Clients often ask us whether they should manage their SIPP themselves or enlist the services of UK SIPP trustees to manage their assets for them. Each option comes with its own benefits and possible drawbacks. But the good news is the decision-making is simple: make an enquiry and we’ll connect you to expert pensions advisors, who can point you in the right direction.
This article discusses the following:
What is a SIPP trustee?
A SIPP trustee is a person or organisation that holds assets in the trust for the beneficiaries of the account. They are charged with ensuring the scheme is run properly and that the account holder’s investments are secure.
What are a SIPP trustee’s responsibilities?
There are different kinds of SIPP trustees, each entrusted by the UK Government’s Pensions Regulator to carry out the following responsibilities:
- To follow the trust deed rules and procedures – These are outlined by the FCA and provide nuanced details on how to operate and regulate SIPPs.
- To act impartially, responsibly and honestly – To act professionally, rationally and objectively in all situations, soliciting expert advice, when necessary.
- To act in the best interests of their beneficiaries – Beneficiaries also refers to anyone who may profit from the scheme in the future.
- To use their powers responsibly – Namely, to practice accountability. SIPP trustees have both appropriated and discretionary powers. There are some responsibilities they are obligated to fulfill, such as to invest the scheme’s assets in accordance with their client’s desires, not their own. Other times, they have discretionary power, like to accept certain contributions into the scheme, or to amend the rules of the scheme. In all cases, trustees are expected to use their best judgment and to operate ethically and impartially.
Can I manage my own SIPP?
Yes, potentially, but whether this is viable really boils down to three factors…
- Your work schedule – How much flexibility do you have? Do you have time for routine research and for regularly managing your investments?
- Organisation skills – You would want to keep track of your investments, so having a good online management system and the tenacity to manage that system is crucial.
- Your expertise – Do you feel confident to manage your assets yourself? With self-managed SIPPs, you’ll need to enjoy research and feel comfortable with high-risk situations.
Unsure? Enquire here and we’ll pass you to a pensions expert who can help.
How to manage your own SIPP
You’ll choose an online “low-cost”, or “self-managed”, option, offered by more than 100 firms. The SIPPs come with personalised templates that take into account factors, like your age and appetite for risk, to help you manage your own portfolios.
Here’s what you’ll need to know in order to manage your SIPP successfully:
- Tax rules – Assets in the SIPP are not taxed. On top of that, HMRC gifts you 20-45% tax relief on contributions depending on your contribution rate. For example, if you were to deposit £4,000 in your SIPP, the government adds £1,000, making it £5,000 in total. For all SIPP owners, the maximum you can save is £1.25m. Beyond that, you’re heavily taxed.
- Pension drawdown – From age 55, you can drawdown 25% tax-free sum, paying tax on additional withdrawals.
Managing your own SIPPs can be complex, so give us a call, or enquire here to be passed on to an expert pensions advisor who will be able to help.
Are managed SIPP providers a better alternative?
If you want a SIPP provider, or a SIPP pension trustee to oversee your account for you, you can choose a managed SIPP, also called a “full-cost” SIPP. These SIPPs, naturally, charge higher than low-cost SIPPs for their services and tend to come with, at least, 20% tax relief.
With the “full-cost” SIPPs, the SIPP trustees are the ones who manage your investments, taking variables like your age, appetite for risk and time to retirement into account.
Full-cost SIPPs offer a wider range of investment options than do low-cost SIPPs. Both types “wrap” assets that include UK stocks & shares, Investment Trusts, Unit Trusts, ETFs, commercial property, gilts and bonds, and certain National Savings & Investments products.
Some SIPP providers also allow other investments, like foreign stocks and shares and Open Ended Investment Companies (OEICs)
Who regulates SIPP trustees?
No need to worry whether SIPPs are safe. They’re regulated by four government bodies – the Department of Work and Pensions (DWP), the Pensions Regulator, HM Revenue & Customs and the Financial Conduct Authority (FCA).
The last entity thoroughly monitors the operations, sales and marketing activities of all SIPPs, requiring SIPP trustees to be FCA-certified in order to operate.
One of the FCA rules is that SIPP providers have to have enough money in their bank accounts to cover clients’ money in the unlikely event that their SIPPs fail.
Managed SIPP charges/ SIPP management fees
SIPPs vary their fees depending on the provider. The basic charges include the following:
- The set-up fee: Some, usually low-cost SIPPs, don’t have this.
- Annual SIPP management fee – Also called a “platform fee”. Platform fees can be fixed e.g., £80/yr, or they can be percentage rates tiered to your investments, e.g. 0.30%.
- Annual charges for funds and shares– These come with percentage or flat fees, too and are charged for your funds and shares.
- Trading/ dealing charges – You pay a fee each time you buy and sell an investment. Some platforms charge rates for shares only (not for funds). If you’re an active trader you’ll want to find a platform with the lowest annual and trading charges.
- Additional charges – These may include income drawdown when you retire and exit-transfer fees (around £50) if you move funds into or out of your SIPP.
Finding the right SIPP is not always easy. Give us a call, or enquire here to be passed on to an expert pensions advisor who will be able to help.
Speak to an expert SIPP advisor
Call Online Money Advisor today on 0808 189 0463 or make an enquiry here.
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