SIPP charges can reduce pension pots by £100,000 | moneyfacts.co.uk

Moneyfacts.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfacts.co.uk will always be from news@moneyfacts-news.co.uk. Be Scamsmart.


Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 01/02/2021

Research has revealed the extent to which self-invested personal pension (SIPP) charges can eat into an individual’s pension pot, with The Lang Cat finding that investors could pay almost £100,000 more in pension costs depending on where they’re saving.

The figures are based on someone who has a starting pot of £100,000 that they hold for 30 years and contribute £10,000 to annually, and the results are surprising. If that person had an interactive investor SIPP, they’d have a funds portfolio value of £1,104,900 at the end of the 30 years, but if they’d have invested in a Standard Life SIPP they’d be left with £94,800 less (£1,010,000) at the end of the period, purely due to SIPP charges.

This highlights the savings that can be made by opting for more modern platforms rather than old-style pension companies, and it’s predicted that the cost of investing could be reduced in the coming years as the industry feels the pressure from more of these “challenger” companies.

“Saving almost £100,000 with an ii SIPP compared to a life company pension sounds incredible, but it’s a very real prospect for an above-average earning 38-year-old,” commented Richard Wilson, CEO of interactive investor, the firm that commissioned the calculations. “This is money that should support your quality of life in retirement, or help secure your children’s future.”

 

What pension charges are there to think about?

Given the potential impact that fees can have on an individual’s final pension pot, it’s vital to know what’s involved. There are a lot of charges to bear in mind when saving into a pension, from fund management costs and advice fees to discretionary fund management fees and SIPP charges, with the latter in particular having come under the spotlight following rule changes designed to make the fee structure more transparent. This means it’s easier for pension savers to see where their money is going, and to see if they’d be better off moving their pension elsewhere.

“Where you are best served as a pension saver depends on a lot of factors, including how much you have to start with,” said Moira O’Neill, Head of Personal Finance at interactive investor. “Before switching out of any life company scheme check that you are not losing any benefits. But for many there are potentially big savings to be made.”

This is why finding the right SIPP provider is essential; more information, together with the top-rated products, can be found on our best SIPP and SSAS overview.

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfacts.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

Retirement fund

Cookies

Moneyfacts.co.uk will, like most other websites, place cookies onto your device. This includes tracking cookies.

I accept. Read our Cookie Policy