InvestEngine zero-fee SIPP/pension lays down gauntlet to big platforms

Is InvestEngine's Pension/SIPP Any Good?

InvestEngine has an excellent pension offering in line with its free general investment account (GIA) and Individual Savings Account (ISA), which also carry no platform charges. ETFs bought through the platform still carry their own charges, though trading them is free.

Pricing: InvestEngine’s SIPP account is free as long as you make your own decisions about what ETFs to invest in. There is a 0.25% charge for their managed accounts (where they take you through a questionnaire and allocate a selection of ETFs to your portfolio) or InvestEngine’s LifePlans which are fairly similar to Vanguard’s LifeStrategy ETFs.

InvestEngine is able to offer such low fees on its services as it takes the interest earned on customers’ uninvested cash, which most other platforms at least partially pay out.

If you compare its zero-fee SIPP offering favourably with those of rival investment platforms, which carry charges they can add up significantly over time. For example, it noted Hargraves Lansdown carries a 0.45% platform fee on a £80,000 portfolio of ETFs. This is in addition to a starting £11.95 fee per trade for between 0 to 9 transactions a month.

Assuming a customer makes 12 ETF trades a year for 20 years alongside making £10,000 annual contributions to their pension and 5% annual investment growth, this would amount to a cost of £6,868 over that timeframe.

InvestEngine makes similar comparisons for providers such as AJ Bell, Interactive Investor and Vanguard which also all carry platform fees. Again these platforms also all offer varying amounts of interest on uninvested cash (you can view a comprehensive table through this link) and access to a broader range of securities.

Market Access: You can only invest in 600 UK-listed ETFs from asset managers such as Vanguard, iShares, Invesco, and JP Morgan. with InvestEngine, so you don’t get access to some more exotic US ETFs. However, it is also worth noting that Hargreaves Lansdown’s platform offers access to a much wider range of securities, including individual stocks and actively-managed funds. Its SIPP also offers interest on uninvested cash (4.02% AER, as of December), which InvestEngine does not.

This may balance things out depending on how customers choose to allocate their assets, though InvestEngine does still offer access to money market ETFs that offer exposure to interest rates, while not receiving the Financial Services Compensation Scheme (FSCS) £85,000 guarantee on losses to bank deposits.

In November last year InvestEngine also launched a range of fully managed investment portfolios named Lifeplans, in a challenge to robo-advisers such as Nutmeg, Moneyfarm and Wealthify.

App & Platform: InvestEngine has really great apps, super simple to use, which hosts around £1 billion in assets for around 75,000 clients, found it to be “a good way to buy ETFs” but noted the range of instruments it offers “is a bit limited if you are looking for more complex asset classes”.

Customer Service: A real team of people in the UK, who you can email for any issues, but no phone number for emergencies.

Research & Analysis: Some good blogs and research notes for pension investors, I’ve interviewed their head of investments, Andrew Prosser, if you want to hear directly from the horse’s mouth how they treat customers.

SIPP Transfer Offer: Customers who transfer an existing SIPP, or open and fund a new account with us could earn a bonus of up to £4,000 but must remain invested for at least 12 months to qualify for it.