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1. What is a SIPP? A Self-invested Personal Pension or SIPP is simply a way of investing over the long term. It is just a more flexible version of a Personal Pension or Stakeholder Pension. Think of it as an invisible ‘tax wrapper’ through which you reach and use your money to buy into investment funds as you would with an ISA.

2. Why is a SIPP better?

There are no guarantees but the ‘best’ pension is normally the one that gives you the most money in retirement and this is about keeping costs down and maximising performance. We can keep charges low at the outset, but one never knows for certain how much growth will be achieved over time. However, attention to several factors can influence how your money grows over time. For instance, if you can see which funds are highly rated by referring to quality research and you are able to switch funds easily and quickly, then maintaining a risk-adjusted portfolio is easier and could lead to greater gains over time.

3. How much will a SIPP cost me?

Cost-wise, it is important to consider not only the cost of the SIPP itself ie, free or charged, but also information such as whether there is any initial charge or switching charge on funds which will either boost or eat into your investment returns.

Also think about the types of investments you want to hold inside your SIPP. SIPPs can hold a massive range of assets as permitted by HMRC but there is no point choosing a SIPP that gives you access to every type of investment, such as directly owned commercial property, if you are not going to use them all. This is the domain of the ‘full’ SIPP for which there will usually be a higher charge.

4. What funds shall I choose?

SIPPs can offer a massive range of fund managers and it is important to choose a blend of funds that is right for your tolerance for risk. While higher risk is normally linked to higher growth in the long term, not everyone is comfortable with higher risk levels. Determining your attitude to risk can be difficult and if you want more help, you might want to consider a SIPP that comes with investment advice.

5. How can I get hold of my money at retirement?

You don’t have to actually retire to start using your pension. You can take tax free cash with or without a taxable income from age 55. The main ways of taking benefits are buying an annuity or using income drawdown.

An annuity is a guaranteed income paid by an insurance company until you die, whenever this may be. Other features can be built in such as income guarantees or provision for a spouse. Drawdown is where you keep your investments where they are and you are allowed to take a certain income amount directly from the pension each year. This is linked, in part, to investment performance and so cannot be guaranteed. Getting good growth into retirement is vital so if you are uncomfortable making investment decisions yourself, a SIPP that gives you access to investment advice is an excellent option.

The Best SIPP fact box

Set-up charges Free
Transfer-in charges Free + £500 per person towards exit fees
Initial charges on funds Free on 99% of funds
Online fund switching Free
Online share dealing £7.50 per trade
Service fee
Tiered, starting at 0.3%
Inactivity fee Free

The value of your investment can go down as well as up, and you can get back less than you originally invested.

The Bestinvest Online Investment Service, including any account analysis and investment reports provided by our guidance services, is an online execution-only dealing service for investors who want to make their own investment decisions. It does not provide advice on the suitability of products and investments; if you are unsure about the suitability of any investment you should seek professional advice. Clients of our Investment Advisory Service and Managed Portfolio Service can use the website to obtain current valuations of their investments but cannot trade on these accounts online and should call their adviser if they wish to discuss changes to their investments.

Past performance or any yields quoted should not be considered reliable indicators of future returns. Restricted advice can be provided as part of other services offered by Bestinvest, upon request and on a fee basis. Before investing in funds please check the specific risk factors on the key features document or refer to our risk warning notice as some funds can be high risk or complex; they may also have risks relating to the geographical area, industry sector and/or underlying assets in which they invest. Prevailing tax rates and relief are dependent on your individual circumstances and are subject to change.

Issued by Bestinvest (Brokers) Limited (Reg. No. 2830297), which is authorised and regulated by the Financial Conduct Authority. Financial services are provided by Bestinvest (Brokers) Limited and other companies in the Tilney Bestinvest Group, further details of which are available here. This site is for UK investors only.
© Tilney Bestinvest Group Ltd 2016.

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