“Transparency around fees is paramount,” she says. “Clients should check if the charging structure is a flat annual fee, or a percentage of the invested amount, to find a solution that works best for them.
“Sipps should be clear about any one-off charges. Some schemes charge a one-off fee each time an investment is made. Clients should also keep an eye out for extra charges that apply for drawing benefits or transferring funds.”
Tom Francis, an investment adviser at Wealthsimple, agrees, stressing that choosing the wrong product could cause a client to suffer significant comparative loss, by the time they reach retirement.
“Cost is critical when it comes to retirement planning,” he says.
“Fees compounded over the long run can make a huge dent in people’s retirement savings if they aren't careful. Advisers should make sure their clients understand what they will be paying over the long term.
“Most importantly advisers should make sure that clients are matched to the right portfolio, or mix of funds, depending on their long term financial goals.”
Not for everyone
Sipps, by their very nature, are not suitable for every client. When these products first came onto the market, it was initially thought that such accounts would only be suitable for those with funds exceeding £100,000.
Since then, however, products billed as “low-cost Sipps” have emerged, but advisers should consider whether there is a more appropriate personal pension available.
“As with any financial product, the fees, structure and investment strategies mean that every provider needs close scrutiny before any recommendation is made to the client.
“Typically, we find that those clients most suitable for a Sipp are those individuals who wish to accumulate pension wealth, but are not readily catered for via an employer-sponsored pension scheme,” says Anthony Carty, group financial planning and business development director at the Clifton Asset Management Group.
“We also find that those who may wish to consolidate various historic pension arrangements into one easy to administer environment are suitable.”
