It comes as new research from Momentum Pensions found 55% of advisers have been shocked in the past by Sipp providers who have levied charges they had not expected.
Until recently, the firm solely provided offshore pensions in the form of qualifying recognised overseas pension schemes (Qrops) to expats around the world, but has since expanded with the launch of its first platform Sipp product aimed at the UK market.
The survey, exclusively obtained by International Adviser, questioned 106 UK advisers and found that 74% of them find it difficult to easily compare the charging structures between Sipp providers, while 77% are actively looking for providers that are transparent with their fees.
'Lack of transparency'
Dean Mullaly, managing director of international IFA firm Mark Dean Wealth Management, told International Adviser he believes “there is an inherent lack of transparency” in the fees charged by Sipp firms.
He accused Hargreaves Lansdown, one of the largest Sipp providers in the UK, of being the worst offender when it comes to unexpected charges.
“The issue is that a lot of Sipp providers predate the flexible access drawdown which has changed their business models."
“I tried to research them and it took me absolutely ages to find out where the actually charges were hidden,” said Mullaly.
As a result, Mullaly said he picked Alliance Trust as his chosen Sipp provider, which charges a one-off flat fee of £275 to use their platform.
The fee is considered simple compared to other providers on the market.
James Hay, one of the top three Sipp firms in the UK, charges a £195 annual fee for its flagship platform product, the Modular iSIPP, which comes with 0.18% annual bps charge on the first £500,000 ($665,390, €601,909).
The product also includes three optional investment modules – whole of market, commercial property and specialist Investments – which comes with a list of charges four pages long.
Describing its product as “competitively priced”, Momentum revealed it charges a setup fee of £250, an annual fee of £250 and an annual income drawdown costs £100. The firm said there are also other dealing charges for the investments within the wrapper, although these were not disclosed.
Meanwhile, Richard Chandler, operations director of UK-based MW Pensions, a subsidiary of rival Qrops specialist Sovereign, pointed out that existing charging formats have failed to adapt to the pension freedoms introduced by the UK government last year.
“The issue is that a lot of Sipp providers predate the flexible access drawdown which has changed the way in which provider must do their calculations, so the business model has changed,” he said.
Chandler, whose firm charges a £500 flat fee for its non-platform ‘full’ Sipp service, agrees with the findings of Momentum’s survey that with the current pricing structure, advisers may find it difficult to compare products.
Describing the prices as “inconsistent with the marketplace”, he said Sipp providers could make it “a lot easier” for advisers.
He expects pension freedoms to push some Sipp providers to simplify their fees in the future – a sentiment Mullaly disagrees with, arguing that many Sipp providers are already “running close to the bone” with regards to the professional indemnity (PI) insurance they have to pay for the risk they take on.
Chandler concedes that the Financial Conduct Authority’s (FCA) upcoming capital adequacy rules – due to take effect in September – could mean that, historically, a large proportion of firms have been “undercharging for the risk that they are carrying”.