A SIPP's headline appeal is control — the freedom to choose from a wide range of funds, shares, and other investments within a single pension wrapper. That flexibility, however, comes wrapped in a charging structure that can be considerably more layered than a simple workplace pension, with fees potentially applying at the platform level, the fund level, and again when income is eventually drawn in retirement. Because pension savings are typically held for several decades, even seemingly small charges can compound into a substantial drag on the final pot. This article breaks down the main layers of SIPP charges and explains what each one is actually paying for.
The three main layers of SIPP charges
It helps to think of SIPP costs in three broad, largely independent layers, each of which can vary significantly between providers and product choices.
| Layer | What it covers | Typical structure |
|---|---|---|
| Platform charge | Administering the SIPP wrapper, holding assets, providing online access | Percentage of assets, flat fee, or tiered combination |
| Fund charges | Managing the underlying investments held within the SIPP | Ongoing charges figure (OCF), usually 0.1%–1%+ a year |
| Drawdown / transaction charges | Setting up income drawdown, ad hoc withdrawals, dealing charges | Flat fees per transaction or per withdrawal event |
Platform charges in detail
Percentage-based platform fees
Many SIPP providers charge a percentage of the total assets held, often on a tiered scale where the percentage reduces as the pot grows larger — for example, a higher percentage on the first tranche of assets and progressively lower percentages on amounts above certain thresholds. This structure tends to suit investors with smaller pots, since a percentage fee on a modest balance produces a modest pound amount, but it can become comparatively expensive for very large pots if the percentage does not taper enough at higher asset levels.
Flat annual or monthly fees
Some providers, particularly those aimed at more experienced or larger-pot investors, charge a flat fee regardless of the total value held — for example, a fixed amount per year or per quarter. This structure tends to suit larger pots well, since the fixed fee represents a shrinking percentage of assets as the pot grows, but it can feel disproportionately expensive for a small, newly opened SIPP.
Hybrid structures
Some providers combine a smaller percentage charge with a flat administration fee, or apply different structures depending on whether assets are held in funds versus direct shares. Comparing platforms fairly often requires modelling the actual pound cost at a specific, realistic pot size, since headline percentage or flat-fee comparisons alone can be misleading depending on individual circumstances.
Fund charges in detail
Ongoing charges figure (OCF)
Separate from the platform fee, every fund held within a SIPP carries its own ongoing charge, reflecting the cost of managing that specific fund. Passive index tracker funds often carry an OCF well under 0.3% a year, while actively managed funds frequently charge 0.75% to 1% or more, reflecting the additional research and decision-making involved in active fund management. This charge is deducted from the fund's assets by the fund manager and is separate from, and in addition to, whatever the SIPP platform itself charges for administering the wrapper.
Transaction costs within funds
Beyond the headline OCF, funds also incur transaction costs when the fund manager buys and sells underlying holdings, which are not always fully captured in the OCF figure and can vary depending on how frequently a fund trades. These costs are typically disclosed separately in a fund's key information document, and while usually smaller than the OCF, they add a further layer to genuinely evaluate a fund's total cost.
Drawdown and transaction charges
Setting up drawdown
When the time comes to start drawing an income from a SIPP, some providers charge a one-off fee to set up flexi-access drawdown, while others include this as part of the standard platform service at no extra charge. This is worth checking well before retirement, since switching providers close to the point of needing income can be disruptive.
Ongoing and ad hoc withdrawal charges
Some providers charge a fee for each withdrawal taken during drawdown, particularly for ad hoc, one-off withdrawals outside a regular scheduled income payment. Frequent ad hoc withdrawals under such a charging structure could accumulate a meaningful cost over a long retirement, so it is worth understanding whether a provider charges per withdrawal or offers a set number of free withdrawals a year.
Dealing charges for shares and ETFs
SIPPs that allow direct investment in individual shares, investment trusts, or exchange-traded funds typically charge a dealing fee for each trade, separate from any charge that applies to fund-only holdings. Investors who trade frequently, or who hold a large number of individual shares requiring periodic rebalancing, should factor these charges into their overall cost comparison.
Comparing total cost across two hypothetical SIPPs
Suppose an investor with a £150,000 SIPP is comparing two providers. Provider A charges a flat platform fee of £150 a year plus dealing charges, and the investor holds low-cost tracker funds with an average OCF of 0.15%. Provider B charges a percentage-based platform fee of 0.35% a year with no separate dealing charges for funds, and the investor holds a mix of active funds averaging an OCF of 0.65%.
| Cost component | Provider A | Provider B |
|---|---|---|
| Platform charge | £150 flat | £525 (0.35% of £150,000) |
| Fund charges | £225 (0.15% of £150,000) | £975 (0.65% of £150,000) |
| Approximate annual total | £375 | £1,500 |
This simplified, hypothetical comparison — which excludes dealing charges and assumes a static pot size for illustration only — shows how the combination of platform structure and fund choice can lead to a materially different total cost even at the same pot size. Over many years, and as the pot potentially grows, this gap would likely widen further in pound terms, though actual outcomes depend on real charges, fund performance, and contribution patterns, none of which are predictable in advance.
Questions worth asking when comparing SIPP providers
- Is the platform charge a flat fee, a percentage, or a hybrid, and how does it scale at my likely pot size?
- Are there separate dealing charges for buying and selling funds, shares, or ETFs?
- Is there a charge to set up flexi-access drawdown, and are ongoing or ad hoc withdrawals charged individually?
- Does the platform charge apply equally to cash held within the SIPP, or is cash treated differently?
- Are there exit fees or transfer-out charges if I later want to move to a different provider?
How charges interact with pension consolidation
Many people accumulate several pension pots over a career as they move between employers, and consolidating older pensions into a single SIPP is sometimes considered for simplicity. Charges are a relevant factor in this decision, though not the only one. An old workplace pension may carry higher legacy charges than a modern SIPP, in which case consolidation could reduce overall costs, but some older pensions also carry valuable guarantees, such as guaranteed annuity rates, which would be lost on transfer and could easily outweigh any charge saving. Before consolidating purely to reduce charges, it is worth checking whether any pension being considered for transfer carries such guarantees or other valuable features, since these are not always obvious from a standard annual statement.
Exit and transfer charges
Some providers, particularly older-style pension arrangements, charge an exit fee for transferring out, though this practice has become less common on modern SIPP platforms following regulatory attention on exit charges. It remains worth checking explicitly before initiating a transfer, since an unexpected exit charge can offset some of the benefit of moving to a lower-charging provider.
The effect of charges on long-term outcomes
Because pensions are typically invested for several decades, the compounding effect of charges deserves particular attention in a SIPP context. A seemingly small annual charge difference, sustained over 20 or 30 years of contributions and growth, can compound into a considerably larger absolute reduction in the final pot than the same percentage difference would produce over a shorter period, simply because charges are deducted from an ever-growing base each year. This is one of the reasons cost comparison is often given as much weight as fund selection itself when evaluating long-term pension planning, alongside — not instead of — considering the quality, diversification, and suitability of the underlying investments held.
Why the layers need to be considered together
A common mistake is comparing SIPPs on a single headline figure, such as the platform charge alone, without also weighing the cost of the underlying funds likely to be held or the charges that will apply at the drawdown stage many years later. A platform with a very low headline fee that only offers a narrow range of relatively expensive funds may end up costing more overall than one with a slightly higher platform fee but access to low-cost tracker funds. Because SIPPs are typically held for decades, it is the combined, all-in cost across all three layers — not any single number in isolation — that ultimately determines how much of the eventual pot is retained by the investor rather than absorbed by charges.
Key takeaways
- SIPP charges typically fall into three layers: platform charges, fund charges, and drawdown or transaction charges.
- Platform charges can be percentage-based, flat fees, or a hybrid, and the best structure depends on the size of the pot involved.
- Fund charges (the OCF) are separate from platform charges and vary considerably between passive and actively managed funds.
- Drawdown set-up fees, ad hoc withdrawal charges, and dealing charges for shares or ETFs can add further costs, particularly in retirement.
- Comparing SIPPs fairly requires modelling the combined, all-in cost at a realistic pot size, not just the headline platform fee.
- Because SIPPs are typically held for decades, even modest differences in ongoing charges can compound into a substantial impact on the final pot.