SIPPs managers cash in on hidden charges, say bankers

Lots of investors are questioning the point of a self-managed scheme if the pension provider stops you making money with your own cash - because they are earning a commission from your savings on the side.

One in four (26%) SiPP and SSAS schemes only pick up interest at bank base rate of 0.5% and many others are offered less than 1%, according to research by Investec.

Fund managers are refusing to let investors move their cash because banks pay a commission for the fund placing money on deposit with them, says Investec.

‘We do an annual survey of returns paid for cash on deposit in SIPPs and our research confirms Investec’s findings - most SIPP providers pay less than 1%,’ says Geordie Clarke, of Money Management magazine.

The magazine is publishing a comprehensive survey of SIPP returns for cash on deposit in the edition for January 2010.

‘The problem is that most SIPP managers do not allow investors to choose their deposit taker.  Our last survey revealed that only Mattioli Woods gave investors any choice.  Many providers are very cagey about disclosing what they pay and will only say that it is linked to base rate,’ he said.

Independent experts feel this is a matter the Financial Services Authority should investigate - and advise SIPP and SSAS investors to check out the small print of their pension schedule if they cannot control their own money or move to another scheme - like a QROPS if you qualify as a UK non-resident.

So how much money are SIPP and SSAS investors losing in this time of low interest rates on savings?

For instance, Investec pays 2.5% gross on balances of £100,000 with a minimum investment of £25,000. Higher rates are available through some offshore banking arrangements with a QROPS - and most QROPS schemes do not pay tax on their gains.

If you have a SIPP or SSAS and believe you are in charge of your own financial destiny - ring up the fund manager and tell him you want to move any cash you have on deposit to another account and listen to the resounding ‘no’.

If you have a SIPP or SSAS and now live overseas, you are entitled to move to a QROPS and benefit from the massive amounts of features.