The hidden costs of SIPPs: what you’re really paying for your pension

A recent survey conducted by interactive investor (ii) between February and April 2025 has revealed a startling statistic: 83% of UK savers don’t fully understand what they’re paying in pension fees.

And when it comes to SIPPs (Self-Invested Personal Pensions) – often sold as the flexible, low-cost way to take control of your retirement – that lack of clarity can cost you dearly over time.

In this concise guide, we break down the true cost of owning a SIPP, what fees you need to watch out for, and how to avoid overpaying for your pension.

It’s not just about the monthly or annual fee

For many of us, it’s easy to take in headline figures like “£10 per month” or “0.25% annual fee” without necessarily delving into the fine print.

In reality, SIPP costs usually fall into three main categories:

• Platform Fees – the provider charges these to manage your SIPP account. These can be flat monthly fees (such as interactive investor’s £12.99 on pots over £50,000) or percentage-based, which grow with your portfolio.
• Fund Management Fees – ongoing charges applied by the funds you invest in, often ranging from 0.1% to 1% per year.
• Dealing & Transaction Costs – including share trading fees, foreign exchange charges, and in some cases, exit or drawdown fees.

It’s also worth noting that some providers offer very low or even zero monthly platform fees, but charge per transaction instead.

If you’re actively buying and selling funds or shares, these trading costs can quickly outweigh the benefits of a low monthly fee, especially for DIY investors managing their own portfolios.

The real cost of your SIPP is the sum of all these, not just what you see on your direct debit statement.

Why these fees matter over time

Although seemingly low monthly platform fees or annual management charges may seem like small change, they can quietly eat into your returns year after year.

For example:

• A typical 0.5% annual fee on a £100,000 pension pot means £500 in yearly charges.
• By contrast, ii charges £164 per year – equivalent to a 0.07% annual fee. They charge £3.99 to buy or sell funds on top.
• You can compare the latest fees for ii, HL, Fidelity and AJ Bell in this useful Money Saving Expert guide.
• Over 20 years, that could reduce the value of your final pension pot by £40,000 or more, depending on growth assumptions.
• You will typically find that annual fees decrease as your pension value surpasses each milestone, e.g., £100,000, £250,000, etc. But a cynic would ask – what more is my provider doing for me at £250,000 than they did at £100,000?

This is known as the “cost drag”- a silent drain on the value of your investments.

This effect is pronounced if you’re in the early stages of investing in your pension.

As you can see, if you lower your fee burden early on, this could mean tens of thousands more in your pension pot when you retire.

How to work out the actual cost of your current pension provider

If you already have a SIPP, now is always a great time to review your fees.

Follow these five points:

1. Check your pension provider’s full fee schedule rather than any marketing claims. Check all ongoing charges, including platform, trading, and exit fees.
2. What are you investing in? – are you holding high-cost funds in your portfolio when lower-cost ETFs or index funds might do the same job?
3. Use a pension fee calculator – most of the major providers such as interactive investor, Vanguard, or AJ Bell can help work out how much you’re actually paying.
4. Compare your costs – compare your fees with what you’d pay elsewhere. Sometimes switching providers can result in immediate savings, especially if your pot has grown significantly. You might even receive cash back when you switch.
5. If you’re unsure what you’re paying or can’t find a clear breakdown via your account, that’s already a red flag.

Are flat fees or percentage fees a better bet?

The answer is typically dependent on the size of your pension pot.

• Flat low monthly fees tend to benefit those with larger portfolios, as they don’t increase with the size of your investments.
• Percentage-based fees are usually better for smaller pots, but they scale up dramatically as your pension grows, making them costlier in the long run.

Working out the true costs is part of your investment strategy

Understanding and managing your SIPP fees isn’t just a tedious admin task: it’s an investment strategy in its own right.

Like with other things in life, small savings on charges, made consistently, can significantly boost your pension over time.

Make sure you’re not just choosing a SIPP for convenience or brand recognition. Instead, choose one that aligns with your investment style and retirement goals.

Make sure you take a look at our SIPP guide to find out more about the basics.