Self-Invested Personal Pensions (SIPPs) allow access to a wider range of investments than more traditional pension options.
The SIPP market is certainly crowded and with over 100 SIPPs available, how does someone go about choosing the right SIPP for them?
1. Allowable investments
Most people start choosing a SIPP by looking at the charges, whilst this is natural, the first thing that should be considered is actually the types of investment that each SIPP will allow. Whilst generically SIPPs can invest in a wider range of assets not each SIPP provider will allow every single type of investment, for example there are some which will not allow commercial property to be bought.
So, the first thing to do is make sure that the SIPPs you are considering will allow the types of investments that you want to buy.
2. Charges
One you have narrowed down your list of SIPPs based on the types of investments they will allow now look at charges. It makes no sense to pay more than you need to, but you should be looking for value for money, rather than a cheap SIPP, where the service might not be up to scratch, or charges increase soon after you have invested.
3. Direct or via an IFA (Independent Financial Adviser)
You may or may not want to take advice from an Independent Financial Adviser (IFA). SIPPs vary, some will take applications via an IFA and also direct from the investor, others only work direct and there are a large number who only take appliactions from an adviser.
Look carefully and only consider SIPPs who will accept your application in the way you wish to make it.
4. Financial stability
You should use a SIPP provider which is financial stable. Whilst there is protection if your SIPP provider goes out of business, and your pension savings are ring fenced, moving SIPP provider can be hard work, time consuming, and costly.
Far better to do your homework upfront, ask for a copy of their latest accounts, do they look financial viable? Are they making a profit?
All of these things, and more, should be considered.
5. Technology
Trading online, or at least being able to view the performance of your investments is becoming more and more important to many investors. Make sure the SIPP provider you choose has the systems to provide the service you need. If you want to trade in shares for example, you will probably want to be able to buy and sell shares online, at a reasonable costs, be able to view your portfolio and also research your targets. Imagine how frustrating it would be if your chosen SIPP provider would not be able to meet your requirements.
Conversly, if you are just buying a single commercial property in your SIPP and nothing else, you probably don’t need to have the ability to trade shares online, and you could be paying for something you don’t need.
Summary
Choosing a SIPP is a complex business, there is so much more to it that simply the charges you will pay.
Spend time doing your homework; the investment will be rewarded with a far happier and longer term relationship with your SIPP provider, which, like a marriage, can be costly to break.
Phillip Bray is an experienced financial writer, regularly contributing to the national financial press, including in the Times, Telegraph, Financial Times, Daily Express, Mail Online, he currently writes for Investment Sense on SIPP pensions.