Clients often find choosing the right SIPP a hard decision to make, so we thought we would offer six quick tips to help you find the right SIPP.
1. Think about what you want to invest in
Most people start with charges, this is wrong. Yes, charges are important, who doesn’t want to get value for money?
But it’s more important that your SIPP can access the investments that you want to buy.
Start by thinking about the investments you want to hold, decide on these and then start to look at charges. Using this approach is a great way of filtering down the wide range of SIPPs available to the ones that will actually do what you want them to.
2. Compare charges
Once you have produced a list of SIPP providers who will allow make your chosen investments you should consider cost. It’s here that you might start scratching your head.
SIPP providers levy a complex myriad of charges and comparing different SIPP costs is not an easy task. Those of you with a working knowledge of Excel will really come into your own here!
Think about whether you want your SIPP provider to charge you a fixed fee or whether a percentage of what you invest will work out cheaper. As a rule the larger your fund the more advantageous fixed fees are.
Really look ‘under the bonnet’ of the SIPPs on your shortlist, making the wrong choice can be expensive as some SIPPs charge exit fees should you move elsewhere.
3. Remember service is important
Charges and investment performance are the two things that will have the greatest affect on your return.
However, the level of customer service from your chosen SIPP provider is also important.
Make sure your chosen SIPP is as flexible as the marketing literature claims.
Yes, it might say you can invest in a deposit account, but is that an account of the SIPP provider’s choice or can you use any account?
The SIPP may allow you to buy shares, but can you use the trading platform of your choice? Or do you have to use the one mandated by the SIPP?
Remember, flexibility isn’t always about being able to buy a type of asset; it can also be about how you buy that asset.
5. Do you actually need a SIPP?
Comparing SIPPs has taken over from house prices as the financial topic of choice at many dinner parties.
But take a step back, do you actually need one?
If all you are going to buy is funds, also known as collectives, using a Personal Pension Plan may well be cheaper than a SIPP.
True a Personal Pension may not have the cache of a SIPP, but it may be cheaper, what price a badge?
6. Do you take advice or not?
Not an easy choice this one.
Many people very successfully run their own SIPPs without the help of an IFA; others however wouldn’t go near a SIPP without an adviser to guide them through the maze of providers and options.
Firstly if you take advice make sure it from a fee based independent adviser.
Secondly, remember that there are different levels of advice. You may, for example, be happy to make your own investment decisions, but need help choosing the right SIPP. Alternatively you may want advice on both the SIPP and the investments.
For all but the savviest investors the right IFA should be able to add value. How many consumers have heard of Liberty, InvestAcc, Carey Pensions or Talbot & Muir? All are reputable SIPP providers, each with their own place in the market, however without taking advice these and others may pass you by.
Choosing a SIPP which is right for you is not easy.
Providers are as different as chalk and cheese, comparing the charging structures alone is enough to baffle most advanced mathematicians!
Following our six tips will help you make a better decision, but there are many other things you might like to consider; more of these over time.
For now, please allow us one final, shameless plug, click here to read the kind words of one very satisfied Investment Sense client who we have helped make the right SIPP decision.