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How to find the cheapest Sipp

Financial services companies have been waging war in the battle to sell Self-Invested Personal Pensions (Sipps).

These plans allow you to manage your own retirement pot rather than leaving it to fund managers.

The Financial Services Authority has warned that some people have been given the hard sell on Sipps when a more simple stakeholder or personal pension plan would be more suitable.

You should only opt for a Sipp if you are comfortable making your own investment decisions. Some - more expensive - plans offer advice. If in doubt about investments, talk to a financial adviser.

Step 1: Read our Sipp guide

Step 2: Read our Sipp Q&A

Step 3: Read Sipps special for investing ideas

Step 4: Read the advice below for finding the cheapest Sipp...

How to find the cheapest Sipp

There is a huge range of Sipps on the market. There are some very sophisticated plans that may be suitable for large pension plans that allow spicier investments, such as direct holdings in commercial property. This guide focuses on no-frills plans where the provider gives no advice.

These are the questions you need to ask...

1. What is the set-up fee? It's typically anything from nothing to £500.

2. What is the Sipp annual management fee? This is a small percentage applied every year that will eat away at your returns. More commonly, it is a flat fee. You should aim to find a fee-free plan.

3. How much are annual fees on the funds? These are the ongoing charges applied to funds that you put into your Sipp, typically 1.5% a year. A decent provider should be able to slice off some of this charge.

4. How much are initial charges on funds - Oeics and unit trusts? These fees are typically 5% but a decent provider should be able to discount these to virtually nothing. Check the discounts on the actual funds you're planning to buy by using providers' websites. As a rule of thumb, compare the discounts with thisismoney's fund supermarket

5. How much are dealing charges on shares and investment trusts?

6. How much are the transfer fees? These are charges applied for moving money, funds or shares into a Sipp from another provider. Also, check if there any exit fees on moving to another pension provider.

7. What rate of interest will I get? Interest rates on cash left in a Sipp vary from 0.1% up to 4.5%. If you expect to keep some of your pension in cash, check what the rate is. For example, Fidelity currently pays one basis point below the UK bank rate - so it pays 4.5%.

8. What are the other charges? Look out for the costs for buying an annuity, costs for paying out on death, etc. Remember that these one-off fees are less important than finding Sipps with cheap annual fees.

Cheapest Sipp providers

There are at least five providers that do not charge a set-up fee for a Sipp:

- Hargreaves Lansdown Vantage Sipp
Minimum transfer: £5,000; Minimum investment: £50 a month or £1,000 lump sum

- Fidelity FundsNetwork (on accounts opened before April 2007)
Minimum transfer: £10,000; Minimum investment on staring a plan: £300 a month or £3,000 a year; Doesn't accept company pension transfers

- Alliance Trust Select Sipp
Minimum investment: £50

NOTE: Alliance will introduce a £75 annual fee from September but it will now also rebate annual commissions on unit trusts, potentially offsetting the cost.

- Sippdeal.co.uk
No minimum investment, £1,000 minimum for transfers.

- Killik & Co
No minimum transfer or investment but there is a £35 or 1.65% charge each time you invest up to a maximum of £15,000 after which the fee drops to 0.5%

Best buy: Between what's on offer to savers the Hargreaves Lansdown Vantage Sipp offers the best deal. While, like others it carries no set-up fee, it also has no annual management charge on a number of investments - what investors could end up paying is an annual cost of just under 0.6%, on other investments, but this is capped at a maximum of £235. Its sharedealing fees for trading in individual shares online ranges from £9.95 to £29.95.

>> Order free brochures on Sipp plans

* Investment trusts vs Oeics and unit trusts

Warning: The Sipps market is constantly changing, as do the issues affecting your pension pot. Get updates with our weekly newsletter...