sipp, where you get access to investment support, or having an initial chat with an adviser before you set up a DIY Sipp.
The average independent financial adviser charges 1.9% a year, according to the Financial Conduct Authority. Some investment platforms such as Bestinvest, Hargreaves Lansdown and Vanguard offer their own advice services, but these are ‘restricted’, meaning they only recommend their own range of products and services.
If the costs of advice are a barrier for you, consider the new breed of ‘do-it-for-me’ Sipps that simplify the investment decisions you’ll have to make by offering ready-made portfolios catering for different risk appetites.
source https://www.which.co.uk/news/article/sales-of-sipps-soar-which-are-the-best-diy-pension-providers-aT0gP5c29pFu