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Vanguard launches ‘low cost’ personal pension

Paloma Kubiak
Written By:
Paloma Kubiak

Investment giant Vanguard has launched a Self-Invested Personal Pension (SIPP) for savers, charging 0.15%, capped at £375 a year.

The SIPP can be opened with a minimum £100 a month or an initial £500 lump sum and investors will be given access to 77 funds and Exchange Traded Funds (ETFs).

They can pick their own funds or choose one of Vanguard’s ready-made portfolios.

Currently, the SIPP is only available to those looking to build up their pension (those not in drawdown yet), but Vanguard said it will look to open up the product to those wishing to take payments from their pension in 2020/21. It will allow transfers of existing pensions.

Vanguard, best known for pioneering cheap passive investing, said it now offers the lowest-cost SIPP on the market, based on the average British pension holder.

A comparison of its charges against those of 14 other leading platforms found a Vanguard customer investing the maximum £40,000 annual SIPP contribution into its ready-made Target Retirement fund would pay £172 a year. The most expensive platform would charge £396 in total.

Over a 25-year period, Platforum, which conducted the research, said a 43-year-old looking to invest the median £40,500 pot, having earned a 4% per annum return, would be £9,808 better off than the same investment held in the highest cost SIPP on the market.

‘Reduce the cost and complexity’

Sean Hagerty, head of Vanguard, Europe, said: “We are very excited to launch the Vanguard Personal Pension, a pension designed to reduce the cost and complexity of saving for retirement.

“An individual’s savings often represent a lifetime’s effort, yet many investors and retirees lose out on their own hard work to high fees and charges. Fees can have a sizeable impact on investment returns, and consequently on the quality of life in retirement.

“At Vanguard, we aim to offer investors the clarity, peace of mind and value for money they deserve, through a service that is simple, effective, transparent and fairly priced.”

Jeremy Fawcett, head of Platforum, added: “Pension investing is a long-term activity and when fees are low, outcomes are significantly improved. The Vanguard SIPP is one of the lowest cost options in the market, especially for those at the beginning of their investing journey.”