SIPP Pricing

Ideas 💡
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Hi there,

Any info or useful opinions on the below would be helpful for my own understanding.

Fairly recently, I transferred an old workplace pension to Moneybox. It was from my first job, so there isn’t an awful lot In there (less than 10k). I was paying 1% a year at Scottish Widows and getting very little in return, so I looked around and chose Moneybox due to their 0.45% annual fee and a reasonable, albeit restricted, selection of funds, with a really sleek and tech-first approach to their products. Naturally, the funds have their own charges, so my annual charges are roughly 0.65% a year, which I was happy with, given it’s a 35 percent saving on my prior fees. However, the lack of choice in the funds they offer, no web platform, and potentially lower fees led me to look at Vanguard.

Vanguard fee is 0.15% a year and then you access loads of their funds. Naturally, you’re restricted to Vanguard products, but it’s a compelling offer at first glance, as I could get my annual charges down to an average of roughly 0.30% vs 0.65% currently. However, upon further review, I found many complaints about customer service, the lack of an app (which they are apparently building now, which is poor given it is 2024) and a few other complaints. I created an account and looked at transferring there, only to immediately hit some snags. It then led me to review my decision to choose Moneybox over Freetrade initially (a bit of a detour, but I am getting to the meat of my point, lol)

I have almost decided on AJ Bell, as it is likely going to be the best solution for me. My needs are potentially different to others. The size of my pot is one factor, as well as my investment preferences. I want to let my money sit in a handful of low-cost index funds and not touch it. The 0.25% management fee, GBP1.50 dealing charge per fund and variety of funds and products to choose from, as well as a web platform and app, seem to be the winner. The irony in this is that I left AJ Bell and moved my money to Freetrade for my GIA, so it got me thinking…

Freetrade is on a mission to democratise investing. I appreciate the freemium pricing model to a degree, but let’s think about it this way. In my opinion, Freetrade is built for those who prefer a tech-first approach and fairer pricing. This is achieved fairly well in the GIA and ISA pricing and products. But to have a SIPP with Freetrade, I would have to pay GBP120 a year just for the account, excluding any FX fees. Granted, this offers you a massive selection of stocks, ETFs etc, but when you calculate that as a percentage of a small pot a year, that’s chunky. If we compare it to Moneybox, a 10k pot would attract an annual management fee of GBP45 a year, almost 66% less. Keep in mind that this fee from Moneybox covers everything except the fund charges themselves, so there’s no fx, no commissions, reinvestment fees etc. Pension Bee takes it a step further and charges a flat annual fee per year, depending on the plan you choose. Their selection is even more limited, but as far as simplicity of fees, thats it.

Naturally, there will come a point where a percentage-based fee will intersect with an absolute fee. As the value of the pot increases (ignoring the fee caps, as they vary, but are usually much higher than GBP120 a year anyway), the absolute fee will become cheaper for someone once those fees intersect. If my calc is correct, assuming a 0.45% fee and Freetrades GBP120 a year, that intersection would be circa GBP26 660 (a 0.25% fee would be GBP48 000). Of course, I assume Freetrade has done their market research and tied that into their strategy regarding price and that this figure could be lower than the average SIPP value anyway, or at least the SIPPs Freetrade is targeting, which is why I am not complaining about the fee, but seeking to understand it better.

Perhaps the goal is to attract higher net-worth individuals in a drive to quicker profitability for the product and the company, which is fine. But there is a reality here, in my view, and it’s this- younger people who are already serious about their pension saving and managing their own pensions are potentially going to be locked out of a SIPP with Freetrade, even though one could argue that they could be the high net worth individuals of the future. Granted, some may unlock value in this by getting the other benefits of this with Freetrade, such as lower FX fees, more stocks, interest on cash. But many will also realise that they can achieve this by having accounts with other brokers with different business models and pricing structures and not have to pay the subscription to get what they need.

Given Freetrades decision to refocus on the UK and build more products for the UK, would there be a time when Freetrade offer another SIPP offering? Or offer the SIPP out of the bundled subscription and move to a percentage fee instead? If I could move my SIPP to Freetrade and pay between 0.25% and 0.45% annual fee, and have maybe a selection of 25 ETFs (or funds, if Freetrade rolls them out in the future), then I would do it in a heartbeat. The Beta rollout of the new web platform, which Moneybox doesn’t have, provides extra peace of mind for me too.

I moved to Freetrade because they didn’t charge high upfront fees and commissions the way Bell did. It opened up a whole new world for me. It feels weird to me that the SIPP offering has me going to Bell for the same reasons that I originally left them. Of course, this entire post is very subjective and may not be relevant for most, which is why I’m keen to hear other thoughts and opinions, for my own understanding.

Thank you kindly.

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Maybe a good idea one day would be to have different SIPP options depending on the size of the portfolio which you can change when you hit the set targets. This could accommodate a wider audience.

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So complicate pricing even more by introducing percentage based pricing along side fixed pricing ?

Imo this is the reason other platforms exist. One of the reasons Vanguard is quite good is that starting a pension is relatively cheap with them, but at the expense of both choice of investment, and time of investment.

Similarly with AJ Bell, I assume you’re looking at restricting your investments to minimise the fees? The platform fee isn’t their only SIPP fee, you still have dealing charges of £5 for shares (including ETFs) and £1.50 for funds.

Even if you only use their regular investing option that reduces that fee to £1.50 (at the expensive of reducing the range of available investments), your restricted to investing only 5 investments per month before its more expensive than Freetrade (assuming a maximum SIPP of £10k)

Additionally they have a 0.75% Fx fee.

Sure, you might be able to make it a little cheaper. At the expense of limiting availability of shares, limiting number of investment opportunities.

And there’s the added complexity of managing what you’re spending. Whats easier? £10/m; or every month keep track of number of investments vs total SIPP balance?

Freetrade is more expensive if you have a small SIPP, and so for people who are just looking to invest in a single fund or similar Vanguard is the best option until you reach about 80k (and they are a good platform, better than AJ Hell (as some put it here))

But anyone wanting access to more options these platforms tend to not offer what you’d want or can quickly become more expensive or increase in complexity as you need to impose barriers to your investing. Realistically £120 a year for access to an investment platform is very little.

You pay more for your streaming services… which is just disposable entertainment

Disney+ premium is £110 a year
Netflix premium is £215 a year
Amazon prime is £95 a year (plus another £36 a year to remove ads)

Freetrade is £120 a year

So while reducing fees is a good thing. We also need to be realistic, you’re not comparing the same things, and when we’re saying £120 a year for SIPP and ISA is expensive… its kind of ludicrous

But if you do have a small pension just now, and you dont want to invest in anything but a handful of funds, go move it to Vanguard for now unless you think you’d benefit from the Freetrade plus plan that includes the SIPP and want to be able to invest in more things and get the lower Fx

(Also remember to vote for your own idea)

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Which would then get people to leave in droves once their pot hit a certain limit.

£120 for a SIPP and ISA is a bargain but won’t be the best option financially for everyone. I’m pleased that Freetrade arent competing in the race to the bottom.

We have never been so lucky to have so many options available for investing, and transferring between. Revaluate yearly and go with what is best for you financially

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Everyone needs to do their own calculations to see what is their best value option.
Aviva charges 0.4% for their Pension plan, which is on the higher end. But prices are around 0.2-0.4%.

For a pot of 50 000, at 0.4% that’s a total of £200 a year. Even if you are not using the ISA, it’s cheaper than keeping the money there. If you have a pension of 40k, paying a 0.3% annual fee, that’s £120, which is the same as Freetrade annual fee.

If you consider that you are paying £5 month for the ISA(and you are using a ISA anyway), the SIPP product cost you £60 a year. That’s exactly a £20 000 pot at 0.3% annual fee. So, if you are using the ISA and have a pension of 20K or above paying 0.3% annually, you are better of on Freetrade. This excluding FX fees, which you can avoid by buying UK based ETFs on your pension. Do you own assessment and cost comparison.

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Is there a TL;DR? Because that’s a lot of text.

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To be fair, I personally dont feel that the pricing is complicated, but that the pricing is potentially locking some of the SIPP demographic from investing with Freetrade.

Regarding fees, yes you are correct. I am a Buffett/Munger/Jason Zweig disciple when it comes to fees vs fund performance. Each to their own, but I would rather get fees to a healthy level, given they will eat away at my pension for many years. Bell fees are high for ETFs and shares. Admittedly, if I transferred there, I would avoid those and stick with funds and the GBP1.50 charge. It’s worth mentioning that the SIPP is static and I do not plan to contribute to it in the near future, so my thinking is I could effectively spend GBP15 by investing in 10 accumulating index funds and then only pay the management fee and fund fees every year. But I take your points on the charges vs a subscription.

Out of interest, do people really prefer Vanguard to Bell? What have you heard?

Its always tough to compare apples to apples because of the pricing structures and business models. But to give some context, I hold most of my non-SIPP investments with Freetrade. Recently, I have tweaked that strategy. I can effectively have a GIA with Freetrade and buy UK shares or ETFs there, US shares on Robinhood and pay no fx or on T212 and pay 0.15% vs 1% on Freetrade, and I can buy European shares on Trading 212 for the same fx fee. I could have an ISA and pay no custody fee with them too. At the end of the day, I want a GIA and a SIPP and would have liked to have both at Freetrade, but it’s not cost-effective to do so, which feels like a shame to me. But as I say, I’m not aiming to criticise Freetrade with this, but just to get a feel for the reasoning behind it.

Maybe an idea would be to allow people to build their own bundle. So if I want a GIA and SIPP but no ISA, then I could have the standard plan and have the two accounts under that subscription? Thats an offering that would solve the issue I am experiencing and others may too.

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Each to their own. I agree though, there surely hasn’t been a better time in history than now to be an investor.

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I agree that it is a good value proposition if you use all three accounts and have a SIPP that benefits from being large enough for the fee to become cheaper than competitors.

As I mentioned in a different reply, perhaps an idea could be for people to choose their bundle for the standard plan? So in my situation, pay the 5 pound a month and have a GIA with lower fx fees and a SIPP instead of an ISA? Or let the SIPP have its own pricing structure and allow those who choose the plus plan to unlock that extra value that they will get from it?

It just seems a shame for those in a similar position to me to go to Vanguard or Moneybox when they could be starting their journey with Freetrade instead?

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Vanguard 100%. If your happy with the funds they have and aren’t concerned about their market domination (them and Blackrock have huge power due to the control over voting since you aren’t investing directly) then vanguard is a good option for sipps below a certain amount.

With a note on the other persons mention that the sipp is really actually £60 a year if you’re already paying for an ISA.

Btw I reread my post and I realised it might have sounded a little harsh, that wasn’t meant. I voted for your idea though I don’t think it’s the best direction for Freetrade (there are other platforms for % fees) it’s a thought out idea worthy of some recognition.

Personally I’m in that category that access to the various options, including treasuries, shares, ETFs (and maybe funds in the future) makes it good value for an ISA and SIPP. And keep in mind that while buffet has the view of minimising fees, his view isn’t at the expense of his investment goals, he’s not restricting himself because it might cost thousands to make an investment. But it all depends on the individuals needs.

And this is where fees aren’t the only factor. The race to the bottom as someone put it might be fine for some, and not for others. I don’t agree with some of what 212 does and some of their terms and conditions. So I don’t invest with them as a platform regardless of how ‘free’ it is

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I look at the fee being offset/paid for by the interest rate which they offer. The first £3,000 in cash (Inc reserved cash) gives a 5% rate, or £150 per year.

I always make sure I have this, either in my limit orders, and the rest as cash for investments that I want to make on the spot. Everything over that is either parked in treasury bonds or Sonia/cash bonds to make sure I get interest, which I sell if I need to top up the cash balance.

This way I’m simply using the fee to transfer money from the real world into my SIPP - ok you lose most of the interest on 3k, but it’s not a big deal, I get much less from my current account with that sort of money in it!

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I take your point. But you can get circa 5% in other places and not pay a fee for it. Chase has an excellent instant-access saver at roughly 5% or a bit less. Plum has something similar. Moneybox has savings accounts with that sort of interest rate. If 3k is small change then one might argue you could leave that there in cash and let the interest net off against fees. But for me, I can just pay a much lower fee for my SIPP elsewhere and still earn 5% on cash.

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If Radderz’s cash in is his SIPP or ISA then the interest is not taxed. You won’t be able to get the 5 percent tax free if for example you have your emergency fund in an easy access account that takes up your full savings allowance. Everyone’s individual circumstances are very different.

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I’ve never been onboard with FT’s pricing model because I think it’s out of kilter with the initial ‘mission’ – but that ship’s long set sail, so I won’t labour the point too much more.

It makes some sense for FT to charge smaller investors disproportionately more.

Some years ago, I remember reading the average portfolio size here was about £3,000.

Assuming many of those clients are using an Isa or Sipp, FT is charging them anywhere from 2% to nearly 5% over a year depending on the subscription.

In a way, it’s a stoke of genius to convince so many people that that’s a good deal.

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