Deep Blue Publications Group LLC: DIY pensions, The cheapest Sipp fund shops

If you are struggling to make sense of the cost of investment shops, use our tool to cut through the detail and find the cheapest

If you are struggling to work out whether you would save money by switching your self-managed pension to another provider, we have just the help you need.

Rather than wade through pages of numbers from each company, or type all your details into an online comparison tool, just take a look at the image, above.

At a glance, it will show you whether your existing investment shop is cheap (green), expensive (red) or somewhere in the middle. This table shows your costs in pounds and pence; the one below displays them as percentages.

As you can see, the results vary greatly according to how much money you have invested. Very few companies – iWeb, part of Halifax, seems to be the exception – are cheap for small and large amounts alike.

While the tables, which were compiled by Lang Cat, a specialist consultancy, offer an instantly understandable guide to the cost of running your Sipp, they do rely on certain assumptions, which are shown on the graphic, so you may need to dig a little deeper to uncover the full costs that apply in your own circumstances.

They also assume that the management fee on a fund is the same irrespective of which investment shop you use, whereas some, such as Hargreaves Lansdown, have negotiated special discounts. However, some experts expect such differences to narrow or disappear as competition hots up.

Sipp charges from major fund shops shown as percentages of the amount invested
Assumptions for all tables: charges deducted by the fund management company are excluded – only charges levied by the fund supermarket are covered. The table covers ongoing annual costs, so any initial charges are excluded. All investments are assumed to be in funds. Where there is a charge to buy or sell funds, we have assumed that there are five fund switches – or 10 trades – a year

Hargreaves Lansdown makes no charge to set up capped drawdown but starting a flexible drawdown plan costs £354. Each recalculation of the maximum income you can take under capped drawdown costs £90 and the company charges £12 to change a payment amount.

Alliance Trust Savings charges £240 to set up a capped plan and £300 for the flexible variety, with an annual charge of £90 for either. Buying an annuity costs £180 and processing of a death claim will cost £240.

At AJ Bell Youinvest, formerly Sippdeal, you pay £180 to set up either kind of plan and an annual administration charge of £120 (£60 if you take no income in a year); a review of capped income costs £90.

There is no charge at Charles Stanley Direct to set up a capped plan but a flexible one costs an initial £300. Income reviews cost £120.

Barclays Stockbrokers charges an initial £90 and annual £120 for either type of drawdown.

There is no initial charge at Fidelity to set up either kind of plan but annual charges are £100 (capped) or £300 (flexible).

iWeb loses some of its low-cost aura when it comes to drawdown: it charges £150 a year up to the age of 75 and £250 a year from your 75th birthday.

How to ensure a smooth switch for your DIY pension

No one wants to pay unnecessary costs, especially if they are coming out of your pension income. So if you want to start saving into a self-managed pension alongside a work scheme, it makes sense to choose the cheapest provider.

Start on the right foot

Look down the column for the amount you are planning to invest (or are likely to have in future) and look for the green boxes. Our tables assume that you invest exclusively in funds, so you may need to do some sums yourself if you make use of shares and investment trusts as well.

Consider making a switch

If you are already a customer of one of these companies, the question is whether you could save by switching and whether it would be worth while.

Switching while you are still saving...

This is more straightforward than moving a drawdown plan but there are still costs and pitfalls to look out for. For example, some fund shops charge to transfer your investments to another provider – Hargreaves Lansdown, for example, will introduce a fee of £25 per fund or share moved in June. The receiving fund shop may charge too.

Having your money in cash as opposed to shares will clearly be a benefit if the markets crash, but equally you could lose out if share prices are rising.

...and switching drawdown

Transferring a drawdown account will trigger an income recalculation and force future reviews to be every three years; currently some customers are on a five-year cycle. If you were able to take your pension at 50 under old rules but have not reached the new threshold of 55, you will not be allowed to carry on taking an income if you switch provider, said Claire Walsh of Pavilion Financial Services.

Think beyond the price

Some investors will want to consider other points such as the ease of using the fund shop’s website and the quality of its telephone helplines. You may also want the reassurance of using a financially strong company or one backed by a bigger group. Sipp providers are being forced to hold more money in reserve by regulators; some experts expect this to result in some smaller firms closing or being taken over.

The cost of running your Isas

These tables, also from Lang Cat, also show the cost of investing in Isas as a percentage of amount invested...

...and in pounds and pence: