View more on these topics

Sipp fees cut despite low interest rates tightening margins

Product providers have continued to cut Sipp fees over the past five years despite consistently low interest rates squeezing profit margins, according to Defaqto.

Figures from the financial research company show the average set-up fee for a £50,000 Sipp investment has fallen by 16 per cent from £267 in March 2007 to £224 in May this year.

Average annual admin fees have also dropped between 2007 and 2011. The figure for a £50,000 Sipp investment fell from £409 to £368 while the fee for a £1m investment dropped from £651 to £602.

Defaqto wealth management insight analyst Andy Leggett says a rise in the use of technology and competition in the market has driven down prices despite “huge cost pressures”.

Low interest rates harm some Sipp providers’ profits because they reduce the margin between the interest rate they pay to clients and the interest rate they receive from the bank running the Sipp accounts.

Leggett says: “The decline in fees is a reflection of the competition in the market and the utilisation of technology to bring costs down, despite Sipp providers facing huge cost pressures, particularly from low interest rates.

“However, demands for increased capital requirements and greater disclosure from the FSA will inevitably drive costs up. It is not clear yet whether these changes will halt the trends we have seen.”

Brookes Macdonald financial planning director Michael Owen says: “The continuing reduction in fees has to be unsustainable. The next decade will inevitably see a consolidation of the Sipp market.”


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm