Self invested personal pensions have been around for a while now. When they first came on the market they were lauded as a pension scheme for the supper rich. A way to build on an already large pension pot. This common misconception has led to many opting for a stakeholder pension when choosing a personal pension.
The flexibility and wide range of investments available with a SIPP has always been marked out as one of the particular advantages (as have the tax benefits of SIPPs), but does this range of investments mean you’ll lose out when it comes to charges?
Let’s have a look…
SIPP Pensions versus stakeholder pensions – the charges
Stakeholder pensions are a part of a scheme put in place by the government to encourage people to plan for their retirement. Accordingly, pension providers have to adhere to a number of conditions, such as not charging over 1.5% for the first ten years and then only 1% thereafter.
SIPP pensions on the other hand carry specific charges relating to the range of investments chosen. But there are plenty of low cost alternatives out there. In fact, many of the top providers such as Sippdeal offer a wide range of investments with no charges when you open your SIPP or transfer in from another pension scheme. You won’t even be required to pay any administration fees or if you pay a single or regular contribution.
The only charges you do pay are when you invest, and the more deals you make the more you’ll be required to pay. However, many have very low charges for the number of deals available. For example when you make 20 or more deals you’ll only have to pay charges of less than five pounds. This suggests a flexible pension scheme available to everyone.
So, what does a SIPP actually offer?
A SIPP is often referred to as a “do it yourself” pension scheme as it provides you with the flexibility and choice to make all the investment decisions for your personal pension on your own. This is compared against a stakeholder pension, whereby your pension provider does this on your behalf.
With Sippdeal, the range of investments is huge – up to 2,500 – and includes stocks and shares, government and corporate bonds, permanent interest bearing shares, warrants, and exchange traded funds and commodities, amongst others. The potential investments on offer is much wider than those offered with a stakeholder pension, and of course you get to make all the decisions yourself.
The question you need to ask yourself is whether it is right for you. If you have a little financial knowledge and want the flexibility to decide on your own investments it offers the perfect solution.