SIPPS seem like a good idea – a self-managed pension plan where you are in control and can make informed financial decisions about your retirement.
The trouble is SIPPs are not a well-engineered pension product but a mismatch of bits of this and bits of that which can seriously damage your retirement prospects.
The SIPP market is in a state of flux.
- One company, Freedom SIPP, has just folded for not paying tax bills.
- Interest returns on cash savings held in the plan are minimal because fund managers are raking in commission and hidden charges, according to a survey by savings bank Investec.
- Some assets in a SIPP may hot have any financial protection – especially if the SIPP is managed by a trust
If you have a SIPP, now would seem a good as time as any to lift the bonnet and see how well the pension is performing.
The basics that should be in place are online functionality for showing fund assets and current market values. Managing the SIPP should be easy online – like transferring funds and paying in cash.
One criticism of SIPPs is transparent fee scales and add-on charges for extra services for changing funds, paying in additional contributions and other basics that should be included in the price. Average annual fees for a SIPP are around the £500 mark – if you are paying more perhaps you should ask why.
One of the problems with SIPPs is trustees and managers try to keep costs down by cutting customer service that results in long telephone waits to find out information, no continuity in dealing with issues as different customer advisors answer the calls and delays in implementing decisions.
If you have a SIPP and suffer from any of these problems, then perhaps you should consider voting with your feet and looking at the options.
Certainly if you are living or retiring overseas a QROPS is an alternative scheme that has more tax benefits than a SIPPs and rids the investor of the requirement to invest in an annuity.
If you need help rating your SIPP, financial data group defaqto (link: http://www.defaqto.com/star-ratings/sipps) have already done the hard work and given star ratings to a wide range of plans.
