Compare the Best SIPP Providers UK October 2024

Who is the best SIPP provider?

There technically isn’t a “best” SIPP provider, as the right choice for you will depend on your investment strategy and needs.

For example, if you have a large pension pot, you may want to consider using a SIPP with fixed fees rather than a percentage-based fee. This way, you won’t face excessive charges on your retirement savings.

Or, if you have a smaller pension pot but would prefer to make large volumes of trades, then a SIPP with low trading fees may be ideal for you.

If you’re still not sure about which self-invested personal pension provider to choose, consider taking investment advice or independent financial advice from a financial adviser.

How to choose the right SIPP provider

Before deciding on a SIPP provider, you should first shop around and compare the different options.

You should closely examine your investment strategy and retirement goals and figure out which SIPP would best suit you. You will need to consider the fees, charges, and investment options available in order to ascertain which SIPP is best for your requirements. Note that the providers I have listed here are all regulated by the FCA.

Fees

It is important to look for ways to reduce the costs of holding your pension, as these can start to erode away at your gains. Large pension pots may well benefit from a flat fee structure, such as you would find at Freetrade, whereas small pension pots will fare better with a percentage fee, such as you would find at Vanguard.

Investment options

The purpose of a SIPP is to provide greater freedom over how your pension fund is invested. Therefore, it is important that the platform you choose has investment options that suit your experience.

Less experienced investors would benefit from managed funds, where they can take more of a back seat when it comes to managing their investments. PensionBee and Moneybox are both good options for investors who plan to set it and forget it. AJ Bell and Fidelity both offer a wide range of investment options for those who like to pick and choose their own assets.

Employment status

There are options on my list that would almost certainly be more suitable for those who are self-employed. This is because they offer the flexibility to adjust your pension savings in line with changes in your income. PensionBee and Penfold tick these boxes.

Features

Decide which features may benefit you. If you have multiple pension pots already in existence, then you may benefit from a pension consolidation service to bring them all together, such as you would find at PensionBee.

Those that struggle to save may benefit from rounding-up features such as those you would find at Moneybox.

Comparison table

Here is a snapshot of each of the providers I have recommended in order to make your selection easier.

What is a SIPP?

A self-invested personal pension (SIPP) is a type of personal pension that gives you more control over how your retirement savings are invested.

In a SIPP, you can choose and manage your own investments, giving you flexibility in deciding exactly how your money is invested.

Compared to other forms of pension, a SIPP typically offers investors a wider range of different investment options.

Also consider: Best Pension Providers for Private Pensions

Investments that can be held in a SIPP

One of the fantastic things about a SIPP is the wide range of investment choices you have. It’s worth noting that not all SIPPs offer the same range of investments. So, before choosing a provider, you should ensure that it allows you to invest in your desired asset.

These investments vary from the standard to the more specialist, so keep reading my guide to find out exactly what you can hold in your SIPP investment portfolio.

Stocks and shares

Perhaps the first assets that come to mind when you think of investing are stocks and shares. This is when you essentially purchase a fraction of a stake in a company, so when you buy shares, you technically “own” a very small part of that company.

Businesses will typically issue shares in an attempt to raise funds to cover operation costs or finance new projects.

When you buy stocks and shares, you can either sell them for a profit if they increase in value, or you can hold them and rely on dividend payments, which are a regular income paid by some companies for holding their shares.

See also: My guide to Best Dividend Stocks UK

You should keep in mind that dividend yields vary from company to company, and some businesses don’t offer dividends at all. So, if you want to invest for an income, you should first ensure that the company you wish to add to your SIPP offers dividends.

Funds

Instead of investing in a single company, funds offer a method of investing in a wide range of businesses with a single investment.

Funds are a form of pooled investment that is overseen by fund managers. These fund managers will use the money from investors to invest in a wide range of assets, depending on the type of fund.

Even though you’ve only invested in a single asset, you technically gain exposure to all of the companies or assets that the fund invests in.

There are several different types of funds, each with its own benefits. This includes:

• Exchange-traded funds (ETFs)
• Investment funds
• Investment trusts
• Open-ended investment companies (OEICs)
• Collective investment schemes

Much like trading stocks and shares, you can either sell your stake in a fund for a profit if it rises in value, or hold it and rely on dividend payments.

If you aren’t as confident making your own investment decisions, then a fund could be a useful investment for you. This is because, since funds are managed by financial experts, they typically know the best ways to invest your money.

Gilts and corporate bonds

One avenue for investment that you may not have initially considered adding to your SIPP is bonds.

Bonds are a type of financial instrument issued by a government or business. You can typically purchase gilts and corporate bonds. Gilts, or treasury bonds, are issued by a government in an attempt to raise money for public works. Meanwhile, a corporate bond works similarly, but for businesses instead.

If you purchased a bond, you would technically be “loaning” money to the issuing agency. The borrower can then use the money raised from the sale of bonds on planned projects.

After purchasing your bond, you’ll typically be paid regular interest at a pre-agreed rate, which is called the “coupon”, until the bond matures.

Then, when your bond reaches its maturity date, you’ll usually be paid back the amount of money you initially invested.

Property

Perhaps the most surprising asset you can add to your SIPP is property, giving you the chance to diversify your portfolio even further. While this tends to be commercial property, you can also invest in residential property if it’s through a Real Estate Investment Trust (REIT).

Investing in property through your SIPP is tax-efficient; you typically won’t face Income Tax or Capital Gains Tax (CGT) once the property is in your SIPP. When the property you’ve invested in rises in value, you can sell it much like any other asset held in your SIPP.

The different types of SIPP

As well as having a wide range of investment options, there are also different types of SIPPs. Each has its own set of benefits and downsides, and one type of SIPP may suit you better than others.

Keep reading to discover the types of SIPPs on offer to help you decide which would best suit your retirement needs.

Full SIPPs

A full SIPP will typically offer you a much wider range of different investments compared to other types of SIPPs.

If your reason for investing your retirement savings in a SIPP is for greater control over how your pension pot is invested, then a full SIPP could be for you. The provider will typically give you information and help administer your SIPP, but you are completely responsible for your investments held in a full SIPP.

While they do offer more control over your investments, it’s worth noting that full SIPPs do tend to have higher fee structures when compared to other types of SIPPs.

Simple SIPPs

A simple SIPP, which is commonly referred to as a “low-cost SIPP”, is similar to a full SIPP, except it typically offers fewer investment options. Despite this, you’re still responsible for your investments, as the provider will not manage them for you.

As a counter to the smaller range of investment choices, you may find that simple SIPPs are typically cheaper than their full counterparts.

Ready-made SIPPs

Meanwhile, some providers may offer a ready-made SIPP, in which the investments have already been chosen by the provider.

The provider will typically give you the choice between a number of small, ready-made portfolios depending on your investment goals, but this is essentially the extent of your control over how your retirement savings are invested.

If you aren’t as confident making your own investment decisions or would rather be less hands-on when it comes to investing for your retirement, then a ready-made SIPP could be more suitable for you.

SIPPs vs private pensions

SIPPs are very similar to private pensions. Though, unlike a typical private pension, a SIPP gives you greater control over how your money is invested, offering an additional level of flexibility.

Also, a SIPP tends to offer investors a much wider range of investment choices, including specialist assets such as commercial property that usually wouldn’t be available in standard private pensions.

This means that a SIPP could be an effective choice for saving towards retirement if you’re an experienced investor and know what you’re doing. Though if you aren’t as confident making your own investment decisions, then another form of private pension may better suit you, as the investments held in them are typically picked and managed by the provider.

Low-cost SIPPs vs regular SIPPs

When it comes to choosing your SIPP, you have two main options: full SIPPs or low-cost DIY SIPPs.

The low-cost variety of DIY SIPPs tends to have a smaller range of investments available to you, though they usually have lower fee structures. Meanwhile, a full SIPP typically has a much wider offering of investments in return for higher fee and charge requirements.

If you’re a confident investor and wish to purchase more specialist assets, such as commercial property, then a full SIPP could be preferable.

Though if you would prefer to invest in more common assets, such as stocks and shares, and don’t want excessive fees and charges eating into your retirement savings, then a low-cost DY SIPP could be the right choice for you.

How much can be paid into a SIPP each year?

When it comes to making pension contributions to your SIPP, you are typically restricted by two limits: the Annual Allowance and the Lifetime Allowance.

The Annual Allowance is the total amount you can tax-efficiently deposit into your SIPP each tax year. While you can go over this allowance, your contributions won’t be as tax-efficient if you do.

As of the 2023–24 tax year, the Annual Allowance is the lower of £40,000 or 100% of your annual income.

Then, you also have the Lifetime Allowance to be wary of. This is the total amount you can build up in your pension pots across your lifetime without incurring a tax charge when you come to withdraw your funds. As of the 2023–24 tax year, this stands at £1,073,100.

SIPP tax relief

SIPPs come with valuable tax benefits and are considered to be highly tax-efficient. Indeed, as well as sheltering your investments from Income Tax and Capital Gains Tax (CGT), you are also entitled to Income Tax relief.

This is when the government tops up your SIPP contributions, depending on the value you contributed and your personal Income Tax rates.

For example, if you were a basic-rate taxpayer and contributed an £800 lump sum into your SIPP, then you would have technically made a £1,000 contribution overall. This is because the government would top you up with £200 of basic-rate tax relief on your contribution.

Meanwhile, higher-rate taxpayers would be able to claim an extra £200 on this contribution, while additional-rate taxpayers could claim back an additional £250. You must claim any tax relief above the basic rate through a self-assessment tax return.

It’s worth noting that tax relief is where the Annual Allowance comes into play; if you exceed your Annual Allowance on SIPP contributions, you typically won’t receive tax relief.

SIPP withdrawals

When you eventually reach retirement age and it’s time to withdraw from your SIPP, you have several different options to choose from.

You’ll typically be able to take the first 25% of your pension pot as a tax-free lump sum at age 55 (rising to 57 in 2028). But beyond this, you will need to decide how to take the rest of your pension funds, and depending on your retirement goals, some methods will suit you better than others.

Continue reading my guide to discover exactly how you can withdraw money from your SIPP, so you can decide which method would best suit you.

Buy an annuity

An annuity is essentially a product you purchase that guarantees you a set income for either the rest of your life or for a set period of time.

When you purchase an annuity, you hand your pension savings over to the annuity provider, after which they will calculate your average life expectancy.

Then, depending on the size of your pension pot and your estimated life expectancy, the annuity provider will provide you with a guaranteed monthly income.

It’s important to note that when you purchase an annuity, the transaction is irreversible, and it isn’t passed on to your next of kin when you die. For this reason, you should shop around for different annuities before purchasing one, as different providers will offer varying rates.

Flexi-access drawdown

You can also set up a flexible retirement income from your SIPP, which is commonly referred to as a “pension drawdown”.

This withdrawal method allows you to take your initial 25% lump sum tax-free and then leave the remainder invested. You can then draw the remaining sum as an income over a longer period of time.

After receiving your first 25% lump sum, the income you take from your remaining pension pot is typically subject to Income Tax rules.

See also: Best Performing Drawdown Pension Providers

Take it as one or multiple lump sums

As mentioned, when you first withdraw from your SIPP, you can take the first 25% lump sum tax-free. Though there’s nothing stopping you from taking the rest of your pension pot as lump sums.

It’s important to keep in mind that only the first 25% lump sum is tax-free. The rest will usually be subject to Income Tax at your marginal rate.

SIPP charges: everything you need to know

The fees and charges you face when you use a SIPP will depend on the type you have. While these fees may vary depending on the provider, you can expect to find the same types of fees across the board.

Continue reading to discover the fees you may face when you use a SIPP, and exactly what they’re for.

Platform fees

A platform fee is essentially a monthly, quarterly, or annual charge for having an account with the provider. This is typically charged as either a flat fee or a percentage of the value of your investments.

If your pension pot is particularly large, you may want to consider using a SIPP with low platform fees or a provider that charges a flat fee. This way, percentages won’t eat into your retirement savings.

Dealing charges

The dealing charge is the price you typically pay for buying and selling assets through your SIPP. These are similar to the brokerage fees that you face for trading on the stock market through an investing app or online investment platform.

It’s worth noting that some SIPP providers may offer dealing charge discounts for frequent traders or zero commission dealing, such as you would find at Freetrade.

Transfer fees

If you wish to change your SIPP provider and transfer your assets to another account, you may face a transfer fee.

This is typically based on the number of assets and investments you wish to transfer from your existing pension. It’s essential that you check how your provider will charge you before you make a transfer.

Management charges

If you invest in funds through your SIPP, there’s a good chance you’ll be asked to pay management charges.

These are designed to compensate and cover fund managers who are making investment decisions for their funds. It is typically charged as a percentage fee.

Which is better: SIPPs or ISAs?

SIPPs and ISAs are both tax-efficient ways of saving money, with a few key differences between the two.

With an ISA, you can generally make withdrawals at any time. Lifetime ISAs (LISAs) differ slightly, as the money held in one can only be withdrawn for the purchase of a house or at age 60.

Meanwhile, since SIPPs are designed to help you save for retirement, the money held in one can typically only be withdrawn when you reach the normal minimum pension age (NMPA). This is currently 55, although it is set to rise to 57 in 2028.

The contribution limits also differ slightly between ISAs and SIPPs. For instance, as of the 2023–24 tax year, the most you can deposit into a SIPP tax-efficiently in a single tax year is £40,000, while ISAs limit you to £20,000 a year.

Also, you won’t receive tax relief on contributions made into your ISA, while you are entitled to tax relief with a SIPP, although it is important to note that any gains made from investments held within an ISA are exempt from Capital Gains Tax

The better choice of the two wholly depends on your investment goals. If you are trying to save for retirement, then a SIPP may be preferable.

Meanwhile, if you are saving for another milestone purchase, such as your dream home or renovations, then an ISA may better suit you.

Of course, as mentioned, there are several different types of ISA, each bringing its own set of benefits to the table. So, continue reading to discover exactly how SIPPs compare to the different forms of ISA.

See also: My guide to ISA vs SIPPs

SIPPs vs Cash ISAs

A Cash ISA is essentially a tax-efficient savings account. When you hold money in a Cash ISA, you can earn tax-free interest on your savings and can typically choose between a variable or fixed interest rate.

This differs quite significantly from a SIPP, as, while you could hold cash in your pension, you can’t make investments through a Cash ISA. Equally, one of the useful things about a Cash ISA is that you can normally make withdrawals whenever you want.

So, if you are saving more generally and think you’ll need the money for something, then a Cash ISA could be for you. Meanwhile, if you can afford to leave the money invested and want to save exclusively for retirement, then a SIPP may suit you better.

SIPPs vs Stocks and Shares ISAs

A Stocks and Shares ISA is a type of tax-efficient investment account. Much like a SIPP, a Stocks and Shares ISA allows you to invest in companies listed on the stock market, among other assets.

Even so, you may find that SIPPs have a greater offering of investments. While you can hold physical commercial property such as offices and warehouses in a SIPP, you’ll typically be unable to do this in an ISA. So, if you have a specialist investment in mind of this nature, then it may be worth going for a SIPP over a Stocks and Shares ISA.

Typically, you’re able to access the value in a Stocks and Shares ISA more easily than in a SIPP. So, if you’re investing for a shorter-term goal than retirement, an ISA may be preferable.

SIPPs vs Lifetime ISAs

A Lifetime ISA (LISA) differs slightly from the other forms of ISA on offer. They are available to people aged between 18 and 39 and are designed for saving towards either the purchase of a first home or retirement.

As such, you can only withdraw money from your LISA when you’re purchasing a new home or when you reach the age of 60. If you do attempt to withdraw money from your LISA for any other reason, you’ll typically face a 25% tax charge on your withdrawal.

One great feature of LISAs is the government bonus: you can contribute up to £4,000 (counting towards your overall £20,000 ISA allowance) into your LISA each tax year, and the government will pay an extra 25% bonus on top of your contributions, up to the value of £1,000 a year.

If your main investing goal is to build a retirement fund, then it may be worth considering both a SIPP and a Lifetime ISA. Since the LISA allowance is relatively low, you may be able to make the most of it while also contributing to your SIPP.

The pros and cons of a SIPP

SIPPs have both advantages and disadvantages that should be noted before you start investing in one. Keep reading my in-depth guide to discover the pros and cons of SIPPs.

Advantages of investing in a SIPP

• You have greater control over your money

One of the most attractive things about a SIPP is the control it gives you over how your retirement savings are invested. They give you the power to make your own investments, giving you greater flexibility and direction over your pension pot.

• There’s a wide variety of investment options

As well as giving you greater control over your retirement savings, SIPPs also give you a much wider range of investment options.

You can typically invest in a number of different assets, including:

• Stocks and shares
• Funds
• Investment trusts
• Property
• They’re typically tax-efficient

When you invest through a SIPP, your investments are typically protected from Capital Gains Tax and Income Tax.

Better yet, you are also entitled to tax relief on contributions made to your SIPP, depending on your Income Tax bracket.

• You can consolidate your retirement savings in a SIPP

If you have multiple pension pots and would prefer to have all of your retirement savings under one roof, then a SIPP allows you to consolidate multiple pots into a single scheme.

Since you will have fewer pension pots to worry about when you consolidate, this can reduce the stress involved with managing several different pensions. Also, you may find that you’ll pay less in fees and charges when you merge your pension pots.

Disadvantages of investing in a SIPP

• You need to know what you’re doing

While a SIPP does give you control over how your money is invested, being entirely responsible for the investment management does mean you typically need to know what you’re doing.

For instance, if you made a poor investment due to a lack of investing knowledge, you could end up losing some of your retirement funds.

Fortunately, some SIPPs do offer investing advice, and some types of SIPPs, such as the ready-made variety, give you a number of pre-built portfolios to choose from.

• You may face additional costs or charges

When you use a SIPP, there’s a chance you could face higher costs and charges when compared with other types of pensions. This includes:

• Account set-up fees
• Platform fees
• Exit fees
• Trading costs

Of course, some SIPPs, such as low-cost SIPPs, offer lower fees in exchange for a limited range of investments.

• Your investments could lose value

As is the case with all types of investing, there’s always the chance that your investments could decrease in value. While this risk can be mitigated with adequate diversification, sometimes a sudden drop across markets can’t be avoided.

COVID-19, for example, was a completely unpredictable event that caused share prices around the world to drop significantly. If you’ve made your investments through a SIPP and markets take a sudden downturn, your retirement savings could be negatively affected.

• There’s a limit on tax relief

While tax relief is a great aspect of SIPPs, you are limited to the amount of tax relief you can receive in a year.

As of the 2023–24 tax year, you can receive tax relief on contributions up to the Annual Allowance of £40,000 or 100% of your earnings, whichever is lower.

Also, when you withdraw from your SIPP, you can only take your initial 25% lump sum tax-free, with the rest typically being subject to Income Tax.

Best SIPP Provider FAQs

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.