How unclaimed tax relief and SIPP platform fees could cost you hundreds of thousands of pounds

How can savers choose a SIPP that offers the best value for their money when there are more than five million of them?

According to recent analysis, savers with Self-Invested Personal Pensions (SIPPs) could increase their retirement funds by tens of thousands of pounds by claiming tax relief and avoiding platforms with expensive platform fees.

According to research conducted by the investment platform InvestEngine, a basic rate taxpayer with a SIPP who puts aside £500 per month for 30 years could lose £18,000 if they choose a platform with an annual fee of 0.25 percent as opposed to one that is fee-free.

According to the analysis, a person who chooses a platform with an annual fee of 0.45 percent would be 32,000 worse off than someone who chooses a fee-free platform.

Taxpayers with higher rates who choose to use expensive platforms and do not file for additional tax relief are losing out even more.

Watch the entire video here: Tax relief is automatically added for basic rate taxpayers with SIPPs, but higher and additional rate taxpayers must claim any additional relief, something that many overlook.

This is because the relief at source approach, as opposed to the net pay method, is used to apply tax relief on SIPPs.

According to InvestEngines' analysis, a higher rate taxpayer who invested £500 per month in a SIPP for 30 years might lose £139,000 if they chose a platform with an annual fee of 0.45 percent instead of one with none, and if they did not claim higher rate pension tax relief.

"Pensions are a long-term product, so small changes today will deliver surprisingly large improvements over time," stated Bob Tronson, head of pensions at InvestEngine.

Tens of thousands of pounds can be spent over decades on annual fees that amount to a fraction of a percentage point. Taxpayers with higher rates who fail to claim the additional tax relief to which they are entitled will lose out even more."

Fees for trading shares or funds can also differ between providers. Swipe to scroll horizontally.

For instance, Hargreaves Lansdown charges clients a SIPP of 1.95 for each one-time fund trade, 6.95 for each share trade if they made 019 trades the previous month, and 3.95 for each trade if they made 20 or more trades.

Customers of SIPP who purchase the basic 5.99 monthly core package pay 3.99 for each fund or share trade.

Customers of AJ Bell pay £5 for each share trade, or £3.50 if they completed ten or more share deals in the preceding month. Each trade in funds costs £1.50.

While some platforms offer a greater selection of funds or shares than others, some providers also offer superior customer service.

How to identify the ideal SIPP for you.

In the end, what you want from your SIPP and how much money you have to invest will determine which provider is best for you.

Based on its fee structure, wide range of investments, and excellent customer service, research firm Kepler Trust Intelligence claims that ii is the best option overall for SIPPs.

Freetrade is the best low-cost provider because it offers a variety of educational guides and market insights, and all of its plans have no trading fees.

In addition to providing a variety of investment options, AJ Bell is regarded as the best in terms of customer service.

According to Sam Richardson, editor of Which? Money, platforms that charge fixed fees are typically less expensive for individuals with larger pension pots if your choice of SIPP is solely based on platform fee.

The most economical choice is usually percentage-based annual platform fees if you have a smaller pot.

Additionally, according to Richardson, it's important to confirm whether a platform fee covers the cost of funds kept in a SIPP because some providers will impose an extra ongoing fund charge.

In terms of fees, he continued, SIPPs with pre-made portfolios can occasionally be less expensive than holding the same funds in a DIY SIPP.