Archived article: This article was correct at the time of publishing. Tax, investments and pension rules can change over time so the information below may not be current.

Why the cheapest SIPP isn’t always the best

With a long-term investment like a pension, it would make sense that the cheapest SIPP provider would be the best choice. However, the features and benefits of many SIPPs mean that despite their higher fees they can sometimes offer you better value for money over the long term.

Lee Dooley Lee Dooley
04 May 2016

A wide choice of investments

Most investors choose SIPPs because they offer a wider choice of investments, but each provider gives you access to a different number of investment funds and asset classes. The cheapest Self-invested Personal Pension (SIPP) will probably not offer the same wide variety as others, which can be a problem if the available investments do not align with your own investment strategy and requirements.

Quality investment research

Quality research is essential for making informed investment decisions, but you won’t usually get access to it from cheap SIPP providers. Conversely, certain leading providers use statistical analysis and fund manager interviews to review and identify the best investments, then publish their findings and investment ideas on a regular basis.

Are there other fees?

Before opening a SIPP you should always check for any extra costs or fees. Most providers will charge you for things like moving your money elsewhere or taking pension drawdown, but these costs vary between companies and some of the cheapest SIPP providers will actually charge the highest fees. As is the case with airlines, these extra fees can soon turn the cheapest option into one of the most expensive.

Online tools and features

Even cheap SIPP providers will let you manage your investments online, but they will not usually offer the same tools and features as their competitors. With online services like our Online Investment Service you can link your family bank accounts to see the bigger picture, use online calculators to review your progress, and create investment reports with details of your risk level, asset allocation and overall investment quality.

Do you need help managing your investments?

If you don’t have the time or knowledge to manage your investments, you could be better off with a provider that offers you the help of an expert – either through an investment management service or Multi-asset Portfolios. Cheap SIPPs don’t always offer this option, but the input of a professional can potentially make a big difference to your returns.

Financial planning

You may have a particular goal for retirement, like paying for your grandchildren’s university fees or securing an income that increases as you get older. Most of the cheapest SIPP providers won’t offer an in-house financial planning service, so if you have complex financial needs or would like a personal financial strategy you may get better value from a provider that offers this service.

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested.
This article does not constitute personal advice. SIPPs are not suitable for everyone. If you don’t want to invest across different asset classes or don’t think you will make use of the investment choices that SIPPs give you then a SIPP might not be right for you. Self-directed investors should regularly review their SIPP portfolio, or seek professional advice, to ensure that the underlying investments remain in line with their pension objectives.