Cheapest ever DIY pension goes live as Vanguard launches Sipp charging just 15p on every £100 invested
- Account fee is 0.15% and capped at £375 across all Vanguard accounts
- Minimum investment is £100 a month, or a lump sum of at least £500
US investing giant Vanguard has launched its long awaited cut-price personal pension in the UK.
Vanguard says the new self-invested personal pension scheme (Sipp) is designed to cut the ‘cost and complexity’ of saving for retirement.
The account fee is 0.15 per cent and capped at £375 across all Vanguard accounts an investor has, including Isas and general investment accounts.
All new Sipp: Cut-price investing giant Vanguard has launched its long-awaited personal pension in the UK for the first time
The 0.15 per cent annual fee compares to a 0.45 per cent charge at Hargeaves Lansdown, 0.35 per cent at Fidelity, while Interactive Investor charges £19.99 per month.
Vanguard’s new Sipp is currently only available to people building up their pot, but drawdown – the ability to take cash out of a pension pot – will be added in the 2020/21 tax year.
The minimum investment is £100 a month, before tax relief, or a lump sum of at least £500.
According to Vangaurd, the Sipp is the ‘lowest-cost on the market for the average British pension holder.’
Vanguard was originally supposed to launch its Sipp in May 2017, when it launched its investment platform, comprising an Isa, Junior Isa and general investment account.
Savers using Vanguard’s Sipp will be able to invest their cash in 77 ‘broadly diversified funds and exchange traded funds, including Vanguard’s Target Retirement Fund and LifeStrategy ranges.’
Annual management charge (%) | How much you get after costs (%) | ||||
---|---|---|---|---|---|
0.15 0.25 0.35 0.50 0.70 1.00 1.50 2.00 2.50 |
1 YEAR 99.85 99.75 99.65 99.50 99.30 99.00 98.50 98.00 97.50 |
5 YEARS 99.25 98.76 98.26 97.52 96.55 95.10 92.72 90.39 88.11 |
10 YEARS 98.51 97.53 96.55 95.11 93.22 90.44 85.97 81.71 77.63 |
20 YEARS 97.04 95.12 93.23 90.46 86.89 81.79 73.91 66.76 60.27 |
30 YEARS 95.60 92.77 90.02 86.04 81.00 73.97 63.55 54.55 46.79 |
Data assumes zero rate of return. Source: Vanguard |
The launch has captured the attention of Vanguard’s rival platforms.
Rebecca O’Keeffe, head of investment at Interactive Investor, said: ‘We welcome choice for investors, and this launch is an important conversation starter.
‘Ultimately, investors have another incentive to review how much they are paying to help find a platform that suits them best.’
‘Most of all, we welcome the idea that investors will be better off in retirement if they pay attention to the overall fees they are paying in order to minimise their costs and maximise their financial future.’
Vanguard offers a range of low-cost tracker funds among its investments, including the popular LifeStrategy range that lets people choose how much risk they want to take and invest around the world
The LifeStrategy funds charge 0.22 per cent, while its FTSE All Share tracker charges 0.06 per cent.
The low charges would mean younger people at the start of their saving for retirement journey could save on fees, while those with more put aside for retirement could cut their costs by even more.
Prior to this week’s Sipp launch, Sean Haggerty, head of Europe at Vanguard, said: ‘The Vanguard Personal Pension is designed to reduce the cost and complexity of saving for retirement.
‘An individual’s savings often represent a lifetime’s effort, yet many investors and retirees continue to be charged far too much on the proceeds of their own hard work.
‘Fees can have a sizeable impact on investment returns, and consequently on the quality of life in retirement. We want to offer investors the clarity, peace of mind and value for money they deserve, through a service that is simple, effective, transparent and fairly priced.’
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