SIPP providers have cut their fees over the past five years according to the independent financial research company Defaqto.
The reduction in fees has continued despite the low interest rate environment squeezing SIPP provider margins. Low interest rates hurt SIPP providers as they reduce the margin between the interest they pay to the client and the interest they receive from the bank running the SIPP account.
Defaqto’s figures show that the average set up fees for a £50,000 SIPP had fallen from £267 in March 2007 to £224 in May 2011; a reduction of 16%. The average annual administration fee for a SIPP of the same size has fallen by £41 to £368 per year.
Andy Leggett, Wealth Management Insight Analyst at Defaqto said, “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.”