SIPP Charges Compared

Managing a SIPP is like any other investment account that you might manage online (e.g. an Investment ISA). You make contributions to the account, choose how that money is invested, manage the investments over time, and when you want to withdraw money (subject to age-related rules), you sell a portion of the investments and withdraw the proceeds them to a nominated bank account.

You can make contributions to a SIPP with your own money, either with a regular savings plan or in lump sums. Other parties such as your employer or family members can also contribute on your behalf.

When you draw money from a SIPP the first 25% is tax-free, with the remainder counting as taxable income which you can include in the ‘Pensions’ section of a self-assessment tax return.

The two main benefits of a SIPP are flexibility when it comes to managing your own pensions, and tax incentives.

If you are not a higher or additional rate taxpayer, you will receive a 20% top up from the government when you contribute to a SIPP. If you are a higher or additional rate taxpayer, you could be due an additional government top up to offset the higher rate of income tax you are paying – you need to contact HMRC to claim the top up above the 20%.

SIPP tax benefits are limited. The current annual limit is £40,000 or 100% of your earnings, whichever is lower. The allowance is the combined value of any contributions and the government top-up, with any contributions exceeding the limit potentially incurring extra tax.

Paying into a SIPP means you have more flexibility, both in how your pensions are invested, but also in how your income is distributed during retirement. Some choose to withdraw the full 25% tax-free lump sum early on in retirement to fund big expenses such as house renovations or holidays, flexibility you would not have with a fixed-payment pension such as an annuity which pays the same amount each month.

With standard personal pension schemes, your investments are managed for you within the pooled fund you have chosen. Often with standard pension schemes, the provider will automatically reduce the risk of your portfolio as you get closer to retirement, so you are not in a position where you are looking to withdraw whilst the stock market is in a slump - with a SIPP you must manage this process yourself.

Standard pensions typically charge an all-in percentage fee for the product, whereas SIPPs can have a fee charged by the SIPP platform in addition to a fee charged by any funds you are invested in, though a SIPP overall is likely to be more cost effective, particularly if you do not transact often.

From an investment choice perspective, most modern personal pension contracts offer a range of options, so it is worth looking at what you have available within your existing personal pension before deciding to switch to a SIPP.

If you are looking to invest in a specific set of shares/bonds/funds you will likely have a lot more choice in a SIPP.

If you have decided to open a SIPP and are comfortable managing your own investments, the best provider for you will depend on your requirements.

This page is designed to allow you to easily compare different platform and dealing charge models - when you input your expected investing behaviour at the top we estimate fees over a period of years, allowing you to easily compare fixed and variable fee models.

We also include a measure called ‘Services’ which highlights the service offering of each provider, including whether they provide research, have a mobile app etc.

Double check any prospective provider has the following:

• The range of investments you are interested in.
• The support channels you need to assist you with any queries (e.g. phone, online)
• If you want to track your investments on your mobile device, make sure they have a mobile app.
• If you want to receive investment research, be sure to check they offer what you need (often you can register for an account to start receiving general research without paying anything).
• Authorised and Regulated by the FCA.
• Some SIPP providers also offer paid advice if you require this be sure to check beforehand.

If you are unsure speak to a regulated Financial Advisor.

If your SIPP contributions are made before tax you’ll receive your full government contribution straight away without having to do anything.

If your SIPP contributions have been made with your salary after tax and you’re a higher rate taxpayer, you can claim your tax back by either of the following way:

• Self-Assessment tax return
• Call or write to HM Revenue & Customs if you don’t fill in a tax return.

If you’re an additional rate taxpayer, you are required to complete a Self-Assessment tax return so that will be your only option for reclaiming.

If you have any queries on how to claim higher rate tax relief, you can visit the government’s page on Pension Tax Relief

You can declare any income from SIPP drawdowns in the ‘UK pensions, annuities and other state benefits received’ section as ‘Pensions (other than State Pension), retirement annuities and taxable lump sums treated as pensions’.

Remember that the first 25% of your SIPP drawdown is tax free - you only pay income tax on the remaining 75%.

You can currently access the money in your SIPP when you reach 55. The minimum age will rise to 57 in 2028. After that, it will continue to rise in line with the state pension age – staying 10 years below it.

You can decide how and when to use the funds built up in your SIPP after you have reached the minimum age requirement. Often people will drawdown the 25% tax-free portion as a lump sum, and then draw the remaining balance gradually over retirement in a way that minimises total income tax. Some could also choose to buy an Annuity with the remaining 75% to get a guaranteed income during retirement. Use our Cash vs Annuity calculator to compare both options.

Operationally, withdrawing money is like any other investment account – you choose which investments to sell and then transfer the proceeds to a nominate bank account to spend when the trades have settled. If you have used your 25% tax-free allowance, you then need to pay income tax on the drawdown.

If you have used up your full annual allowance in the current tax year but have not used your full allowance in any of the previous three tax years, you may be able to carry some of it over – this is called the ‘carry forward’ rule.

To be eligible, you must have been a member of the pension scheme in each of the tax years you wish to carry forward, contributed less than the annual allowance during those years, and earned at least the amount you are contributing in the tax year for which you want to use the unused allowance (as the annual allowance is the lower of £40,000 and the income you earned in the year).

SIPPs are regulated and authorised by the Financial Conduct Authority (FCA).

As SIPPs are self-directed pensions, SIPP entities are not authorised to provide investment advice, so you will not receive comments on the suitability of any investments you have chosen in a SIPP based on your personal circumstances.

If you require advice you should speak to a regulated financial advisor.

Investments in a SIPP grow free from tax – there is no income tax on shares or funds that pay dividends (and you will not use up your dividend allowance) and any gains you realise do not incur Capital Gains Tax. Any interest payments, such as those from bonds, are also not subject to income tax.

If you are not a higher or additional rate taxpayer, you will also receive a 20% top up from the government when you contribute to a SIPP. If you are a higher or additional rate taxpayer, you could be due an additional government top up to offset the higher rate of income tax you are paying – you need to contact HMRC to claim the top up above the 20%.

Any income you take out of the SIPP after your 25% tax-free portion is classed as income and will be taxed as standard.

The current annual allowance for pension tax relief is £40,000 or 100% of your salary, whichever is the lower of the two.

Your employer can make contributions to your SIPP, in addition to or instead of a workplace pension. These contributions, in addition to any government top ups, count towards your annual allowance, but are not limited by your income.

If you do not have any earnings in the tax year, you can still contribute up to £3,600 gross into your SIPP. If you have begun to draw income, you can contribute up to £4,000 gross per year.

Shares and funds held in a SIPP can benefit from dividends if the company or companies (in a fund) chooses to pay them.

Dividends paid from shares or funds in an SIPP are received tax free and will not impact your dividend allowance.

Any interest payments, such as those from bonds, are also not subject to income tax.

The Financial Services Compensation Scheme (‘FSCS’) is an independent body set up by the Government under the Financial Services and Markets Act 2000 and funded collectively by regulated participants in the financial services industry. It can pay you compensation if a firm is in default and cannot meet any valid claims against it.

SIPP providers that are authorised and regulated by the FCA are covered by the scheme up to £85,000 per person per provider. All the providers listed on this page are covered by the FSCS at the time of writing.

The FSCS does not protect you from fluctuations in market valuations which are common amongst SIPPs, particularly if the investments are high risk and return.

The investments within a SIPP are legally ‘ring-fenced’ from the SIPP provider itself. That means that, if a fund provider fails (due to poor administration or misrepresentation or fraud), the investments are safe and have their own separate FSCS protection.

Yes, you can transfer your SIPP to another provider if you choose to, though this may incur exit fees. You will need to fill in forms, which often can be done online, with your current and future providers, and request a formal pension transfer value from your existing provider so you know what should appear in your new account. If the new provider offers the same funds/shares/bonds in your current SIPP portfolio then these may be able to be transferred directly otherwise the funds will be sold and the cash re-invested with the new provider.

Our Retirement Calculator simulates different scenarios to show you what retirement might look like. As part of this, we forecast any SIPPs you have or are contributing to, and then draw them down to help meet your desired income at retirement.

You can see the SIPP drawdown forecast on the graphs, and then broken down in the tables at the bottom of the calculator page.

If a SIPP holder dies before the age of 75, any money left in the SIPP can normally be passed, free of tax, to any beneficiary as a lump sum or as a pension pot. If you die when 75 or older, any withdrawals will be subject to income tax at the beneficiary’s income tax rate.

You can nominate whoever you like to receive the proceeds of your SIPP on your death. This can usually be done online or by filling out an ‘Expression of Wish form’ with your provider.

Upon death, the provider will transfer a SIPP to the nominated beneficiaries automatically, and the SIPP will not be included in the original holder’s estate (which would mean it was subject to inheritance tax). This means you do not need to include your SIPP in a Will.

Most of the time a SIPP can be managed online, with phone or post support reserved for specific account issues or queries. Some providers do offer dedicated phone support for normal account management (e.g., buying or selling investments), though this usually comes with higher account fees.

Our ‘Services’ metric summaries the services each provider has available to help you manage your account, with stars awarded for:

• Phone support
• Fully functioning mobile app
• Research
• Online tools and calculators
• Online web platform

You can buy and hold lots of different types of investment in a SIPP (like an Investment ISA), such as:

• Traditional funds (unit trusts, OEICs (Open Ended Investment Companies))
• Investment trusts
• Exchange-traded funds (ETFs)
• Individual shares
• Government and corporate bonds

Remember charges to buy and hold different types of investment may vary, so shop around to make sure you are getting the best deal.

You cannot invest directly in property with a SIPP but you can invest indirectly with a residential property fund or Real Estate Investment Trust (REIT).

Residential property funds work similarly to other funds, but instead of holding shares or bonds they hold residential property or residential property companies (they may also hold other types of assets depending on the fund’s investment objectives).

REITs generate income by renting the property in the trust. As they hold a range of properties, they provide diversification benefits, so if one of the rental agreements gets into difficulty; it is only a small percentage of the total fund income.

The SIPP platform you choose will have likely have different a range of direct costs. If you invest in funds, they will also have ongoing charges.

When deciding between platforms, the main charges to look out for are:

• Platform charge. TThis is the cost for holding investments on the platforms and is often either a flat fee, which best for big balances, or as a percentage of the value of your investments (so the most your investments grow, the larger the fee). Often percentage-based charges will be stepped like income taxes, decreasing as the total balance grows. Often the platform charge is higher for traditional mutual funds and capped for exchange traded instruments such as ETFs and shares.
• Selling/buying funds and shares. This is the cost incurred everything you buy or sell investments and is often dependant on the investment type. Active traders looking to make multiple adjustments to their portfolio each month will want to shop around to minimise these charges, as they can really add up. Regular monthly investments often come with a discounted charge rate.
• Transfer-out fee. The cost to move your Investment ISA allowance from one platform to another.

If you already have an ISA or general investment account with an online provider, they may offer discounted platform fees for opening a SIPP, so be sure to check before making any decisions.