This marks the third year in a row that sales of Sipps have exceeded 850,000, after they dipped to below 740,000 in 2020.
So what's behind their growing popularity? Here we explain how a Sipp can give you more control over your retirement savings and how to choose the right company for you.
Find out more:What sets Sipps apart
The big attraction with Sipps is that you can choose your own investments. They can also work out cheaper than other types of pension.
Find out more:Accessing your Sipp
You can consolidate all your pensions into a Sipp, or hold it alongside any existing workplace schemes. Contributions and investment performance will determine the final value of your pot at retirement.
As with other pensions, when you reach the age of 55, you can take up to 25% of your pot as a tax-free lump sum from your Sipp.
Find out more:Pay attention to charges
You’ll still need to pay attention to the fees charged by your Sipp, however, as some providers are more expensive than others.
Our calculations show that a Sipp with a starting value of £250,000 would be worth £18,000 more after 10 years if held with the cheapest provider (Freetrade) than the most expensive (Wealthify), assuming annual investment growth of 3%. After five more years of charges and compound growth, the difference is more than £31,000.
Sipps typically charge a fixed admin fee or a platform fee calculated as a percentage of the funds you have invested. Companies apply percentage platform charges in two ways – either across the whole pot depending on the pension value or reduced fees on amounts above certain thresholds.
For example, AJ Bell charges 0.25% on the first £250,000 of funds, 0.1% on the next £250,000 and no charge on funds over £500,000.
Find out more:Is a Sipp right for you?
There are lots of reasons why this type of pension might appeal to you, including lower charges and the convenience of being able to bring together different pension pots in one place.
But a Sipp isn't suitable for everyone. They're best for savers who feel comfortable choosing and managing their own investments.
Alternatively, ready-made portfolios, offered by some investment platforms and pension startups, are a good option if you want personalised help with investment decisions, but don’t want to incur the expense of full financial advice.
source https://www.which.co.uk/news/article/would-you-be-better-off-with-a-diy-pension-aKR4l5R0oQBl