Vanguard has launched a Self-Invested Personal Pension (Sipp). The Vanguard Personal Pension Sipp is open initially to “accumulation” stage investors (those paying into a pension).
For investors who wish to take payments from their pension, drawdown capabilities will be added in the 2020/21 tax year.
A 0.15% account fee is capped at £375 across all accounts in an investors’ name on the Vanguard Personal Investor platform, including Sipp, ISA, and general account. Investment is from £100 a month or with an initial lump sum of £500. The Sipp can invest in 77 broadly diversified funds and exchange traded funds (ETFs), including Vanguard’s Target Retirement Fund and LifeStrategy ranges.
Research company Platforum looked at the fees for an investor able to invest the maximum £40,000 annual Sipp contribution in one of Vanguard’s single-fund retirement solutions – a Vanguard Target Retirement Fund. The research calculated an investor would pay £172 a year in total charges including fund fees, transaction costs, and Sipp charges in a Vanguard Target Retirement Fund through the Vanguard Personal Pension, as compared to as much as £396 in total on the most expensive platform.
Looking at the potential impact of Sipp fees over an investment lifetime Vanguard puts forward the example of a 43-year-old looking to invest a pension pot of £40,500 for retirement (median pension pot for a British investor not yet in drawdown). The provider says if that person had invest through a SIPP in the Vanguard Target Retirement Fund 2045 and retired 25 years later at the state pension age of 68, having earned a return of 4% per annum on their investments, investing via the Vanguard Personal Pension would leave the investor £9,808 better off than the same investment held in the highest-cost Sipp on the market.
Sean Hagerty, Head of Vanguard, Europe said: “An individual’s savings often represent a lifetime’s effort, yet many investors and retirees lose out on their own hard work to high fees and charges. Fees can have a sizeable impact on investment returns, and consequently on the quality of life in retirement.”
Jeremy Fawcett, Head of research company Platforum, said: “Pension investing is a long-term activity and when fees are low, outcomes are significantly improved. The Vanguard Sipp is one of the lowest cost options in the market, especially for those at the beginning of their investing journey.”
Nero Patel, wealth planning director, Canaccord Genuity Wealth Management said: “Vanguard is making it clear they have a low-cost pension wrapper and this, coupled with a low-cost investment solution is no bad thing. But it is probably more appropriate for sophisticated investors who are able to select and manage their own investments from the limited choice on Vanguard’s platform.
“And that’s the point – investors have to make their own decisions. They are not paying for financial or investment advice. Nor is there a selection of alternative funds on the platform for investors to access that might have performed better. We welcome this launch but we think that savers and investors have to be mindful of the fact that the ball will be in their court where it comes to assessing their own risk profile and having the knowledge of the funds they pick to give them the returns they are looking for – there won’t be a pensions or investment expert making the decisions for them.”
Further reading: Are SIPPs still working for experienced investors?